RATES HAVE DROPPED, SHOULD I REFI? MORTGAGE TIPS WITH NMLS 2498573 BOBBY BAKER

Tim: [00:01:01]Well welcome to another episode of the Pilot Money podcast, Timothy P. Pope certified financial planner here. I specialize in the planning needs of the professional pilot, guys if you’ve been following along, you know that we have a change coming up, the name of the show is changing super close to solidifying that and we’ll be excited to announce that soon. So the content of the show, the frequency, everything that you know and enjoy about it will stay the same. The only thing that will change is the name, so stay tuned for that.
[00:01:33]In other news though, matter of fact, it has been a busy last couple of weeks right? The elections are behind us, and the markets have responded favorably to that. That’s been nice, we’ve seen that in the portfolios, but also the Fed has been busy right? So earlier this year the Fed cut rates and recently they cut rates again. And so what does that mean for you? The pilot at home, and for your financial situation. Well at the top of our heads we expect your short term cash, we expect that interest rate to drop. So for the past couple of years your sleepy money, and generating these ten ninety nines, and you’re like whoa what is this? My sleepy money is actually generating some interest, so now i’m going to have to pay taxes on that. So we do expect those rates to drop and your high yield savings, your regular savings, CDs, your T bills and so forth.
[00:02:27]But on the liability side, such as a mortgage, we also expect those rates to drop as well. And that can actually be positive news for you, when rates drop, what you’re paying the lender will drop as well. So joining me today is Bobby Baker from Trident home loans to talk about all things mortgage.This is a real fascinating conversation because just like most financial products, mortgages come in all shapes and flavors. And each one serves a different purpose. So with that lets open to today’s conversation with Bobby. Well, Bobby Baker, welcome to the pilot money podcast.
Bobby:[00:03:05]Thanks, Tim. It’s great to be here. Thanks for having me.
Tim:[00:03:08]Absolutely. Look, I am excited about this conversation. Because quite frankly, we connected because a listener of the show reached out. and said, Hey, I just had a meeting with Trident Home Loans. They really expand my horizon on what’s possible in the mortgage world. And that listener was kind enough to say, Hey, maybe some other listeners may also want to have this conversation. So I reached out and I’m glad that you are here. So we’d love to get your aviation backgrounds. Maybe you can give us a brief overview of where you’ve been in aviation and what you’re up to now.
Bobby:[00:03:43]Yeah, I’ve been very fortunate, very blessed throughout my life, throughout my career and what I’ve been able to fly and uh, fortunately, I’ve let the military, let the taxpayers pay for my flying hours and for my training and, also for operational flying as well. So, I started in the army. The first thing I flew was a Huey helicopter back in 1993 when I was going through flight school at Fort Rucker. And then I transitioned was an Aeroscout and flew the OH 58. So, my first tour was in Savannah, Georgia. I was dual rated. And both those helicopters and absolutely 100 percent it’s all I wanted to do was fly every day. An opportunity presented itself to switch to the U. S. Navy. Three of my best friends switched over, thought they were crazy, and didn’t want to do it. Went visiting in Pensacola, a couple Irish wakes later. And seeing what the Navy had to offer. It was a no brainer. So I switched the Navy went through Navy flying ended up flying F 18 primarily got four years living on board aircraft carrier did six deployments. Also fortunate went to Fallon went through Top Gun on graduate Top Gun adversary course, and then I also was qualified to fly the F 16. They sent me down to fly at the Air National Guard in Tucson. So dual rated and Vipers and
Hornets at the same time in Fallon. And I kept telling myself it’s never going to get better than this.
[00:04:53]And arguably it never did. So then also in Key West, my last tour, I was allowed to fly the F 5 and also fly the H 60 with the search and rescue unit. Just a fantastic career. Down in Key West, my job was as the commanding officer of the base. And as the CEO of the base, I was responsible for 733 residential homes, 834 hotel rooms, 525 campground spots. And again, I had no idea. This responsibility would present itself and that’s when I started to fall in love with the real estate side of things and maintaining homes built in the Cuban Missile Crisis and then how we interact with the community for what they supply or provide for homes for members and became a realtor.
[00:05:33]And then taking the first VA loan for myself, I shopped around and talked with Marty Menvey, one of the owners of Trida Home Loan. Talking with local lenders, shopping around as I recommend everybody do. Trida Home Loans was by far the best. Can’t say enough about the customer service and then also, Probably more importantly, the numbers, the numbers were just, they were off the chart. They’re fantastic. So after doing real estate for about two and a half years and several transactions with China home loans, that’s when I decided and was invited by Marty to join the team to make me a better realtor, make me a better loan officer being realtor. So I was like, all right, double agent.
[00:06:08]Sounds kind of sexy. But not as sexy as, you know, the real deal being a spy or being a movie star or whatnot. But still, I was like, all right, let’s do this. So last summer I got bored, went through the process of taking the national exam and then spun up. So licensed in nine different states and off and running and it’s just been fantastic helping people and, primarily military and pilots, cause that’s what we understand the best. That’s our mission. That’s what we do.
