3/19/25 Hidden Opportunities: Navigating Foreclosures, Reverse Mortgages, and WEP Changes

The Moneywise Radio Show and Podcast Wednesday, March 19th BE MONEYWISE. Moneywise Wealth Management I "The Moneywise Guys" podcast call: 661-847-1000 text in anytime: 661-396-1000 website: www. MoneywiseGuys.com facebook: Moneywise_Wealth_Management instagram: MoneywiseWealthManagement

• 0:00Speaker 00

  From the padded radio room off Stockdale Highway, here is Money Wise. Call or text in at 661-396-1000.

• 0:09Speaker 01

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• 0:30Speaker 01

  Securities offered through SEF Securities, Inc., member FINRA/SIPC. Investment advisory services offered through SEF Investment Advisors, Inc. SEF Securities, Inc. and Money Wise Wealth Management are independently owned and operated.

• 0:40Speaker 00

  Now, let's start the Money Wise Show.

• 0:43Speaker 02

  Welcome to the Money Wise Show. We are live from the Gero Ellis padded radio room off Stockdale Highway on ESPN Bakersfield, 1230 a.m., 101.1 FM, and always streaming at MoneyWiseGuys.com. You can text into the show 24 hours a day at 661-396-1000. Today, we're your hosts. I'm Sharad Waite and...

• 1:03Speaker 03

  Seth Perry.

• 1:04Speaker 02

  Seth Perry, good having you here.

• 1:06Speaker 03

  Thanks, man.

• 1:07Speaker 02

  You know what's great about today's show? Well, I mean, nothing against our guests, but today, it's just you and I and Stevie. Just the three of us.

• 1:15Speaker 03

  Just the three of us.

• 1:18Speaker 02

  Listen to that voice. It's just, I'm really excited for today's show. We're going to start the show off with reading some messages from listeners and encourage anybody who's out there listening, send in a message, comment, question, send them our way, 661-396-1000. That's the number that you can text. So, let's get to it, Seth.

• 1:41Speaker 03

  Let's do it.

• 1:42Speaker 02

  First question is, "I'm considering converting my garage into an ADU rental unit. Would you guys happen to know if there's tax benefit or credits that could be available in California for creating additional housing?" So, you know, both you and I had to look into this a little bit because we weren't familiar with any grants or credits. And so, doing a little research, first of all, an ADU is, what does it stand for?

• 2:11Speaker 03

  Additional Dwelling Unit.

• 2:12Speaker 02

  Dwelling Unit. It's a fairly new phenomenon where the state of California changed its laws where you could...

• 2:22Speaker 02

  Essentially, it forced the cities to allow people to build these units on their own property as a way to fight against the lack of housing. We have a severe lack of housing in the state. And so that opened up, there's a lot less regulation involved in creating an ADU in your own property. And so I think that the first thing is to address the grants. Neither of us were familiar, but I did a little research. There is a grant that is available through the California Housing Finance Agency. It offers up to $40,000 to help pre-development and non-recurring costs like permits, design fees. But you

• 3:07Speaker 02

  have to meet certain income requirements. And the income requirements are your income needs to be less than 80% of the area's median income. So, or the county's median income. So, for instance, in Kern County, where we are here in Bakersfield, the income limit is about $60,000. So that means you have to make less than $60,000. And it needs to be an owner-occupied property, which means the applicant must own and occupy the property where the ADU will be built. So, you know, there's a few other restrictions. The property

• 3:50Speaker 02

  must be a single-family home, or a two-to-four unit residence. And the property should be free of any outstanding liens or judgments to qualify for the grant. So those are the main qualifications. So, right there, that's going to disqualify quite a few people because, owner-occupied, for once, like, well, I don't know, maybe I could see a scenario, maybe where that could, that could work for somebody. But in terms of other credits or other impacts or benefits for building or creating ADU, it would be pretty much the same benefits that you would get from another rental property that you would have. So if it's rented out, for example, you can, there's some depreciation

• 4:35Speaker 02

  that you can participate on, which means you can depreciate the cost of the construction over a, over many years, helping offset some of the income that you would be receiving. So you have to be renting it out. And that, of course, that rental income counts as income towards you, but you can deduct some of the, offset some of that income by that, by the depreciation. This is something your tax professional would do, would help you with on your taxes.

• 5:02Speaker 03

  This one's kind of interesting, too. The more I think about it, and I'm listening, the listener called it an ADU rental unit, but it's, it's kind of like just a home addition. So I'm wondering, you know, it's just, he's converting a garage in this case.

• 5:15Speaker 02

  Right.

• 5:16Speaker 03

  So definitely one to chat with your tax professional about, to see about. There are a lot of tax advantages.

• 5:22Speaker 02

  Yeah.

• 5:23Speaker 03

  But then I'm thinking, you know, handyman brain is thinking, man, the electrical plumbing in your garage.

• 5:29Speaker 02

  Right. Yeah. Maybe it's a detached garage, which

• 5:33Speaker 03

  That would make more sense.

