Owning The Coast
Owning The Coast is your weekly deep dive into the people, places, and possibilities that make Santa Cruz one of the most inspiring places to live. Hosted by real estate pro Brandi Jones, mortgage and market expert Ryan Buckholdt, and insurance specialist Jerry Seagraves, the show blends their unique expertise with candid conversations and dynamic guests. Each week, you’ll hear stories that go beyond property lines — from navigating the local housing market to discovering hidden trails, tasting the best bites in town, and meeting the entrepreneurs, artists, and community leaders shaping the coast. Whether you’re a long-time local, a newcomer, or dreaming about making Santa Cruz home, Owning The Coast offers the insights, inspiration, and insider knowledge you need to thrive in life and living by the sea.
Owning The Coast
Wealth Building Through Real Estate: The New Tax Landscape w/ Chris Sheehy
Numbers often hold hidden significance. In numerology, the letter B equals 28—the number of wealth. Perhaps that's why the "Big Beautiful Bill" seems destined to create financial opportunities, especially for homeowners and real estate investors.
For California homeowners struggling with limited tax deductions since 2017, the increase in SALT (State and Local Tax) deduction caps from $10,000 to $40,000 delivers substantial relief. A household earning $250,000 with a $1.2 million home could save approximately $579 monthly—money that flows directly back into family budgets. Meanwhile, real estate investors benefit from reinstated 100% bonus depreciation, allowing first-year write-offs rather than spreading deductions across 27.5 years. Through cost segregation studies and real estate professional status, investors can potentially offset ordinary income, creating powerful tax planning opportunities.
Beyond these immediate benefits, the bill permanently increases estate tax exemptions to $15 million per person ($30 million per couple), dramatically improving wealth transfer options for families. This proves especially valuable in high-cost regions where real estate often represents half of household net worth.
However, these financial planning conversations unfold against challenging economic realities. Insurance costs have skyrocketed—some homeowners report premiums tripling in a single year. Industry experts recommend mitigation strategies like water shut-off devices, Firewise community participation, and higher deductibles to manage these costs, though many find themselves forced to choose between home ownership and financial sustainability.
As financial planner Chris Sheehy from Harbor Light Investments emphasizes, comprehensive financial planning means examining the "three legs of the stool"—lifestyle, retirement savings, and emergency funds. A balanced approach prevents homeownership from undermining long-term financial security. Whether you're considering ADU investments (which can generate substantial positive cash flow) or simply maximizing your primary residence benefits, understanding these changes requires personalized guidance from experts who've navigated these waters themselves.
Three, two, one.
Speaker 2:You can't hear it yeah we didn't hear anything, mm-mm. Hi, I'm Brandi Jones with Keller Williams Thrive. Thank you Investments, and we are talking about the big, beautiful bill today. How fun.
Speaker 3:Sounds fun.
Speaker 2:I got something fun for you guys.
Speaker 3:Oh yeah.
Speaker 2:In numerology, capital B is 28, and 28 is the number of wealth. So I think the big beautiful bill is supposed to be about wealth. So I feel, like you guys, Chris and Ryan are studying up on this and being in know, being in real estate, and Jerry's in insurance. What is your biggest takeaway? When you looked at the big beautiful bill, what did you, just as an umbrella thing, what was the biggest aha thing you pulled from that, Ryan?
Speaker 3:So basically. So I hear it's 700 pages. I did not read through 700 pages. I just looked at what is real estate important and took those two things out. Anything else that the big beautiful bill has to do with is probably terrible. There's probably some good things in there, but for the most part not sure about any of that. I just looked at the two components that are going to help people who are homeowners or investors who are buying into real estate are going to help people who are homeowners or investors who are buying into real estate.
Speaker 2:Awesome. Now, chris, you are Harbor Light Investments and we sort of jumped into the bill topic. But first I just want to say you this is your company.
Speaker 4:Yes.
Speaker 2:And it's located where.
Speaker 4:Santa Cruz and we have a branch up in Berkeley as well, and I have a partner up there.
Speaker 2:Oh well, berkeley is close to San Francisco. Weren't you trading up in San Francisco in your former life?
Speaker 4:Yeah, I spent about 10 years on the equity derivatives trading floor up in San Francisco trading stock options.
Speaker 2:Nice, and then you and Maya came down here, and now you have three big, beautiful children.
Speaker 4:Yeah, yeah, after all the stress of the trading floor, we actually took a year off and just backpacked around the world to like decompress. And then we ended up here when we had our first son, who's going to turn 10 next week, and I've got a middle boy he's going to turn seven on Wednesday. And then my daughter turned four in May.