Tim:[00:06:28]Wow. So, well, thanks for that background. I’ve got some follow up questions. So, how common is it for a pilot to fly both the F 18 and the F 16?
Bobby:[00:06:38]If you’re in the Navy and you’re stationed at Fallon, Nevada, where we have what’s called NAUTIC, the Naval Air Warfare Development Center almost everybody who is a fighter pilot is dual qualled. Or maybe even quality than three airplanes, believe it or not three is definitely the max. I was just two and three is an exception, but it’s common for those guys. Because it just understand how you’d fly them and fight them. It’s just a great experience. So that’s why they set that up and they wanted, uh, better adversary, a faster adversary, you know, an airplane that can come at you simulating different countries at that speed. So that’s why they needed to be purchased back in 2002, 2003.
Tim:[00:07:12]Yeah, because you think about, you know, angels. You think about Thunderbirds and two different demo teams. But it sounds like that there’s several of you or a number of you that can do them both. So. then your love for real estate was spawned from your responsibility as commanding officer.
Bobby:[00:07:29]That’s correct.
Tim:[00:07:30]Okay, so then you got into the game of selling, and you worked with Trident personally and then were you sending clients that you were helping to buy a home, were you sending them to Trident as well?
Bobby:[00:07:42]Exactly. So the main reason I got my real estate license was just to save a little bit of money for myself and for my family. Because as you know, homes are expensive. We live in Key West. They’re more expensive down here. So I was like, if I spend two weeks, get a license, get spun up, know, I could save 3%, possibly 6 percent on a purchase price of a home.
[00:08:00]And then also COVID was hitting. I was looking at an unknown date of when Delta was going to say, go home or just hang out. We’ll call you when we call you, call it furlough, call it what you will. So there was all these unknown. So I did that. After I got my license, a couple of folks were like, Hey, help me find a house and almost all military. So to me, it was like still being the commanding officer. In fact, I’m pretty sure I’ve talked to more people out of buying homes than buying homes just by being a military trained realist, not a pessimist, but a realist. And then, you know, pros and cons. Here’s what you got to consider. Analyze it from every angle, you know, kind of like we do is when we’re studying our adversaries and in the military.
[00:08:28]So that’s, spun up and the next thing, you know, one house, two houses, three houses, and again, it’s just me. Protecting my family, my family being the military primarily. And, you know, that’s spread to civilians as well. And it’s just, now it’s protecting customers. And I say protecting, but it kind of really is protecting, educating, because we bought several homes and I’ll be honest, I didn’t really know what I was doing, took several loans over the years, didn’t really know what I was doing. I just show up at the closing and big old stack of documents, look at the wife. She wants the house. I’m like, okay, I just started signing, you know? So that’s why it all spun up and that’s how I started to grow. And then I spoke with local lenders that are great people. And I was like, hey, here’s what I’m looking to do.
[00:09:09]What’s the best rate that you can provide? You know, this was 2020 timeframe rates were pretty low, like the lowest we’ll see in our lifetimes. But I compared them to Trident and then, you know, locals are like, You gotta go with them. They offer a better deal. We can’t beat it. You can’t touch it. And then just the understanding from Trident. You know, I can remember calling Marty the first time. I was like, Marty, you’re going to think I’m crazy, but I want to do this, this, this, this, and this, you know, I was talking about three different home purchases over the next five years. And I want to do this with a VA and this is a conventional, this is a second home.
[00:09:39]And I figured he’d just hang up, go. Dude, write it down, send me an email, sort it out, make it simple. But he sat and listened and he’s like, all right, step one, step two, step three, call me when you’re ready. I’m like, wow. And then you know what? Just like he explained it and it just flowed out and I was like, this is impressive. But really why I joined Trident was it’s probably been 60 times I recommended to try to home loans and just said compare and run the numbers and you know every time they were the best and the customers were super happy and even going to closing the title attorney is like, oh my gosh.
[00:10:12]I’ve never seen rates this low So i’m like, are you for real? How long you been doing this? It’s like 25 years and i’m like, okay I’ve been doing it for three back then So I was like, that’s impressive. But as I get my life, I’ve never seen, again, it was the fed, you know, just aligning in the plan has called it what you will. But even to this day yesterday, folks are getting rates they can’t get from others. And there’s a reason for that. I mean, try to, you don’t see them advertising all over the place on TV, on Google, other places, you don’t have flyers coming to your house. You know, there’s a lot of money that’s being saved by the fact that they rely primarily on word of mouth.
[00:10:48]As opposed to having to advertise or having to cold call or any of that. We don’t do any of that stuff. I mean, 99. 9 percent for me, it’s all word of mouth. It’s like, Hey, you work for Trident, talk to so and so. I’m like, absolutely. Let’s see what we can do for you. And if there’s a better deal, just a better rate, there’s a better opportunity. By all means, we’re like, it’s about you. It’s about the customer. So we’ll push in that direction. Every time.