• 5:34Speaker 02

  Make more sense. But even then, it's going to be, it's expensive. Remodels are very expensive. And so, you know, you're, you're weighing all of these costs versus what benefit you're going to get back from it. I've, I've been shocked. I'll occasionally just peruse Zillow or listings and I've seen by far, it's just anecdotal, but a lot more homes that have these ADUs. Maybe it's also the aging population. It's very popular. I know many clients who have built ADUs for their mother, for their mother-in-law, mother, like the old mother-in-law's quarters. Is that, is that not PC anymore to call them? Mother-in-law's quarters? Everybody knows that. You say ADU.

• 6:11Speaker 03

  Yeah. What's an ADU?

• 6:12Speaker 02

  I know what mother-in-law's quarter is. But, you know, there's, it's, I like that fact that California is trying to do something to make it easier for us to build on our own property.

• 6:23Speaker 03

  Have you seen the prefabricated ones?

• 6:24Speaker 02

  Yes.

• 6:25Speaker 03

  Prefabricated ADUs?

• 6:26Speaker 02

  Yes.

• 6:27Speaker 03

  You know, you, you might save a little bit, but they're kind of packaging it like, hey, if you're a handyman, here's your, and I guess it just literally comes out on a, on a trailer and they just unload everything, like literally everything. And if you're handy and special enough, you can put this thing together, but it's like, I think about putting a shed together. That's a project. Imagine putting a house together.

• 6:46Speaker 02

  I've seen the ones, you've probably seen the same ones that they have them on like Amazon and it's like, it's like it unfolds, you know, like the walls.

• 6:54Speaker 00

  It's a pop-up house?

• 6:55Speaker 02

  Like a pop-up house. Yeah.

• 6:57Speaker 03

  I've seen some of those out here by the river too, but I don't, I think those are different. But.

• 7:03Speaker 02

  Yeah. So hopefully that helps our listener there. If you're considering that ADU, hopefully we gave you some, some information to chew on there. We got a, another question here from a listener, again, 6613961000. That's the number that you can text anytime. We'll be happy to help. Here it is Seth. It says, good morning, Money Wise. Does age affect a mortgage loan? Sending love and goes on to say, sending love and prayers to Gero and really excited to take my children to Woolworths once it reopens. God bless. So God bless you. Thank you for that. And thanks for the love and prayers to Gero and his family. And yes, bring your kids by Woolworths.

• 7:44Speaker 02

  We're so excited for that too. We can't wait. It'll be our new offices in just, just about three months.

• 7:50Speaker 03

  I think the number one question I get from clients and friends when I'm telling them, is the burger counter gonna be there? Absolutely.

• 7:55Speaker 02

  Yeah, for sure. The burgers, fries, shakes. We got to do a little taste testing, didn't we?

• 8:01Speaker 03

  Absolutely. Yeah, we did.

• 8:03Speaker 02

  That was really, really fun. Our chef, Richard Yoshimura, who was one of the founders of Moo Creamery and has a, has a great resume. Treated us to some, some of the, the pre, the pre-menu taste testing. We're really excited.

• 8:20Speaker 00

  I'm gonna, I'm gonna get him on the show before then.

• 8:23Speaker 02

  Oh, for sure. Oh yeah. It'd be great to have Richard on. He's fantastic. So let's answer this Seth about mortgage loans.

• 8:32Speaker 03

  You know, reading the question, um, does age affect a mortgage loan? Well, my question back would be, is the mortgage loan in place currently? And then in that case, no. The age would not affect, but the age would affect if you're going to apply for a mortgage loan. And there's a few different reasons why. Now while they can't. Use age-based discrimination. They kind of have their own underwriting guidelines. That does prevent an older person who might be on a limited income from qualifying for a loan.

• 9:05Speaker 03

  Age 70 and higher, the rates of rejection is just skyrocket from there. And then there's a little bit of theory that part of that could be just the, just the age of the, of the potential loan purchaser that they just might not be shopping their loans around enough. And this is outside of that question, but it's always a good idea. I am surprised somebody if they're, if they're going to buy a TV, you know, like, like myself recently just bought a new TV, you know, Walmart, Costco. I'm, I'm learning what 120 hertz is. I'm, I'm studying these, what is 4K, all this and that. But when it goes to a home loan, some people just go to their Aunt Betty and, and sign up for the first thing they see and they're committing to a 30-year note.

• 9:47Speaker 02

  Right.

• 9:47Speaker 03

  30 years, 360 payments. It's worth doing research. Don't ever be afraid to hurt your family or your friends' feelings. You know, say, hey, you know, I'm just looking to make the best decision I can and shop it around.

• 10:00Speaker 02

  Yes, definitely. I think, yes, what you said Seth is they, the, the lender cannot deny you a mortgage because of your age. It doesn't matter how old you are. And this is the protections under the Equal Credit Opportunity Act, which has been in place for many, many years across the country. But what they can deny you for is your ability to repay. And so it would make sense that statistically, like you said, the older you get, once you get over 75, then it starts to go, you get start declined a lot more because what they're looking for with the mortgage lenders looking for is just your, how, how likely it is that you'll be able to make those payments.

• 10:38Speaker 03

  What's the risk? What's the risk this person's gonna make their payments?