Speaker 2:Yeah, since you've been here, you've been a part of the community, you've been on certain, I would say, not--for-profit, non-profit, like CASA.
Speaker 1:Women's.
Speaker 2:Council of Realtors. You've definitely left a footprint here, or a fingerprint either way, and now you have, I would say, a clientele. Tell me a little bit about your clientele, because you're a financial planner. But let's just say, in my business, in real estate, people are like do you have a financial planner?
Speaker 4:Why would I send them to you? So a financial planner is a little bit different than a pure investment manager. Pure investment manager is more like what you're going to run into and say, like a bank branch, something like that, someone who walks in and you deposited a huge check and some guy kind of sidles over and says what are you going to do with that money? A comprehensive financial planner is usually a CFP, which I am. My partner has his PhD from Harvard and designed portfolios for a company called BlackRock for a decade before getting into the financial planning. End of the business.
Speaker 4:And so guys like us are going to go through your entire life with a fine tooth comb. And by the time we make an investment recommendation, it's so obvious what you should do because we've covered every other base. An investment recommendation it's so obvious what you should do because we've covered every other base. There's not much guesswork involved versus someone who says, hey, let's pick the latest stock or let's try and do something exciting. I met a guy recently who would put every one of his clients in Apple for the past decade, which has been amazing for them, super, super inappropriate for probably half of them, if not more, and so we try and just do what's best for the clients at all times, based on all the information we can gather.
Speaker 2:You know, we were talking the other day and I'd love to go over this example. You had a Silicon Valley tech person come to you saying hey, I want you to look at my portfolio. What was it? I want to take a year off, or there was some strategy. You, you caught him and you said that's not necessarily the strategy. Tell that story, Cause I think it's really helpful for people listening of, like how you can look at a situation. And although chat GBT gave them an answer, you're like well, yeah, super, super nice guys about 34.
Speaker 4:He wants to either sail away or just take a backpack and go, like my wife and I did, and so I'm all about it. And so what he's done is he's used ChatGP to create this 45, 50 year financial plan for himself, and he just wanted me to kind of double check it. And within three or four minutes you can tell none of that is gonna happen and you just need to focus on can I afford to take this trip and what am I gonna do when I get back? And so we spent half an hour just running through ideas to strategize the next three years of his life, and after that he needs to call someone like me to talk about the next 30, 40, 50 years. But there's 0% chance he was going to actually be able to game out the rest of his life at this stage.
Speaker 4:And so it was. It was. It was good because it gave him some answers and a framework to think about things. But I mean, this guy had $100,000 in a 401k and he thought that would be enough to retire on. He thought he was going to work in a bicycle shop after working at Apple for a period of years, and you know, he just had some pretty strong signs of burnout, and it was really important to pull him back and say let's get you out of this situation you can't tolerate. You've worked at Apple, you have multiple advanced degrees. You're not going to end up at a bicycle shop after this, most likely, and so it was a really fun way to pull him off the edge and help him make a few good decisions just for the next few years, and then think about the future after that.
Speaker 2:I think that's really important. I mean, our podcast is really designed for people coming from the Silicon Valley. We really decided that we are an intake community and that there's a lot of people who have higher levels of knowledge, and so when you get a chance to bring your humanity to something and like plan it out because you lived it, I mean that seems like a client for life.
Speaker 4:Yeah, great guy, I'm sure we'll work together for ages.
Speaker 2:So we have a few people here that are probably going to want to pick your brain. You've got all kinds of people that are going to come to you. Typically, you're planning for wealth, correct? There's a big difference between gains, or right now you're like long-term or right now you're like long-term.
Speaker 4:Yeah, my whole deal is help someone run their own race right. And so, you know, on friday, the first household I talked to is, you know, in excess of 20 million dollars. You know net worth. And then the next one was probably more in the seven to ten range. And so we're working on certain topics. And then I get plenty of people who have between 500 000 and a million, and we're working on many different. And then I get plenty of people who have between 500,000 and a million and we're working on many different things. I can't give the same advice to those three different parties. It's impossible. And so, teasing out of each group what do you want out of life? What do you want your legacy to be? How do you want to spend the next five, 10, 15, 20 years of your life?
Speaker 2:That gives you everything you need to know in order to advise these people. So this might be a trick question. A lot of people, when they come to you, they're looking at their portfolio. How much does real estate play in that?