Tim:[00:11:12]So it sounds like Trident’s business model is we take care of our people and then they will, through word of mouth, spread the good word of what we’ve done for them, how we’ve helped their families. And then there’s cost savings in that because, as you said, you don’t have to have either pricey marketing budgets, you know, price hitting ad spots and so forth. So you do all of those things and then you pass those savings back on to your current and future customers through lower rates, is that how you’re seeing it?
Bobby:[00:11:45]Absolutely. That’s our super successful marketing strategy. It’s primarily word of mouth. We are customer centric and uh, the money we say, which is a lot of money. not using Zillow, Google, et cetera, like I already said, it’s, it’s going to allow us to provide the most competitive and the best rates. And the reason that we’re so successful is because like I said, it’s, it’s pilot owned and operated and they’re also military. So when it comes to VA loans or loans for pilots who understand pilot pay, we know the pilot contracts, we know the pay structure. We’re the best at qualifying transition pay. So somebody’s a new hire on year one pay approaching year two, or they’re upgrading captain. We just know it cause we’ve lived it and we have access to public knowledge, all the contracts for the different airlines and we know what they’re going to make. And a lot of times you’ll see other institutions, get confused, like, wait, you get paid by the hour?
[00:12:36]But they don’t understand a minimum guarantee and they don’t understand how it all ties together and other airlines are different, how they pay and compensate. But that’s why we’re good. And, you know, on the military side, or even airline side, someone’s been on sick leave and they’re coming out. We understand what they’re getting for that and how much they’re going to get. We can qualify them for the future military leave, leave of absence. Maybe they’re coming off a period of disability. We’ve put ourselves in their shoes. We’ve got folks on the staff. That have been in the same situation and then we get them there. We also ensure the underwriters and that’s another one is that the people that we work with, they understand and they trust Trident because of a proven track record, but we get the underwriters and the investors to understand and then qualify the customers. It’s a win win for everyone.
[00:13:24]And again, like the fact that I don’t have to go and advertise or push out information, my advertising, if you go look, been pretty minimal. I mean, I posted just one or two on LinkedIn. I’m fairly new to being an MLO, but I’ve been interacting with loan companies for the last five years. But I love the fact that I don’t have to go and quote unquote, hustle to sell yourself. It’s just word of mouth and it spreads like wildfire when you take care of somebody and explain what’s going on. It’s just wonderful and it’s a good feeling. You’re helping people out and you’re getting them the best rate for the most part of 30 year Let on I mean I mean that’s a long time in somebody’s life. So and again I’m talking primarily primary residential or second homes, but still it just feels good. You know.
Tim:[00:14:03]Yeah, no, that’s right, you can sleep well at night, and knowing that you just, you help somebody and their family. Don’t think you mentioned this, but I do want to confirm, so, in addition to being a former naval aviator, you are also at the airlines,
Bobby:[00:14:18]That’s correct. I fly with a major airline, awesome job loving it.
Tim:[00:14:23]Okay, so when you say, hey, not only did you help out and you’re currently helping out military aviators, but you also know the one 21 world you’re living it and also you’re reviewing it as the MLO, and working with folks as a realtor. Let’s talk about. Some of the products right, when I say products, I mean, different loan types that clients may be looking at, or that might fit certain circumstances better than another one. So one question that I’ve got for you is, you know, hey, between year one and year two pay a lot at major airlines, usually we’re looking at, you know, I’ll say a 20 plus percent increase in compensation. And then between year two and year three pay, it’s going to be a plus 10 percent somewhere above 10 percent usually.
[00:15:07]And then the further you go on, it kind of tapers off and settles, you know, between two and two and a half percent and a lot of cases until you switch your equipment or upgrade to captain, right? Are there products out there that will allow the pilot to kind of walk that line? Or do you tell a lot of folks like, hey, maybe you want to wait until year two to pay if this is the house that you want, right? So I’d love to hear what you do. And then I’d love to hear about the different products and use cases. Bobby:[00:15:34]Yeah. So what we do is we go back and again, our intention is, and we’ve seen this already is, we’re going to help with and assume a fiduciary responsibility for life, you know, much like yourself. So. We’re going to help pilots through not just this next couple years, but throughout their careers when they start in their early days, this is, you know, back in the day, 727 co pilot today at 737 or Airbus 320, 717 or whatnot, all the way to when they become a wide body captain. You know, that’s from buying their first home, whether they’re civilians coming out of the regionals or transitioning out of college. To getting out of the military and starting with the airlines and transition out of the military as a retiree or somebody who’s separating, you know, different situations.
[00:16:15]And then we’re going to continue and watch the cycle of life that’s going to happen, which is, you know, common to all of us. And they’re going to get big and buy more. And then as they approach 65, maybe 67 in the near future, then they’re going to downsize after retirement and maybe move closer to the kids or their future grandkids. So you follow that cycle. I. You’ll see requirements, desires for different homes. And you know, I know plenty of airline captains that, you know, wanted to buy a whole bunch of land in Montana or whatnot, or folks that want to do agriculture and have tree farms or whatnot. So there’s, all kinds of different scenarios.