• 10:41Speaker 02

  And, and if you're, if you're in your, you know, late 70s or 80s, generally you're not work, working. And so you don't have that income. Maybe you just have your social security or pension, which the, the lenders will take that into account. They'll take into account your, your, your pension and your even annuity payments or other rental or investment income. But you know, for most of us, the largest share of our income is from working and our paycheck. And so, you know, if you're not working in your 80s, It's not because your lenders will say it's not because you're 80, it's because you don't qualify for the income portion of it. But also, good advice on just shopping it around. I am also

• 11:22Speaker 02

  surprised at how often people just go, okay, I guess this is it. They think it's like a standard rate or something, you know, a standard cost. And you can definitely want to shop that around. Good stuff. Let's go to another listener message. It says, hi, Money Wise. My aunt is 85, and she's outlived her money. She's looking at getting a reverse mortgage on her home, and it's paid off. And I believe it's valued at about $400,000. What do you think? And I also believe that you had a young lady on the program this last year talking about reverse mortgages. Can we get a name and a phone number? Thanks. So, we couldn't remember

• 12:03Speaker 02

  having a guest on, at least in the last 10, 15 years. We did a little research. It was like, I'm not sure who that was. And so, can't give that recommendation. However, we have had Alan Maderos from Agape Mortgage on. He also deals with reverse mortgages. And that is somebody who we could recommend. We're not mortgage specialists. We do know a little bit about reverse mortgages, though. And I have seen reverse mortgages be like, a great thing for some people. And then for others, I've seen it be a total disaster. But the disaster doesn't come from what I think the biggest misconception is on reverse mortgages, which is they feel

• 12:45Speaker 02

  like, a reverse mortgage, essentially, you're writing your home, you're writing your home off, and you're giving it to the mortgage company in exchange for some money. That's not what the, that's not what a reverse mortgage is. A reverse mortgage is using the equity, or at least a percentage of that equity in that home, and not needing to repay it back until death, or until you move out of the house. Then it needs to be settled. And it's taken out of the equity that is left in the home. So- It's not, I think a lot of like beneficiaries, like kids or grandkids think, oh, you know, grandma had a reverse mortgage, that means when she passes, there's nothing left in the

• 13:29Speaker 02

  home. No, that's not necessarily the case, because the mortgage company isn't going to allow you to withdraw all of the equity from the home. It's going to be limited on how much that you can, you know, how much you could withdraw from the home. It's a significant portion, but it's not, I don't think it's more than, you know, 60 or 70% of the equity.

• 13:54Speaker 03

  Silly question. I got a silly question for you.

• 13:56Speaker 02

  Yeah, yeah.

• 13:57Speaker 03

  What if you were on the tail end of your mortgage, maybe you have five years left to pay, you owe $50,000, right? Can you then take out a reverse mortgage to have it cancel your original debt? And now you're, I don't know.

• 14:12Speaker 02

  Yeah, yeah, you could, right? I believe you could, because let's say you owe 5% left on the, on the home, but you're going to get a reverse mortgage where you're going to access, let's say, 50% of the equity. So, yeah, so it'd be, it'd be equivalent of like getting a home equity line, paying off your first mortgage, but now you have that equity line that's still there that you're paying on. The difference with a reverse mortgage and why people use a reverse mortgage is because you don't have to make those payments.

• 14:42Speaker 03

  Yeah.

• 14:43Speaker 02

  It'd be cheaper in many cases just to get a home equity line.

• 14:46Speaker 03

  Yeah.

• 14:47Speaker 02

  And just, you know, pay it back over time. You have, you know, it might be a little higher interest rate, but it could be a lot less expensive, because a reverse mortgage does have high upfront costs. They generally are going to charge for mortgage insurance. You have a mortgage insurance fee, which can be up to 2% of the home. And then you have your closing costs and escrow and some of those other costs, which can account for oftentimes more than $10,000. So, it's, it's pretty significant upfront cost to go into the reverse mortgage, but the benefit is you don't have that. Payment while you're alive and it's just going to be settled.

• 15:30Speaker 02

  The loan will be settled when you die or when you move out of the house. Which brings up another concern for some people is, well, what if you're in the home? And you have a reverse mortgage and you need to leave the home because you need to go to a skilled nursing facility? Or retirement residential care facility? Well, guess what? Now you've got to figure out a way to resolve that. Maybe you have to sell the home or you have to figure out a way to pay off the loan. Because reverse mortgages are for occupied. You have to be living in the home. So those are some of the nuances to be aware of. We'd highly recommend though, if you're considering reverse mortgage, talk to an expert. Talk to a mortgage expert and find out more and see if it makes sense for you. So there you have it Seth. I think we answered those questions.

• 16:15Speaker 00

  Sounds good.

• 16:16Speaker 02

  Let's take a quick break. We come back, we've got a lot to talk about, including the Fed has come out of their two day meeting. Give us a little bit more insight about where interest rates might go. We're going to cover that when we come back. We're Money Wise.

• 16:27Speaker 00

  Don't forget, Money Wise is more than a radio show. We're an independently owned local wealth management firm with 60 plus years of collective experience. Our financial advisors are here to help you Kern County. Together, let's be smart, be safe, be money wise.

