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Investor Insights • Brie Schmidt • How To Start To Learn About Real Estate Investing

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Welcome to the April episode of Investor Insights With Brie Schmidt!

Use coupon code REAL for a discount on Midwest Real Estate Summit on June 1-2 in Chicago. Click here for details!

Brie Schmidt is one of the most well-respected buy-and-hold investors in Chicago. Each month we’ll be discussing an investment topic brokers should master.

This month we’re going back to basics! One of our most requested suggestions from listeners is about how to build their knowledge of real estate investing into their practice. In this episode Brie talks about small steps you can take immediately to start to gain awareness of how to increase your understanding so that you can service investor clientele. The more knowledge you have, the more value you can provide!


Transcript

D.J. Paris 0:14
Hello and welcome to another episode of Keeping it real. The only podcasts made by Chicago real estate brokers for Chicago real estate brokers and actually brokers all over the country we have started to receive listener mail letting us know that it’s not just Chicago that people are tuning in. So we appreciate that. Today on the show, this is our Monday market minute. And we have Carrie McCormick who comes on every month. She is also our longest running contributor to our show. She came on since the very beginning and wanted to come on every month and talk to our listeners about what’s going on in the Chicago real estate market. She’s an app properties broker 20 years, not only in the top 1% really in the top, probably 1/10 of one but for sure. 1/10 of 1% Absolutely a powerhouse. Everyone knows Carrie, in the industry. And you should follow her on Instagram, which is Carrie McCormack real estate. So at Carey McCormick real estate for Instagram. And another neat thing is she was just featured or is featured in CES magazine and the dynamic women’s issue. So go pick one up today. Again, ces magazine, their most recent issue. So without further ado, welcome Carrie once again to the show.

Carrie McCormick 1:30
Well, thank you, thank you, I’m glad to see the sun is shining here in Chicago. We’re kind of knee deep in our spring market. But I wanted to just kind of dive in and get to some really important information that has kind of made a change in our industry. This year, our fearless leader and with our properties, our fearless leader Thad Wong had put out a video about this, which really struck a chord and it’s really great information. So it’s a little bit of math. So people who are listening just, you know, hang tight in your chairs or wherever you’re at. We’d love to if anyone has any questions about this as well, you know, just do a little bit of a follow up. But just a real

D.J. Paris 2:11
quick I was to say I am also the opinion that when fad Wong speaks, I pay attention, because he’s usually right. And he’s a few steps ahead of everybody else.

Carrie McCormick 2:21
He really is. And this is really courtesy of him as well. He really did a good job explaining this. So I just want to chat about the increased cost of homeownership because of last year’s Federal tax changes. I think a lot of our sellers and even buyers just don’t understand this, of how it’s it’s made a big impact in our industry. And really, for decades, one of the strongest reasons to own a home has been the ability to deduct your property taxes. And there is, you know, because of that change this year, people have been able to afford less than last year. Yeah, so. So we’ve always had these unlimited deductions in state taxes and property taxes. And last year, obviously, it changed to a max deductible of $10,000. And this has been just like I said, a huge change in the real estate market for what a buyer can afford. And it doesn’t have anything to do with what they want to spend. It has something to do with what they can afford each month. So with no, you know, taxes and p&i, which is principal and interest on their loan, etc. So this one change has affected the value of properties across the board. And a lot of my sellers are asking me, you know, why am I selling my home at the same prices? I bought it, you know, last year, three years ago, five years ago? Well, here’s a quick example for you. So you could bring out your calculators on this one, see if I’m right. So for example, let’s just use a property that’s priced at $500,000. So approximate taxes on a $500,000 property is $10,000. Okay. To qualify for that, that property, the buyers income has to be approximately $150,000. Right. And then your state income tax on that would be approximately $7,500. So in 2018, you had an unlimited deduction, and rough math would give you a deduction of $17,500. Well, this year, as you know, the max deduction is $10,000. So the difference in deduction from 17, five to 10,000 is of course $7,500. So let’s say again, that particular buyer, they’re they’re earning $150,000. So now they’re and I keep using the word approximately, but they’re, you know, they probably are paying about 30% in federal income tax on that money, which is a safe assumption. So you multiply that by 30 percent. So obviously they’re making 150, multiply that by 30%, that equals $2,250. So the cost of owning this particular home is $2,250 per year more. And then if you take it down monthly, it’s $187 a month. So I know it doesn’t sound like a lot, but it is. So this buyer in 2019, has to pay $187 per month more to own this home versus last year, right. But there’s more. So there’s, you know, interest rates. So, obviously, now you’re getting a loan for this property. And there’s, you know, your mortgage has interest rates. Well, the good news is that the interest rates haven’t really changed much, they did fluctuate through the year, but right now apples to apples, let’s say last year, it was four and a quarter, this year, it’s four and a quarter. Again, you’re paying $187 more a month to own this property. And then you have to multiply that by your interest rate. So overall, now over a 30 year loan, that is a total $38,250. So in all reality, this buyer in 2019, paying for a $500,000 property, that overall cost is $38,250. More. So again, in 2018, you’re paying $500,000 for the property, with all the tax implications and changes this year, you are now paying $538,000 for this property. So that person’s buying power has completely changed.

D.J. Paris 6:32
Well, that’s really interesting. And that’s just for a $500,000 property, what happens at a like one and a half million dollar property.