[00:16:50]You can sometimes, you know, I can’t make it all up, but sometimes I scratch my head. I’m like, that’s our part of the job too. I love it like this guy’s pure genius. He’s doing this, this, this, he’s going to do this, this, and okay. That’s awesome. So I learned as well and same for. Real estate you go into some homes. You’re absolutely beautiful. How do I do that at my house? So again, I’m not saying i’m stealing ideas, but I am if you want to call it stealing. But there’s a lot of different centers that are out there. So, just yesterday. I took a phone call from a young pilot at piedmont, and it’s going to be upgrading in the next couple months and currently lives in Las Vegas and moving to Florida where he’s from and families from and was looking to see what and how they qualify for a home.
[00:17:33]So what we’ll do is we’ll take that information. Obviously take notes and we’ll do the best we can to help them plan for a move and then for a home and they’re talking you know possibilities. We might rent for a few months and then we’re going to go ahead and buy how much can we afford and does it make sense? And is it smart where Trident comes in and and is really really good is we understand where they’re at. We understand there are different ways to qualify income again with your underwriters, your investors, your lenders,
and then how to maximize that for them. So a lot of times, you know, you’ll see people go, Hey, I get paid such and such per hour.
[00:18:04]It’s going to change. No, no, no, no. I want two years past income. Show me what you made. That’s your track record. You know, show me the pay stubs, show me bank accounts, but you know, that’s just black and white. it’s digital. So it’s zeros and ones. there’s no thought. And it really isn’t portraying, showing, displaying what they’re going to make. And, you know, that’s factual and that’s something were to happen. There’s also, what ifs it could be, there could be an injury or something that takes them off of flying. So that has to be weighed in and considered too, but really that’s where we come in and we go, okay, we can qualify that. We can go back and look and see what the contracts are, when, when the pay kicks in, what his average flight’s been, what it’s going to be, and then we take it from there.
Tim:[00:18:44]Okay. So you guys, you look backwards, like you want some historical data, but you’re also focused on the progression just because Pilots are contractual, right? It’s like, like with organized labor. So or at least in the one 21 world, in the one 21 world, got to have that medical. If you get hurt, like you’re on disability, short term, long term kind of thing in the military, a lot of times I would imagine you can get a different job, right? So it’s not like you’re out of work per se. So you look backwards, you take the nuance of where they are and then where they’re going. Talk to me about the different loan types and I’d love to hear some use cases. Because as you talked about, and I love that fiduciary for life that you talked about, like different life stages that pilots are going to go through. So I’d love to hear different use cases for the loans that you’re seeing and what’s some of the common ones that you’re working with?
Bobby:[00:19:35]Yeah. Primarily it’s VA loans. Arguably the best loan out there if you’ve earned the right to use a VA loan by joining the military and we use that a lot. Other ones, it’s conventional just based upon non military members coming through and transitioning to the Part 121, to the majors. And then the others, like, we kind of talked about, you know, folks, they may be buying a condo, so the rules change when you’re buying a condo, but it’s not a showstopper, just some different, does it qualify for a VA? Does it qualify in other matters? So that’s, something we work through.
[00:20:03]But those are primarily the VA loans and the conventional loans is what I’ve been working personally. And again, we do others. You know, investment, second home, USDA and the refinancing too, when the rates drop. So we saw that big time through 2020, 2021, when rates went to unprecedented low numbers based upon COVID whatever, all the stuff. So I just ran through an example. If you want to start with a military member who’s separating, who’s wanting to buy a house and move, right? So imagine you’re in the military and you’ve been given orders, which you can’t necessarily refuse, to go live in these different places. And, I did 26 and a half years, 13 moves.
[00:20:43]So I averaged about every 18 months, and that’s the military way. You know, it’s just up and out. Get up to the top and then get out of the way. So it’s a lot. You don’t realize that when you’re young. And then you finally hit retirement or separation state and you’re like, well, I’m going to go back where my wife’s family’s from, which is normally the case or my family’s from or both if you’re lucky. we’re going to buy our, retirement dream home that we’ve been waiting for, for all these years and talked about what we’re doing, all these deployments and everything else. Folks will come down, they start planning, they want that house like day one. And you can’t necessarily do it day one, because what you made in the military, whatever pay grade, is not what you’re going to make when you retire.
[00:21:17]You’re retiring, you’re going to have a pension, and you may have some disability, but that’s not what you made in the past. So that income for the past two years doesn’t qualify you moving forward. And then, oh yeah, you’ve got a CJO, conditional job offer, with benefits. we’ll say American Airlines and that doesn’t start for another 30 days. So how do you qualify this? It’s confusing. You can see if you’re the banking world or the loan world, you’re like, this is crazy. This person is going to make 40 or 50 or 70 percent of what they just made before. And then they have a job that’s supposed to start, but it’s not guaranteed. It’s conditional, and something could happen that’s where it gets really, really tricky. And then if you have a member who’s not retiring from the military, now they’re just separating. 9 times out of 10, they’re going to affiliate with a reserve unit, and they’re going to have reserve pay. But that’s going to be different than pension. So you see how it can get kind of conflicted, and you can see how it’s stressful, too.