Speaker 4:Oh, real estate's huge, especially around here. It's typically for the average mom and pop who stuff money into their 401k each year, save on the margins and then own a primary residence. A lot of times it'll be about half of their net worth. Wow, and if it's a real estate investor, it's going to be above and beyond that.
Speaker 2:That's beautiful. So back to the beautiful, big, beautiful bill. So we kind of talked about the overarching kind of umbrella piece. Then Ryan said something to that. What was your take when you got it? Looked at it kind of like a couple of aha moments or things that you were like okay, this is kind of good, yeah, I think there.
Speaker 4:I think for the vast majority of the kind of working population of the United States, you're going to get more money back in your taxes. I'm, I think, justifiably worried that it's going to create inflation. So maybe the typical people earning a regular salary, paying their mortgage, are going to get, you know, three or 4,000 extra dollars back on their tax bill. But then the things they need are going to start costing four or $5,000 more in the next couple of years, and so I'm a little bit worried that it's a short-term benefit. You know people will enjoy it. Everyone likes getting more money back on their taxes, but if they're, if in the longterm it reduces all of our purchasing power, I'm not as big a fan.
Speaker 2:So, ryan, if we have inflation, what happens to our interest rates? Go up, and where are?
Speaker 3:they now High sixes, low sevens and they've been there for about three years.
Speaker 2:Yeah, three years. So, taking a look at this big beautiful bill and your concept and how you saw it from the real estate angle, let's just say, give me an example where you think it could benefit somebody.
Speaker 3:So there's two folds. There's one which is the SALT tax. So SALT tax is state and local taxes. So, previous to the big beautiful bill, so let's go way back, let's go pre-2017. Basically, all SALT tax was write-offable against federal, so you could write off any state taxes that you paid, any income taxes, anything against federal income tax.
Speaker 3:Well, 2017, trump had lowered that to $10,000. If you make over $150,000 per year, you're going to pay in California $15,000-ish, let's say $10,000 per year. You're going to pay in California 15 ish thousand, let's say a 10,000. So you just lose that deduction once you've already paid the 10 grand. So, basically, in 2017, we all lost the deduction. Now that it's up to 40 grand instead of $10,000, then it brings it back to people making under 500,000 per year that now you can actually see that benefit Once again. I ran the numbers the other day because I was interested in what it looked like and for somebody with an income of about $250,000, married, filing jointly, purchasing a house for about $1.2 million or owning a house for about $1.2 million, it was a difference of $7,100 per year or $579 per month. Less in taxes you're going to pay.
Speaker 2:Less in taxes.
Speaker 3:Correct, so that'll be in their pocket $579 per month-ish.
Speaker 2:Is that calculable? Can I say this Calculable when you're pre-approving somebody now? No, no, it's got to be past tense.
Speaker 3:Correct Because we use all income from a gross point of view, not net point of view. So it's just a benefit that people are going to feel that does not have to do anything with qualifying or anything like that.
Speaker 2:Chris, did you want to add anything on that?
Speaker 4:I think it's going to be huge. I think that homeowners in California were getting tapped out just on their property taxes. That was eating up all 10,000. Oh, I like that, and so now their entire state tax bill was not deductible against their federal taxes, and so this is going to open the door for a tremendous amount of people to have an additional $30,000 write-offs against their federal income tax.
Speaker 2:So it's going to be great $30,000 write-offs against their federal income tax.
Speaker 3:So it's going to be great. I love that. Ryan, what was your second piece? Second piece is they brought back bonus depreciation at 100%. Okay, so back pre I think, 2017, we had bonus depreciation at 100%. Then, as the years went by, they were reducing that and it was going to be in 2027, that bonus depreciation for investment properties was going to be basically zero. So in this tax bill he brought that back to 100% bonus depreciation.
Speaker 3:Well, what that means for real estate investors so people who buy investment property when they go to do their tax returns, they can itemize or they can use what the current calculations are for writing off things off of an investment property. So depreciation, what a normal number is is you take how much the house cost to build and divide that over 27 and a half years. You can't depreciate the land. You can depreciate the structure because it's going to wear down over time. You can do a thing now called you've always been able to do this but you can do a cost segregation study where it takes every piece of the product that is used to build the house and amortize it over the length of time that the IRS says is allowable, like, for example, carpet is five years, windows are seven years, roof is 15 years. So if you break those all out, instead of just taking the whole thing and dividing by 27 and a half years, now you can break each piece out, which usually increases the quickness of the depreciation, so it allows you for a bigger write-off.