• 16:49Speaker 02

  Welcome back. We're Money Wise. We're your hosts today. I'm Sherrod Wake here with Seth Perry. We were just talking Seth about reverse mortgages and the, you know, one of the, one of the issues with them is that if you're, if you have a reverse mortgage and you go into long-term care, well, you got to figure out how to settle that reverse mortgage. Which kind of led us to, we should, we should cover a little about long-term care.

• 17:13Speaker 00

  Yeah.

• 17:14Speaker 02

  And you've got some statistics.

• 17:16Speaker 03

  Yeah, so you know, when we're working with clients and something that our listeners should be thinking about is, you know, there's the, there's the end goal, right? There's the end game, getting to retirement. That is not, that is not the end game. You have to now make sure that your money is there for you. It provides for your needs. You're able to do the things you want. Medical costs are covered, right? But then the final piece, not a lot of people get excited to talk about, but we're going to talk about it because it needs to be talked about is long-term care. And so what long-term care is, is if you need to go into some type of a skilled nursing facility, or if you need to go into a full-service care, like if perhaps a family member is bedridden, those types of things. So the average stay currently in the US is 3.7 years for women.

• 18:01Speaker 03

  Meaning if, if on average, if a woman needs to go into a long-term care facility, she's going to be there 3.7 years. And for a male, it's 2.2 years because we, as men, don't live as long for a ton of different reasons.

• 18:16Speaker 02

  Right.

• 18:16Speaker 03

  A ton of different reasons.

• 18:17Speaker 02

  Yes. So the, the odds of going into a, into some sort of care facility are, are super high. It's like half, close to half, I believe, of us will spend a significant time. Well, like you just said, you just gave the numbers of the average time spent in long-term care between two and a half to just over three years, depending if you're a man or a woman. That is like, if you think about like fire insurance that you get for your home or like homeowner's insurance, you know, the odds of your home catching on fire are

• 18:54Speaker 03

  Very low.

• 18:54Speaker 02

  Very, very low, but like it's required.

• 18:57Speaker 03

  Yeah.

• 18:57Speaker 02

  Like you can't get a mortgage if you don't have homeowner's kind of stuff. So, and yet the odds are so low. But you know, if somebody were to tell you that you had almost a 50% chance at some time in your lifetime, your house is going to catch on fire, you, like you buy that insurance right away.

• 19:12Speaker 03

  Right.

• 19:13Speaker 02

  The problem, and I've got a big time issue with long-term care insurance, and it's that we have

• 19:21Speaker 02

  Some of it is covered by Medicare. Medicare does cover some long-term care. In fact, right now Medicare covers up to 100 days of the highest level of long-term care, skilled nursing coverage. That's that $8,000, $9,000 a month cost. Not residential care or assisted living care. That's not a medical, that's not covered by Medicare. But Medicare does cover those times where you are needing, you're not in the hospital, but you're not going home or you're not going to a residential care facility. For, you know, a lot of people, that's enough coverage

• 20:06Speaker 02

  to figure out what's going to happen. Medicare doesn't pay for, what will happen is Medicare will cut off your coverage, less than that 100-day coverage, if you're not showing improvements. So for example, if you're in the hospital or you have dementia or Alzheimer's where it's a chronic illness, where there's no cure, like it's degenerative, then Medicare can cut you off sooner. And then at that point, your only options are you privately pay or you have some form of insurance. And so you pay into this long-term care insurance when you can qualify for it, which means you're healthy.

• 20:49Speaker 02

  And so you're buying into this for years and years because you're buying in when you qualify for it and you're healthy, and then you may never need it. And so I see some times where people can't, really can't afford it. And yet they have it. And now they're like getting ready to lose their home. And it's like, well, this is terrible. Insurance anyways is just sort of like this game that nobody likes to play. You're just, it's you against the insurance company, you know? And you're just hoping that you outlive the odds. But in this case, if you outlive the odds, now you've paid into this insurance for all these years,

• 21:33Speaker 02

  which kind of leads us to that there are some hybrid products, which doesn't, which can allow you to not totally lose control of the assets that go into the insurance. And I'm thinking of like the You know, some of these annuity products that have

• 21:52Speaker 03

  Long-term care writers.

• 21:53Speaker 02

  Yes, long-term care writers. So it's like, you know, you deposit a hundred grand and on top of that hundred grand, you're going to get an extra hundred grand or more that can go towards coverage in home care or assisted living. And that that can make a little bit more sense. But again, you got to have the money to be able to, you know, put into into some of these products. And

• 22:16Speaker 03

  And they're highly commission driven. I mean, let's be honest, a lot of the the just, you go to a place that that's where they specialize insurance. There's, there's a lot of just commission driven stuff. And I always offer myself, hey, if you want me to evaluate a policy, you want me to take a look at something, I'm going to tell you exactly, you know, exactly what it's going to do, exactly how much money the agent is making. As I started out in this industry, doing a lot of permanent or cash value life insurance. I was trained, hey, this is the best thing man's ever come up with. And, you know, not necessarily.

• 22:48Speaker 02

  Yeah, for sure.

• 22:49Speaker 03

  Not necessarily.