[00:22:15And then you have the wife and the husband are like, We went to this house for this much, and we’ve been making this much money. We’re going to qualify for this, and I’m taking this other job. And you’re just like scratching your head going, Okay. So again, that’s where having lived that, having been through that and again, it’s not just me, but all the loan officers that try to home loan. Not all of them process, 80 percent of them, you’ve got that experience and that help and all those lessons learned and the gotchas to go and then run through and get them qualified. And again, the way that’s all done is, you know, very, conventional or traditional for any loan officer, but it’s just our understanding of how you transition out of the military as a retiree or somebody separating.
Tim:[00:22:52]So in that case where in that scenario, you just laid down, Hey, somebody’s going to make, 60, 70 percent of what they have in the past couple of years, they’ve got the CTO, which, things do happen. We’re seeing it happen right now. So are you guys going ahead and figuring out how to push them through so they can get that home on day one? Or are you saying, look, here’s some hurdles and I think this might make more sense on year two pay or, once the cash starts flowing, after you’re done with training or whatever. Like, so what are some of those conversations like?
Bobby:[00:23:23]Yeah, to answer your question. It’s not what you said in the beginning just push them through that’s not what we do Like I said, We’re responsible. So we’re assuming fiduciary responsibility for What they’re doing and we do not want to push somebody to a situation where they’re going to lose their home Or they’re going to be super home poor or they’re going to regret it and they’re going to you know I hate the fact that they went through trying it for this so we’ll coach them and go here are the options You know, we give them a little, a scale.
[00:20:50]This is like super risky. This is what I think you should do. And then if you want to be completely conservative and safe, let’s just punt it for a year. Let’s go rent a home, get to know the area. If you’re moving back, let the dust settle. And then after the dust settles and you, and you know, we’ll see what’s going on. We’ll also give them a prediction of what we think rates are going to be doing. Let’s go there and that’s the advice we give. Does that always work? No, we’ve got some folks that are very patient and very cautious. And we’ve got other folks that are like, I want it now and I want it my way. And you go, oh, okay you just advise, you know, and you paint the picture as a realist, which, in the military, is great about worst case planning. That kind of preparation because, you know, worst case in the military, somebody’s going to die or there’s a risk that people are going to die.
[00:24:33]So we’re very good at doing it in that fashion. So and I have no problem with worst case planning, but, you know, some people, they don’t. They don’t see that as the right way to go about it. Like I told you, as a realtor, I see folks who come down and I’m like, you could
go buy this, house, but you only have two year orders and you’ve got a family of five and here’s how much your BAH is. And then You could just go into base housing, which is here. So let’s take a look. Just to have that, they have a look and I drive them through and show them and tell them what it costs and show them the amenities and the community. And they call me back and they go, yeah, I’m gonna call base housing. Thanks a lot. That was awesome. You know, and I spent an hour, two hours with them, showing them the whole community, showing the commute time, showing them all that. And then, you know, I get a call from the broker. He’s like, Hey man, we’re supposed to be selling houses. You’re putting them on the base. I’m like, I’m doing what’s best for the customer. It’s just an extension of what I did in the military and being a commanding officer multiple times. I’m just here to explain what’s there and what makes best sense and they make the decision. We’re not here to blindside anybody or to push them in a direction they don’t want to do. So, I’m a huge fan of let’s, you know, find, Three yeses, three no’s, three pros, three cons, or, or whatever. Just make sure you give it a whole 360 perspective before you walk them down a path. And again, that’s how we do it.
Tim:[00:25:46]Thanks for sharing that because I love that and there’s so much alignment with the process that I’ll go through with folks as well. I’m a big fan of saying, Hey, the truth is somewhere in the middle, right? So this is the dream, this is what we want, this is what we expect to happen. And then, Hey, what if things go sideways Which is kind of your worst case and people are people, clients are clients. And, you know, of course I’ve had some fun with that. Folks were, you take them through the scenario and say, Hey, this might be really nice on year two. You’ve got some wiggle room, you know, you’re going to have known the area and this and that. And some folks say, hey, okay, cool. Some folks say, hey, thanks. But then they put in an offer anyway. So I think to your point as fiduciaries, We have a legal responsibility to. Take a circumspect process to make sure folks are going in with eyes wide open. and then that decision is going to be theirs. I just want to know more about the investment or the second home. Cause I know a lot of pilots that I talk to, they’re interested in potentially doing real estate investments either through single family homes that they want to manage themselves, or maybe they want to go through syndications or what have you, but I’d love to hear what you’re seeing and what you’re working with in terms of second properties.