Speaker 3:So if you can take that now big write-off so before, let's say, over 27 and a half years, it was 15,000 per year Now you can take it and do it all the very first year. So let's just say that that depreciation comes out to $300,000 for the year. You can take that offset and now bring all of that against your ordinary income with a real estate professional. So you have to be a real estate professional in order to roll that over to offset any other incomes that you have. So, for example, my wife and I my wife is a real estate professional because she spends over 750 hours a year taking care of our properties, managing our properties, doing new construction projects, those sorts of things. So we're able to take that write-off and roll it against my W-2, lowering my W-2 income, saving a huge amount of taxes, which then allows me to go buy another piece of rental property. So just keeping going forward by taking the big write-offs that very first year. So allows for cashflow.
Speaker 2:If you were to recommend for somebody to follow that plan Chris, or you, do you have a tax person, or Chris, would you help structure that? Or who would you go to for somebody who might let's say they're managing two or three properties, you know, and they don't necessarily know to think about these things who would be their next step to talk to?
Speaker 3:So, personally, what I did is I started to seize kind of some stories about it. So then I just started talking to friends that I knew that owned other rental properties and I was like just probing hey, have you heard about this? Is this doable? What's this look like? How do I do this? Then I got referred to somebody who did a cost segregation study and then I asked him hey, what does my situation look like here? Here's all my information. And then basically after that we took it to my CPA and said, okay, based off of this information, what does everything look like compared to my tax situation? So it really took a lot of probing to find the answers. It wasn't like somebody presented it to me.
Speaker 3:So I think that's really important is identify with people who have already done it, learn from them. So always have you know. One of my coaches always says have the mentor that you're trying to achieve in all the different spaces. Like if you want to be, you know, great at marriage, find somebody who's been married for 40 years. What are the practices that they do? Find somebody who has owned multiple properties what are the practices that they do. So I think it's really important to not ask your coworker who's never done it before. What do you think about this? It's really find the people in life who can help you through those situations.
Speaker 2:Chris, what do you think?
Speaker 4:I couldn't agree more. Yeah, If you find someone who's already walked that path a few times and you can just kind of hang on to their coattails, and so let me give an example. So my wife wanted to start making sourdough bread recently and it turns out her oldest friend. The husband has been doing it for years. He's just absolutely spectacular at it. It took him years.
Speaker 2:Her second loaf has been basically perfect, oh, so second loaf first one not so good.
Speaker 4:Uh, second loaf came out perfect because she had him on speed dial. He sent her spreadsheets, he did all the measurements for her. It just comes out so much better when you're working with someone who's done it a few times, and if you can find someone who's done a few hundred times, that's the person you go with. I don't care if they cost 10 times as much.
Speaker 2:Jerry, do you have some questions? I know you're a local investor. You've got a family.
Speaker 1:I'm just absorbing this because these guys are the guys I want to be right, like you know, they know all about me.
Speaker 2:Can you guys be my mentors? We'll be your mentees.
Speaker 1:No, I mean this is an interesting stuff. Like I think that a lot of tax professionals aren't privy to a lot of this real estate investment stuff, and so I guess the nugget of information I'm taking away is you really need to find the right tax professional for you that's privy to this. I mean, I know my own guy. I've had to prompt him on stuff and it takes a lot to say, hey, I've heard this is a thing, can you look into it for me? And we did that last year. I had a business I closed and we went back and refiled for some different.
Speaker 1:I guess we we redid some of our taxes that he had done improperly not so improperly, but just wasn't the way. We would have done it if we'd known and just finding somebody who has those hacks ahead of time and, like Chris said, just making sure you understand that the person that has done this has done it so many times before, that it's a well-oiled machine. They know the path to go down, they know the loopholes that you might get caught up by, and I've encountered that firsthand with my tax guys. You know it's difficult. Like I have a guy out in Visalia who does like farmer's stuff, you know, and you know he doesn't know about real estate investing as much. Or or you know stock trading, like I. For example, I had some losses last year and he wasn't taking an account for the losses that I had. And what is it 4,000 a year that you can claim?
Speaker 4:I don't Well, 3,000, I think 3,000. Yeah, it's 3,000 carried forward.
Speaker 1:Yeah carried forward Right, and so I had to remind him like, hey, remember this year to do that, and it's super important to find somebody who's privy to those details that pertain to you. And, yeah, ask around and find the right person that fits.
Speaker 2:Well, first of all, I'm from Visalia. Oh, that's a.