• 22:50Speaker 02

  Yeah, no. And know that, you know, there, some of these products can be advisory products, insurance products, which is the that your advisor is just paid a fee, not a commission. And so it can, they're really nice. Life insurance, for example, you can get, you can get a life insurance policy, at least some of the permanent or whole life insurance where it's, it's an advisory product. So there's no commission that's being paid out to the, to the agent. But the the advisor can still get paid, you know, a fee that you would say 1% is kind of like a standard advisory fee.

• 23:24Speaker 03

  And they carry a death benefit still, right?

• 23:26Speaker 02

  Yeah, exactly. Has all the bells and whistles, but you get, you know, when you're talking about life insurance, the commission is generally the first year's premium, amount of premium. So, you know, you're paying whatever 10 grand in premium.

• 23:42Speaker 02

  That agent's getting paid 10 grand. If that 10 grand could just stay in the form of reduction of the cost of insurance, oh, that's great. I'm a big fan of all of those. Another part of this long-term care is in the state of California. You know, we're kind of very, we kind of lean socialist, socialist, you know, where we have like a lot more programs than a lot of people would like to pay for. But for better or for worse, California has a long-term care program that's administered by Medi-Cal, which Medi-Cal has a lot of programs for indigent and people who don't have assets.

• 24:23Speaker 02

  But when it comes to long-term care, it's different because the state of California views it as, especially when you have a husband and wife, they're concerned about somebody becoming so impoverished that now they have to go on to the welfare side of Medi-Cal. They become a burden to their family and now it doesn't serve anybody a benefit because they've had this health event. So the California has significantly changed the qualification limits for how much you can have in assets to be able to qualify for Medi-Cal. And the asset test has actually been eliminated, starting in January of 2024, for many of

• 25:07Speaker 02

  those who would qualify for the long-term care under Medi-Cal. So even before this elimination of the asset limit, a married couple could have almost $200,000 outside of your retirement. So all retirement funds were exempt, your home is exempt, business or rental property was exempt. And on top of that, you could have $195,000 sitting in the bank and still qualify. Well, now that asset limit has been eliminated, so there's no limit on how much you can have in assets. They will look at your income to determine what your share of cost is, how much your portion is that goes into it. But it's not going to exceed your income, a total income. Yeah. At least if you're a married couple. And even if you're a single person.

• 25:52Speaker 02

  It would be fair that all of your income was going towards your share of cost, you know, minus maybe a little bit. And so, you know, the state of California does have some protections for that. Again, it's just the highest level of care, that skilled nursing care. Nobody goes to nursing home willingly. Like, you're not-

• 26:11Speaker 03

  It's difficult, man. We have dealt with that in my family and thankfully, you know, the family was able to pitch in and, you know, pretty much work shifts. We had a calendar, working shifts, you know. It's difficult. These are conversations, again, not the most exciting, but I encourage you guys, you know, have these conversations with your parents. You know, you might get shot down a few times, but, you know, start to at least open the dialogue and start having these discussions. Now, you mentioned the elimination of something, and we always have here what's I like to call the show before the show. And we were talking about the windfall elimination provision, as well as the government pension offset. And come to find out, true story-

• 26:53Speaker 02

  Let's take a break. Let's take a break first, and then we come back, let's talk about that. The windfall, this is huge. And we've got some real life stories. Plus, we've got a listener message here asking about foreclosures. Great question. Keep them coming our way, 661-396-1000. We'll be right back.

• 27:09Speaker 00

  Need to get your financial fix on the go? If so, subscribe to the Money Wise Podcast and catch up on all past shows.

• 27:21Speaker 02

  Thanks so much for tuning in. We're Money Wise. I'm Sharon here with Seth. We are answering your questions and comments.

• 27:30Speaker 03

  Great questions today, guys.

• 27:31Speaker 02

  Yeah. We've got another one here, Seth. It says, "I've heard you guys discuss some properties..." Oh, that's a different one. I'll get to that. It says, "What is the risk of buying a foreclosed home here in town? I've never tried, but a few buddies of mine are wanting to buy a few. But I have a lot of questions and wondered if you guys may know or have heard of anything when it comes to foreclosed homes?" We do. Actually, we're just talking off the break. You were talking about some experiences with foreclosures, Seth.

• 28:00Speaker 02

  Generally speaking, though, with, you know, my advice with buying a foreclosed home is that it can be a great, it can be a great thing. My home that I live in now was foreclosed on. It was a, it was a bank owned property. I bought it in 2009. And got a great deal on it. I was able though to walk through it. I was, I had a Realtor that, you know, helped me with the process. And, um, you know, it was, I, I knew what I was getting myself into. I was buying it for a residence for my family. And I've loved it. It's been, been fantastic. If you are buying a foreclosure though, like at auction, sight unseen,

• 28:42Speaker 02

  that, that raises a whole new level of risk. And again, it can work out, but with increased risk, you, you, you would expect a higher return, but that means that you're taking on a lot more risk.

• 28:58Speaker 03

  Absolutely.

• 28:59Speaker 02

  It means you, you mentioned stuff like mold or squatters.