Bobby:[00:26:56]So I see a lot of that too. As you know, I live in Key West and on the real estate side, on the loan side, I’ve got a decent amount of people calling and going, Hey, an Airbnb. We want a VRBO. We want it in Key West. We want it like, One block from Duval Street, or maybe they want it up in Sugarloaf or Cudjoe near the water. But yeah, I get those phone calls fairly often. Or on the other side, I get, Hey trying to find a place to stay. It’s crazy. Crazy expensive. So can you possibly help us get a place in the base? Or you make a recommendation? And it has gotten really, really crazy. Just a little bit of history here for Key West, but recent history. Right now there’s a hundred million dollar airport renovation at Key West International, and that came about just a few years ago because during COVID, you had, the restrictions and people that carry COVID cards, people had to wear masks or not wear masks. But, you know, I’ll argue that Florida Governor DeSantos, he did it better.
[00:27:47]They made it more relaxing than others. And people will argue, you know, there. X amount of deaths and all that. I get it. But the end result was a lot of people wanted to come to Key West because they couldn’t leave the country because of COVID and all the restrictions. So they wanted to get as far away as they could. They didn’t want to deal with. Masks and restrictions. So they did. They came and if they had a home down here that was a second home or a third home or whatnot, they’d come and live and work remotely from their homes down here. And, you know, they just stayed Key West was also fairly isolated in
the beginning from COVID just because of its, remoteness and 42 bridges to the main line and cruise ships were cut off.
[00:28:24]But the end result of all this was people wanted to buy in Key West and the home prices just surged to the point of, doubling, almost tripling in the last four years. People couldn’t come via cruise ships. So now they want to come via air. So 2021 is the first time over a million air passengers come to Key West. And then the numbers just keep getting bigger and bigger. You know, every month they put it out, like 13 percent for the month of June compared to last year, greater than the number of air passengers. And that’s why they’re doing this, these seven terminals at the international. So demand is high. Also, if you had folks that grew up here, several homes, you know, maybe three, maybe 30, and they’re doing long term rentals. Well, now they’ve decided. Let’s not do it long term. Let’s turn them into short term. And they have certain rules in Monroe County, Florida. So you don’t have a transient license. You have to do a minimum of 28 day rentals, but these folks that were doing 12 month annual leases are now doing one month rentals and tripling their income.
[00:29:23]Sounds great and all, but what’s happening is they’ve been driving out the, the blue collar workers, the middle class, you know, your hotel workers, your restaurant workers, so we’ve got a problem. So now you see a bunch of affordable housing being built up. He’s got affordable. You think, you know, low income, but this ain’t low income.It’s six figure income. You qualify for these homes. So that’s just kind of painting a picture for where we are in Key West. And now you’re talking second homes. The rates, well, it’s going to cost the same, but if you’re not a cash buyer and you’re taking a loan and the rates are going to be a little bit higher. And then when you’re looking at having a property, that’s not your homestead property, you’re going to pay more taxes as well. So it may or may not make sense. The folks that I’m seeing coming down that are doing the best are those that could come down and sometimes I’m like, who are you?
[00:30:07]But they’ll come down and they’ll just buy a seven figure home with cash. They could self insure if they want to, which is also a preferred choice by a lot of people because the insurance rates in the state of Florida, they just keep going higher and higher because Florida has been hit by a lot of storms and will continue to be hit by a lot of storms as we’ve seen in the past. And the fear of megastorms, so it’s doable. And again, I can only speak to South Florida for the real estate side. Other parts of the country, you know, it makes sense to go and do it. And folks can do it.
Tim:[00:30:39]Trident, to you guys, like which kind of loan product are you looking at or working with for somebody who says, hey, I want to do an Airbnb. I want to have a second property. That’s going to be primarily investment.
Bobby:[00:30:51]Yeah, so you can’t do a VA because the VA has to be your primary residence. So we’re doing second homes. They’re doing conventionals. You’ve seen at times, you know, folks may want to do FHAs. They want to come in and plan it out for the next five years, see how things are rolling and then turn around and sell the home or refinance the home or, or, or go, go with that.
[00:31:10]Exactly, so up front you get in and it doesn’t cost you as much and then you see what it’s going to do. What’s it going to bring you for cash flow? What’s it going to bring you for, for a month a month? Do the numbers make sense? And if they do, you know, that’s, that’s a way to get your foot in the door. And then after you get it going, get it flowing. Then you can think, okay, now do I want to go ahead and refinance it to a 30 year as a second
home or do I want to refinance to a 15 or, or whatnot? But exactly. It’s, it’s getting in, getting your toe in the door and getting started.
Tim:[00:31:40]Okay, we didn’t say this out loud, but I’m pretty sure any service member listening knows, but Jess, if we could paint with big fat crown, the benefit of the VA loan is what?
Bobby:[00:31:48]So the benefit of the VA loan is you’re going to get a lower rate. There’s no requirement to put money down. You’re not going to pay PMI, so private mortgage insurance. Another benefit for the VA loan is you have to wait 210 days. You have to season the loan and after the first payment. But if rates drop 0.5, it’s called an Earl. So it’s a VA interest rate reduction loan. And what that allows you to do is 0. 5 or greater for the reduction. It’s a low cost refinance. So it really is like one of the best deals out there. So you don’t have to go back and take another credit hit. For most of the banks you don’t have to go back and get another appraisal or home inspection it’s just streamlined. So it’s, beautiful thing. And you can do it over and over again if the rates keep dropping. So that’s the benefits of the VA loan. A lot of people are afraid of the VA loan.