Speaker 1:I like people from Visalia. They know farming, they know almonds, you know.
Speaker 2:I'm from Visalia. I totally lost my train of thought it was going to be amazing, but I was too busy being in character of Visalia.
Speaker 1:But like your point about that, he knows all the yeah, like if I was a farmer, like he would have gamed the whole system for me, cause it's way different, yeah, and we got with him when we were, you know, before we had anything really, and he was really great guy. We love him to death. But it takes my research and and collaborating with local people that I I trust to bring up topics that are important for me and my particular situation here in Santa Cruz that pertain to me, you know.
Speaker 2:I think one of the themes right now is one there is a saying that you should have three groups of people in your life your mentors, and then your I would say equals, and then your mentees. And so the bottom line is like be responsible for your money. If you think that making money and putting it in a bank account and handing it to a CPA or a tax person is going to give you everything, that's probably not the answer. So I've heard from all three of you that it is stay on top of your finances, pay attention, and confusing. I mean, it's a confusing time. Things are changing and and the subject is the big, beautiful bill and how is it going to help.
Speaker 2:Mostly, we're focused on the real estate aspect of it, but being more dynamic. So let's just start with a person starting like our 31-year-old or 32-year-old. He's got some money. So what we've said before is that the Silicon Valley is really here and they have what it's not funny money, but it's fast money. They got chunks of money. They didn't necessarily inherit from generational wealth. Now Santa Cruz itself has this beautiful blend of generational wealth and fast money. So I am going to jump forward and skip this question real quick and, like your generational wealth people, what are you seeing? This big, beautiful bill helping them with?
Speaker 4:oh well, I mean certainly the estate tax being bumped up to 15 and being made a permanent, 15 per individual. So a married couple can pass on 30 million dollars, you know, with no estate tax to their children and grandchildren is huge, that's massive. Yeah, I feel like that's the headline.
Speaker 2:I feel that's what. So let's talk about that a little bit more. Like what has and Ryan, you know, I mean we all know but like we say that there's golden handcuffs on sellers right now because, no matter which way they turn, they're either taxed on something or they can't get into something because the interest rates this widens the gap in the birth of, like, all sorts of things. So people we saw people putting trying to avoid paying taxes how does this help, just fundamentally, with your family, dad, kids, you know, in the sense of like, how would you explain that to them?
Speaker 4:So switching gears from the generational wealth question correct.
Speaker 2:Sort of.
Speaker 4:Yeah, I mean so say you're a first time buyer who's just trying to get a get a roof over their family's head. They can't rent anymore. The SALT tax is going to be a gigantic benefit to them. It's kind of the. I think the person you described is the typical person in Santa Cruz, the young kind of techie. One spouse makes $250,000. They have all these stock options too, but it's never clear whether or not they should sell them. They have all these stock options too, but it's never clear whether or not they should sell them.
Speaker 4:Like, if Apple gives you $100,000 of Apple shares per year, should you just launch those and consider income, or should you hang on to them, Because everyone who hung on to them 15 years ago is now retired and so it's really hard to consider that income? That's kind of one of those six or one half dozen. So you look at the 250 of base. You know, if there's little kids, a lot of times they have the luxury of one spouse staying home. There's going to get a kind of a quote unquote starter house. It's going to be 1.2. Well, what do you say? It's 600 bucks a month. It's a significant benefit. I mean, you've got that coming in. I was hoping they would raise the limit on how much mortgage interest you could write off. The first $750,000 of each loan you can now write off the interest on that, but they didn't?
Speaker 1:It just seems like, with the property values being what they are, it seemed like the natural escalation to me, right Like that was yeah, it was almost like it was overlooked. I felt like average price of the home has gone up so much in the United States over the last four years Yep.
Speaker 4:Yeah, exactly, but I know a lot of people are sitting tough with their low mortgage, either their paid off mortgage or their low rate Right. So I don't know how many people are actually paying interest on loans over $750,000 on their $2 million house. That I that I don't know, but it feels like there's got to be a ton of them out there. It has to be, and that would obviously be super beneficial. And then, obviously, if a young family wants to make some side income and ADUs in Santa Cruz is a huge, huge industry, and so if you can get all the depreciation on that unit I'm not sure if you can ADU on the property or it has to be a separate property, that I don't know but if you can move the profitability of this project from, say, year three to year one, all of a sudden it's green light and the sooner you start on these things the better it is.