• 29:02Speaker 03

  If you're able to, well, the first thing that comes to mind is, is, you know, if you can get in there and get an actual home inspection, you know, and I'm curious, do they need more friends? You, you and your friends that want to buy a few of these? Cause I can, I can put my number on air, but no, joking aside, you know, if you can get in there and have like a certified home inspection done, what are they? Four to 600 bucks these days?

• 29:25Speaker 02

  Yeah.

• 29:26Speaker 03

  You know, which is a small price to pay to have peace of mind because they get in the attic. They, you know, they're checking the integrity of the, of the house. They're checking the plumbing in the attic. Um, but you could have black mold situations. There's just a lot you don't really know. But it's kind of like buying, uh, I think of it like buying a car on salvage title.

• 29:42Speaker 02

  Yeah.

• 29:43Speaker 03

  You know, you don't know the history. Maybe it was in a wreck, right? But there's people swear by, how does that get the best deals buying salvage title?

• 29:49Speaker 02

  Right. Or they're a mechanic, right? So they're like, I can, I don't care. I can fix anything on that car.

• 29:54Speaker 03

  The DIYer on this house. Now I will tell you, um, the majority of the houses being bought here in Bakersfield are coming, you know, are being purchased by people in the Bay area and people in Los Angeles who have a ton of money. They come in with all cash offers and they're usually able to.

• 30:11Speaker 03

  Buy out, you know, someone's going to be willing to accept an all cash offer versus somebody who might be taking out a mortgage, even if they're getting a little bit less for the all cash. It's smooth, it's easy. So be willing to pay, you know, be willing to you and your friends, you know, get as much, as much cash gathered up as possible.

• 30:27Speaker 02

  Do your due diligence when you're looking at it. I'm assuming this would be for an investment property. When somebody's saying, I want to buy multiple foreclosures, they're looking at flipping them, you know, fixing them up or just, you know, turning around and selling it for a profit. And those, those opportunities definitely exist, but they're generally done by people, like you just said, that are coming in with a lot of cash, accrue, or the expertise and the skill set to be able to fix it up under budget and ahead of time so that they can get and move it on quickly.

• 31:04Speaker 03

  And I know prices are crazy right now. The fires in, in Los Angeles have impacted our local construction market. The tariffs have impacted our local construction market. You know, the cost of lumber, the cost of electrical, just wiring to maybe rewire a room. Everything is going to be more expensive. So make sure you factor that in. Another piece of advice, don't go to TikTok. Don't go to YouTube. Honestly, they make, I mean, they make everything look, oh, so easy. And usually the people making those videos, in my humble opinion, are people who are broke. And that's how they're making their income is, is by talking about people, other people who really make money. All that said, buy books, buy, you know, buy, just start to soak up a bunch of knowledge. If you could, if you could just

• 31:45Speaker 03

  pour yourself into researching for three to six months and then make an educated decision, I think you'll, you'll save yourself thousands in the long run.

• 31:53Speaker 02

  Know the numbers, especially, I've seen people that, you know, been to seminars and do all these stuff. And then it's like you, your numbers were way off. Like you should have had somebody look at your projections before. And sometimes it's come down to these reality shows. There's a ton of these makeover shows, like, like on HGTV where the whole show is literally about them coming in, buying a foreclosed home, fixing it up in a couple of weeks and then turn around and selling it for this big profit.

• 32:22Speaker 03

  And almost every one of those shows, there's problems and they can't script that. They can't script it. But if you watch those shows, almost every one of them, you know, they run into something and that's what makes the drama of the show. But like, imagine being the one that. You know, you didn't know there was going to be a $15,000 repair to, you know, raise the corner of the, the house or something, right?

• 32:40Speaker 02

  And the other thing they don't show in those shows, they just show like the, like the gross profit. They don't talk about what you gotta pay in taxes. Cause it's a short-term taxes, a short-term capital gains, which is taxed at ordinary income rates, which in many times, 90% of those homes that they're showing on HGTV that they flip, they wouldn't have made a profit. Like even, you know, oh, they made 20,000 and it only took them a month to do that? Like, no, they didn't.

• 33:10Speaker 03

  And this isn't to shoot down your dreams, but I'm thinking of just the logistics behind it. If, if you're gonna, if, if you have a hard time knowing when to pick your kids up from school, you're gonna have a very difficult time being kind of the point man and coordinating all these, you know, contractors coming and going. It's a lot of mental stress and it would become a full-time career. Now, for those that do it and do it successfully, they're very happy and they can make a lot of profit. More power to them, but do your homework, do your research.

• 33:36Speaker 02

  Know your numbers. Another message here, Seth, that says, "I've heard you guys discuss some properties in Kernville and wondered how high the homeowner's insurance has gone in the last few years. Thank you. Have been looking at some properties up there for when I retire." So I have a property up in, up above Kernville in Alta Sierra. It's an old cabin and we've had it for over 10 years and love it. Love it up there and we love Kernville too. We're just, you know, up the mountain from Kernville. Um, my family, my kids, we, we have memories up there. It's, it's our second home. It has been absolute joy.