[00:32:36]A lot of realtors are afraid of the VA loan. There’s a misunderstanding that a VA appraisal is going to be harder than a regular appraisal. I don’t know where it’s come from or why that is. And, there are some benefits that are provided to the veteran or the active duty member taking a VA loan. But all in all, the VA loan is the best thing that’s out there. And if you’re entitled or eligible, I should say, to use a VA loan and it’s going to be your primary residence, then there’s really no reason not to do it. It just makes all the sense in the world.
Tim:[00:33:02]I’ve got one more question on VA loans. I mean, with one of the benefits there is. You don’t have to put any money down. What are you seeing, given where rates are, are your clients bringing money to the table with a VA loan, even if they are not required?
Bobby:[00:33:17]You know, last year, November, December timeframe, we were seeing probably 7.25 somewhere right around there. And then last week, you know, they ticked up just a little bit. So maybe 6.25, but we’ve seen the drops there. So when you’re doing a VA loan, you can bring more money. You can, buy the rate down, but we were going to advise people to do is, you know, just. And there’s a saying out there, you know, you marry the home price, but you’re dating the rate. And if the rates drop, you can do a low cost. I almost want to say no cost, but low cost because it’s, it’s, it’s pretty dang cheap, but you can do that refinance. And again, it depends on whether you have to pay the funding fee or not. If you have a VA disability rating, you don’t, if you don’t have that disability rating, then you do. But the point being is you might bring extra money to the table, by down the rate and then guess what?
[00:34:07]Six months later, a year later, the rates drop anyway. So that’s a sunk cost. You, you paid that. You’re not going to get that back. So for the most part, we advise them not to do that because you’re already getting a better rate. probably, almost a full point better rate than, than if you went conventional. So it’s like, why do that? And then you can put your money elsewhere. I mean, you know this better than I do. But if I’m, you know, I got a VA rate and it’s X percentage, especially when they’re down to twos and threes and I can go and throw it in a, in a money market and make more than that. And then why would I not do that?
[00:34:36]And again, it could be a little bit more work or you maybe have to hire somebody, but just maximize what you can do with your money. And then. Others will talk about, you
know, how much you want to commit to the home or not, but again, VA rate, for the most part, you see VA loans, cheapest rates no down payment required, no PMIs, don’t have to worry about putting 20 percent down. And then you can work that out for 30 years. I mean, it’s a beautiful thing. And then the other Benny too is say you live in a location for we’ll say three years And then you pcs permanent change of station to the next duty station, even though it’s a va loan you can keep it as a va loan and you can rent it out To the next person who’s coming in who doesn’t want to buy and then i’m not sure if people know this or not But there’s a two and five rule where if you live in a home for two years and it’s your primary residence within the last five You can sell the home and take, as a married couple, up to 500, 000 tax free, single, 250,000 tax free.
[00:35:30]Well, if it’s in the military, you have to check with the IRS publications. If you live in it two of the last 15 years, you can do the same thing. So there’s a special benefit for the military. So I’m sitting there going, you buy a house, you live in it with a VA loan. And then, again, it doesn’t have to be a VA loan, you live in it two of the past 15. But you could let that appreciate, you know, appreciation, home ownership. It’s all about time. It really is. So why not, if you’re in an environment where you can, you know, and some people will say, I need to make 200 a month minimum net profit to keep the home. It just depends on the person.
[00:36:04]But I didn’t know this until I got to the real estate business probably four years ago. And it’s like, man, and I, I forgot when that rule was put in, but the two and five, I’ve seen a lot of folks in the military, like I said, I moved every 18 months, but if you move. They have three. I’ve got that you’ve got two of the last five minutes. I’ve got three years I can rent this out for two years we’ll say and have a year of slop and then I can go ahead and sell it and take it If there’s, a profit the two and 15, now you can start stacking homes, you know, talking about second homes and investments and you have to live in a two of the last 15.
[00:36:40]So, you know, you can, you can do the math on a piece of paper, but you do too. And you keep it, do you buy another one? Now, can you keep doing VA loans? Well, the answer is yes. Do things change though? Yes. But if you have entitlement, you can do that. But again, it can get a little bit more complicated. Will folks do that or not? Yeah, they’ll do it. Of course they’ll do it. Yeah, it’s kind of, it can be kind of fun, you know, and that I’m a big advocate of not paying your taxes, but I’m also a big fan of, I don’t make these rules, so I will abide by these rules and I will try to try to make max benefit for myself and other individuals as well. So that’s how we do it.