Carrie McCormick 6:40
So I mean, good point. So let’s, if you I’m not going to go through the math again. But if you take that scenario up to 1.5, obviously, the purchasing price consequences go up. So but doing the math on that if if it was 100, or no, if it was 1.5 million, that person has to earn approximately, let’s just say $400,000. Right, so now their tax deductions have changed. So really, again, running through all that math, that property would cost in 2019 1.678. So you’re paying 178,000, up net paying, but the consequences are $170,000 difference. So again, when someone’s buying a property, they’re looking at their overall cost, their tax deductions, and their buying power has just changed. So we’re really having this struggle in the least I’m seeing with my sellers, you know, the struggle with pricing and what buyers are offering and what they can afford. So it’s it’s a very interesting dynamic of what’s happened in our market. It really boils down to educating your sellers and educating your buyers.

D.J. Paris 7:51
Yeah, you know, it’s so that’s, that’s so such interesting information. And I was thinking that this would be I suspect, most buyers and sellers and all the just general population has no idea how these tax laws are really affecting anything. We’re just not that tied into it right now, there’s so much other news to pay attention to, this would almost be a good opportunity for listeners who are realtors to even partner with a CPA or partner with other professionals, financial advisors, that sort of thing. And even like, do little seminars about this sort of thing. Be Awesome. Absolutely.

Carrie McCormick 8:26
Yeah, absolutely. Because it’s a

D.J. Paris 8:29
lot of great information that most people are not aware of, I think,

Carrie McCormick 8:33
and if anyone has any questions, I’ve got a great little handout on it, you know, that really kind of walks you through the steps of it. Of course, I always tell people, I’m not a CPA, or an attorney, you know. So, you know, of course, consult them as well. But it’s just kind of a nice little outline. Just some good talking points with your buyers and sellers.

D.J. Paris 8:53
Awesome. Well, I’m for my marketing minute, my marketing moment minute, I have a really simple idea. And I suspect the listeners, as soon as I say it will go, I’m not interested in listening anymore. This is silly. It’s so basic. So please indulge me for about two minutes before you turn the podcast off. But I was on the way over here thinking about, you know, fundamentals and for in my own business, and I’m not a traditional realtor, I do recruiting real for realtors, but I still have similar sort of, you know, responsibilities. And I was thinking what is the one thing I do not do a good job of, and that’s personal notes. And I know I should the data is really clear that everyone should be writing their client’s personal notes as often as possible. And very few of us do it. I suspect, and I’m certainly in that category. And then I realized, Okay, well, what would be one step I could take immediately that could get me actually started doing it. And it would be a little easier to manage than writing three a day or five a day, which is tough to do, I think. And I said I have everybody’s birthday. I should be sending handwritten cards. For birthday, so my suggestion this week, it’s so simple. But please, please do it. And I was thinking back to my own birthday, which is coming up, and I was thinking back to last birthday. And Alright, when’s

Carrie McCormick 10:12
your birthday? June 10.

D.J. Paris 10:14
So it’s, I’ve got it, but a month, they thank you, I do, except you can send gifts and, and money and all of that. But, um, but what I was thinking about was birthday cards. And I realized last year, I, you know, I had a few from family, a few from friends, but not that many, maybe I’m not that popular. But I was thinking about the people who, like the financial advisor I have who I really liked, by the way, my CPA, I really like my insurance agent, I really like none of those people sent me a birthday card, I don’t need it. I wasn’t looking for it, but I’d recognized it. And I thought, that would be a really simple thing any of us can do. And so here’s my suggestion with the cart, don’t send them or if you have the option to add the ability to go out and purchase a card versus sending like your company, stationery, foldover card saying happy birthday, that’s fine. But a way better and much more effective way would be to go to Walgreens, get a two or $3 card, get maybe even a fancy one and send it off to your client. And actually just write don’t write thank you for being a client not necessary. Just write hope you’re having an amazing birthday. And you know something silly about them, you can write that just and then sign your name. And I promise you that will be the only real card that person got from somebody you know, who is one of their professionals in their life. It’s simple. It’s easy. It’s a little, you know, cost a little bit. But please do that. I promise you that person’s and mailbox is not flooded with birthday cards.

Carrie McCormick 11:45
It’s still it’s still a great reminder. I love it. Yeah,

D.J. Paris 11:49
it’s simple. And anyway, so that’s all I got this week. So on behalf oh, by the way, so if anyone is ever interested, I know. You know, in speaking with Carrie directly, we get a ton of requests for that Carrie, what’s the best way somebody should reach out to you whether it’s a buyer, a seller and investor or renter? Or somebody in who’s a real estate professional? What’s the best way to reach out?

Carrie McCormick 12:12
Always call me everyone knows they work all the time. And I’m always answering my phone. So 312-961-4612 Or if you prefer to send me an email, it’s Kerry, CA RR IE, at 80 properties.com.

D.J. Paris 12:27
Well, thank you again. And I always say this, and it’s so important for the listeners to realize is that we were very lucky to have Carrie willing to come on the show. In fact, I had been lacs and been behind in schedules, she messages me When’s our next show, because this is really important to her and to me to be able to provide this value. So one of the best ways you can support us is, you know, continue to listen and also send this off to other other people that you think could benefit. And definitely everyone should follow Karis on Instagram, she has an unbelievable Instagram account. She does it all herself by the way, which is at parrot what’s really impressive that you do it all yourself. That is not easy stuff. She’s not just taking pictures of the food she eats you know, like there’s actually like pretty impressive. You know, a posting here that I’m really jealous of but which is at Carey McCormick real estate you can find on Instagram. So on behalf of Carrie and myself, thanks again for continuing to listen. Our listenership keeps going up, pass this on to friends, and Carrie and I will see oh, by the way, if you have questions for Carrie, let us know you can find us on Facebook, our website, you know you can find us. Let us know and we’ll pass those through and Carrie can answer them next episode. So on behalf of Carrie and myself, thank you and have a great week or great month Carrie.

Carrie McCormick 13:46
Thank you. Thank you guys.

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