• 34:17Speaker 02

  Um, I, I would, I would love to be up there more than I can be up there, but I've got, got a job, got things doing here in town, but I absolutely love it up there. Um, we did have a big fire a couple of years ago. Uh, devastated a lot of the area, but it preserved almost everything within the, within that, um, the Alta Sierra area. Kernville also is, is fantastic, but property values have gone up there just as they have everywhere in the state. So it has become much more. More expensive. I can't speak specifically for Kernville. I can't speak for Alta Sierra, which is just above Wolford Heights, above Kernville. And that is homeowner's insurance for us is not available. The only way that you can get homeowner's insurance right now is through the fair program, the California fair,

• 35:01Speaker 02

  which is the insurance of last resort. And actually, that's been the case for me for years, even before the fires. Many, many years that's been the case. The problem now with fair is that the rates have gone up dramatically. I used to pay on our little cabin, and this is, we're talking about, this is a very small cabin. It's under, under, it's about a thousand square feet. And, you know, it's, it's almost, almost an 80-year-old cabin. And the problem is that our, our insurance on that has gone from, it was about, it was under $2,000 a year

• 35:42Speaker 02

  to now about $6,000 a year. So it's tripled. It's tripled in price.

• 35:48Speaker 03

  And the fair plan is a state-run?

• 35:51Speaker 02

  It's a state-run. It's a state-run, like, supported program for properties like this, like properties of last resort. And now this is going to get even worse for us that have to rely on the fair, fair plan because the fair plan is funded by insurance companies that, that pay into the, the state to help offset the cost of insurance in the state. But what, what are, what are happening to homeowner's insurance companies in California?

• 36:21Speaker 03

  They're taken off?

• 36:22Speaker 02

  They're, they're leaving.

• 36:22Speaker 03

  They're out of here and then it's trickling down to, you might not own a home in the woods, but you're feeling the effect with your car insurance rates. State Farm, they've hit me 20, a 20-plus percent increase the last two years. We stay faithful and loyal to them because they've always paid their claims. I have the best agent in town, Mike Alexander, State Farm, H Street. But again, yeah, I can't, that's very expensive, very expensive.

• 36:45Speaker 02

  So expensive. It's, insurance is a total mess in California. It's just, it's, it's really, really Really unfortunate. All right. When we come back, Seth, I want to talk about this windfall provision. This is really, really a big deal for over a million Americans. Those who were potentially had jobs at government jobs or other, other jobs where they weren't getting the social security credit. There was a big, big change and now checks are being mailed out. So I want to talk about this when we come back. We're Money Wise. Don't go anywhere.

• 37:16Speaker 00

  If you're a business owner who provides a retirement plan for your employees, contact Money Wise Wealth Management to see if you're maximizing your options and minimizing your liabilities. Money Wise 401k plans are customized to you and your company's needs. 661-847-1000.

• 37:42Speaker 02

  Thanks so much for tuning in. We're Money Wise. We're your hosts today. I'm Sherwood Wait. That's Seth Perry. Thanks for your questions and comments. Really appreciate it. Let's talk about windfall elimination provision, Seth. This is a, this is a wacky rule that always bothered me for years. It's changed now, fortunately. But the rule essentially reduced your social security retirement benefit for people who had pensions from work where they didn't pay social security taxes. Instead, maybe they paid into a different pension, like a government pension.

• 38:15Speaker 03

  CalSTRS, for example, teachers retirement system.

• 38:18Speaker 02

  Yeah. All right. So you can speak to this.

• 38:19Speaker 03

  Absolutely.

• 38:20Speaker 02

  This was, this is odd because what, what, what happened is in calculating your social security retirement benefit, they wouldn't count the income that you're, or they would, they would, wouldn't count the income that was going into these other pensions. And for some people, it was reducing the amount of social security benefit that they were entitled to by up to almost 600 bucks a month. It's like 560 bucks a month, at least this year is what that amount would be. Fortunately, there's been a change, a huge change, and it just took effect. I think it took effect last year, but it, it took a while to get implemented and then it's been. Delay, but you've got some latest news.

• 39:05Speaker 03

  Yeah, I was in in meetings today. One gentleman told me he got a check for, I want to say four or $5,000 of backdated money he was owed. And so from doing a little bit of research, I believe if this, if you qualify, so if you paid into social security and then maybe you stopped and took a job like a teacher or worked for the city and got on their pension and stopped paying social security, this will, this will affect you. Where now you will get, you'll get the full amount of your social security and the full amount of your pension. Okay?

• 39:36Speaker 02

  Yeah.

• 39:38Speaker 03

  And everything is supposed to take place April 1. That's when you're supposed to see the increase in your payment. They're going to be sending you a letter. Many of you have probably already gotten letters. We'd love to hear about it. But they're sending you a letter with your, your new social security payment amount. If you're drawing social security and then a retroactive check, which is fantastic.

• 39:55Speaker 02

  Huge. Yeah.

• 39:56Speaker 03

  I guess I can see why they would do it. If, if like for me, example, I paid into social security about 15 years and I got in the education system. So I wasn't paying social security. Right? So.