Tim:[00:37:16]No, the tax code is written to help you understand where you do not have to pay. There’s very little of it that discusses where you do have to pay. So to your point, it’s allowed, as fiduciaries, we’ve got to tell the people. This has been an excellent conversation. I’ve learned a lot, tried at home loans owned by pilots, operated by pilots, tell us, you know, when people should give you a call and to help them better understand their mortgage options.
Bobby:[00:37:48]Yeah so, they’re considering buying, you know, and again, the timeline is their timeline. It’s, that’s, that’s their life on what, when they want to move and how they want to do it. But if they’re considering buying, they should give us a call, get pre approved. We should, we, we do basically pre approved, not pre qualified just about everybody. Our team, it’s fantastic. So many good people work and try to home loans with, you know, 17 years plus others have been in the business longer than that and moved from other companies that tried it. But 17 years experience, the customer service, you can go on Google, you can look, last I checked, it was like 955 star reviews. I’m sure it’s, it’s, it’s more than that now. One of the owners, Marty Medvey, was the number one VA loan originator in the country back in 21
and 22. And I don’t know, he’s been in the top 10 for, I don’t even know how long. So we’ve also, we’ve got others that are, that are there, I think we have three in the top 20.
[00:38:36]We’re talking, you know, half a million again, as it’s a big number, but half a million alone originators out there. And we’ve got folks that are the best of the best. And, and, you know, I, I learned from them all the time talking with them and inspired by them. And, uh, it’s great. And trying to almost, like I said, we’re just not here to go, okay, I’m going to give you a loan, charge you a rate. We’re all about the best loan based on this specific situation. And we talked about a couple different scenarios, but that’s how we roll. And again, end of the day, if somebody can beat us, which happens every once in a while, but not all that often, then we’re going to say, hey that’s a better deal. That’s a better package to go with them. And even then we’ll still support them and back them up and, and make sure that, you know, they understand what they’re getting into and what they’re doing, but, uh, if you’re in the market, you’re considering buying a home and give us a call absolutely.
Tim:[00:39:22]Well, this has been great fiduciary for life. You heard it here first. I love that. tag. So Bobby Baker, thanks so much for coming on the pilot money podcast.
Bobby:[00:39:30]Awesome. Thanks. It’s been great to be here. Thank you, Tim.
Tim:[00:39:33]That brings us to the debrief section, the first thing I want you to think about is: what do the recent rate cuts mean for you. So maybe you secured a rate during the pandemic, and you got a beautifully low rate, so maybe the recent rate cuts don’t mean anything to you. But maybe you bought a home in 22 when rates just increased, I think the fed rates raised up like five times, it was crushing. Okay, so maybe you gotta raise in 22 or 23, when rates were higher by comparison, still historically not as high as they’ve been in the past but by recent history they’re higher by comparison.
[00:40:16]So, does the math make sense to refiy? And notice how I say, does the math make sense? Cause a lot of time there’s a nedric reaction, like hey, rates have dropped, I want to refiy. But be careful, in terms of what are the fees that are gonna be associated with the refiy. Bobby talked about the earl, so if you have an earl you can do a VA, your rates will drop by half of percent. But what if you don’t have a VA, so run the numbers, see what the fees are going to be, see if it makes sense. When is the break even point on the refiy? Does it make sense long term? Is there a benefit long term? Is there a benefit short term? There’s alot of factors, how long have you had this current rate? What’s your pay off? What the new rate is going to be. Do we have expectations that rates are going to drop even further than they are now? So point number one: What do the recent rate cuts mean for you?
[00:41:12]Point number 2, we’ve probably talked about it and just a simple google search, you’re gonna find that there are multiple mortgage products out there,and just like any financial product, there’s not one size fits all. Right, so there’s the conventional, there’s the VA, there’s the FHA, there’s arms. And you’ll remember those from the great recession, where you’ll remember there’s construction loans. And each one represents a different tool that you’ll use for a specific purpose. And so take some time, educate yourself on the different options, talk to people, do your research, read about them to see which tool is right for your goal.
[00:41:51]And then the third thing that I want you to think about is what is the best real estate move for you right now? And primarily i’m thinking about your primary residence, so Bobby mentioned it and I’ve talked about it on the show, I talk about it in our practice. You know sometimes pay scale hasn’t caught up in you know where home prices are in your local
market, just yet. And that brings you to a major decision point, how much risks you introduce to your financial situation right now, or is this a thing where it’s now even required. Right? Maybe this is gonna work itself out in a year or so as you move up the pay scale. And so when you think about what’s your best real estate move right now. Whether it’s your primary residence, whether it’s a vacation property, maybe it’s an investment property. Right? And as you think about how the rates have come down, is it time to jump in or is it not? How does it fit with your overall financial goals? And that’s why I love financial planning by the way. Because a lot of times there’s so many competing goals in your plan and a lot of these decisions are not made in vacuum. Theres, hey if i make this one, what is the trade off over here? How does that impact me on the short term or the long term? Right, and you get to put all the pieces together, how are these going to work together to help your short, intermediate, and long term goals? So with that thanks for joining another episode of the pilot money episode and we’ll see you next time.