• 40:06Speaker 02

  Yeah, but you, you were still, yeah, you weren't paying into social security. That's true. But it, you weren't also getting credit for that your, your, your full income. That was counting towards the calculation of what you would get in social security, which is a little unfair. Whereas if you were contributing just to social security, it's taking into account your full income. So that's where that discrepancy would happen with, with, you know, with people. 500, an extra 500 bucks a month. This affects 1.1 million people. And the, it can be as much as this check that you're getting is to get you caught up,

• 40:47Speaker 02

  can be just over $6,000 and then up to almost $560 a month, like in, like in your example. So it's really, really a huge deal for a lot of people. Could you imagine, you know, you're retiree and you're on fixed income. All of a sudden you've got an extra 500 bucks a month?

• 41:02Speaker 03

  I mean, it's huge. If you're on a very fixed income, you know, I don't care what income. When you're on $500 a month, there's a lot you can do there.

• 41:10Speaker 02

  Yeah, yeah. We got a message here. It says, oh, thanks. Is a foreclosed home the same as a HUD home? No, it's not. They are.

• 41:23Speaker 02

  There is a difference. Both properties have been repossessed, so there are some similarities there. And usually the repossession is due to a loan default, but they do differ. HUD homes specifically are from FHA insured mortgages that went into foreclosure, whereas foreclosed homes can be any type of property, you know, where the owner just defaulted on the mortgage. That's the biggest difference. HUD homes are owned and sold by the US Department of Housing and Urban Development. That's where HUD comes from, Housing and Urban Development. And it's also sold through a very specific bidding process on the HUD Home Store. And

• 42:05Speaker 02

  so HUD homes often are sold as is, which we were talking about. There's a big risk there. Especially if somebody's going to foreclose. Yeah, for whatever reason, they'll just start kicking in the walls and tearing out fixtures and...

• 42:21Speaker 03

  We've got a great comment from a listener. It says, MW, I think that's MoneyWise. MoneyWise, I've had my share of rentals and they were good. I was blessed to put my two girls through Cal State Bakersfield, but I still like the stock market now that I'm up in my 60s. I don't have to worry about property taxes. I don't have to worry about eviction and loss of monthly rent. Stock market, awesome. I'm reading it verbatim. Stock market, awesome in the USA. Keep up the good work.

• 42:46Speaker 02

  Oh, that's awesome. Yeah, that's a big deal for a lot of people. They just get tired of managing their properties.

• 42:53Speaker 03

  It's huge. And to get someone evicted, I want to say the process is like six months. You have to hire an attorney, if I'm not mistaken?

• 42:59Speaker 02

  Yeah. I mean, you can do it yourself, but it's a hairy process. It's certainly not fun. I've recommend to, you know, if it is a pain, there's a couple of things you can do if you're just tired of managing your home, your rental properties. You can hire, there's a lot in town of management companies, and they do a great job, and it's hands-off. Like, you know, you pay them a fee, and yeah, that's going to cut into your cost, but for me, it's so worth it.

• 43:28Speaker 03

  Peace of mind.

• 43:29Speaker 02

  So peace of mind. They'll do the applications. Do the evictions, they'll go and clog the toilets, you know, you don't have to worry about it. The other are REITs, 1031 exchanges where you can take an asset, you know, a property, real estate property, and you can, it can go into a like investment that's also in investment property. And that's also a way to kind of get hands off. And then you, you know, you have, you know, have, you can continue on some of the benefits of owning real estate. And, you know, so that can work for some people as well.

• 44:09Speaker 03

  We want to remind our listeners, we will be off the rest of this week as ESPN Bakersfield will be airing live March Madness games, but we will be back live next week.

• 44:18Speaker 02

  How about that? How about that? We're going to do some best of shows that will be some shows we've got in the can.

• 44:23Speaker 03

  No best of.

• 44:24Speaker 02

  Oh, no best of.

• 44:25Speaker 03

  All live basketball.

• 44:26Speaker 02

  You just get to listen to basketball.

• 44:28Speaker 03

  Twenty hours of basketball every day until Monday. I'm new to the show, but I want to give a shout out to our producer because he is flipping awesome. Can you hit the applause button?

• 44:38Speaker 02

  Yeah.

• 44:38Speaker 03

  On yourself?

• 44:38Speaker 02

  What's your sound effects, Stevie? Seriously, best producer.

• 44:43Speaker 03

  He's a boss.

• 44:43Speaker 02

  Best producer in town, hands down. Nobody even comes close. And probably been doing it longer than anybody else. Anybody else been producing longer than you?

• 44:52Speaker 03

  No, my dad retired, so.

• 44:53Speaker 02

  Your dad? He's, he is it. That is the man right there, Steven Nicholas. Thanks so much, Steven. Good show. Yeah. And thank you, Seth. Great show.

• 45:05Speaker 03

  Yeah, I enjoyed it, man. It's been good. We've only been on, I think, one other time and.

• 45:09Speaker 02

  It's fun.

• 45:09Speaker 03

  Time flies, man. It was great. And thanks to the listeners. So many awesome questions. Continue to bring them in. There's no, there's no bad question, except the one that's not asked.

• 45:17Speaker 02

  That's right. Good stuff. Thank you, Seth. Want to remind our listeners that you remember these three things. Be smart, be safe, and always be money wise.