Speaker 3:The question that they asked me about the ADU was at what year was it put in service? So I spent the money and then the year it was put in service was 2024. And so they said this year, even though I bought the property three or four years ago, I spent that money in 2024. So there I'm being able to write off that depreciation from that. Oh, no way, that's great.
Speaker 2:Ryan, what do you? How would you encourage people to benefit by becoming an investor? Let's say we got past the first time home buyer, the person who's just the you know, the married couple or whoever the two incomes with maybe a child. And let's say they now are like oh, I do want to put an ADU, or junior ADU, or maybe I want to buy a condo we talked about that last time. How would you structure that in your mind or in a presentation with them?
Speaker 3:So I, when I built a, a couple ADUs on our properties. We went several different ways. We went one brand new construction stick built, put it on top of a three-car garage, built a thousand square foot, two bedroom, two bath Needed my own cash to do that or pull money out of my rental properties or my current residence in order to fund that so I could build it. The second one we did is we did an ADU manufactured. So basically they brought it down on a truck bed, lifted it over to my house on a crane and set it onto our rental property. They poured a foundation, bolted it down to the ground and that was the ADU.
Speaker 2:You were on video for that, weren't you? Yeah, we did a video of that.
Speaker 3:That one actually all said and done was a little under $400,000. They actually did the financing for me on that, where I put 10% down. My payments were $2,200 a month and it rents for $3,750.
Speaker 2:Wow, that's awesome.
Speaker 3:It made sense.
Speaker 2:Do you want to shout out to who you did that with?
Speaker 3:Yeah, it's called Samara and they're out of Redwood City up there they were great.
Speaker 1:They have a showroom up there, right Like. I think we've been through that yeah walked through.
Speaker 3:it had the showroom, yeah, and they handled everything. I'd never talked to the city. I never talked to the county, never had to deal with permits, never talked to the plumber, never talked to the electrician.
Speaker 2:I did. Yeah, shout out to Max Nelson. He is a realtor as well, but he works with Samara and he is local. He works for a room real estate right now, so if anybody's interested in his contact information, I mean, it's pretty spectacular craning that prefab. It's pretty fun.
Speaker 3:Yeah, it was cool.
Speaker 2:And the financing isn't crazy because you did that at a time. Well, obviously you're a lender, but when interest rates, you know you weren't necessarily pulling cash out of a house at the time.
Speaker 3:No, exactly, and my interest rate is 7% on a second on an investment property on a 30 year fixed. That's really good, that $2,200 a month. The fact that it's raining for $3,750, it was a no brainer. I put 10% down, so $40,000 down, that's unbelievable. Yeah, pretty huge.
Speaker 2:Let's say, somebody is, and this is for you and Chris, I have enough money to do something in Nevada. Would that be beneficial? I mean, do you look at that, chris, where people want to go out of state or oh, yeah, okay.
Speaker 2:Yeah, back to being real estate focused. The general rule is, if somebody is buying their first investment, you should be within 10 to 15 miles of where you live. That way you can go manage it yourself or be there if there's an emergency, or you understand the culture and the prices. But for a lot of people around here that's just not possible. Yeah, you know, our median home price is still 1.3. And then you know the rents that you're talking about. What was that? 1,000 square feet or what's the adu? 700, 700 square feet, two bedroom, one bath, and you get 37 50. That's insane, it's crazy. It's beautiful. Yep, it's so beautiful. Don't throw up, okay. Um, did you have something additional to like think about on that one?
Speaker 4:it's. It's the same answer I give basically to all these questions.
Speaker 4:I feel like run your own race run your own race if it makes sense to you, if you have family, if you, if you have family, if you have a family in Nevada, if you have a friend who could help you out over there. You know if, by the end of the conversation is clear, the person thinks they're going to commute over there, manage this property, commute back, work a full-time job, raise their kids. It's my job to try and dissuade them from taking on that. You know that just lifestyle suck to make a few bucks and then we get into the whole opportunity costs.
Speaker 4:Okay, what else could you do with the same amount of money? Right, and so typically there's something you can do with a similar amount of money that's going to produce a return that is frictionless. And they tend to go that way most of the time. But sometimes, if you can add value my dad's a builder and he lives in Nevada, Done Great, he can be over there sprucing the place up. I think that's a great idea. But you got to ask a few more questions. At first blush it's always like I don't know about this, but sometimes, sometimes it makes sense I have the same stance as you on that.
Speaker 1:I mean I get a lot of clients who are like I can't afford anything here for rental. I who are like I can't afford anything here for rental, I'm going to buy it in another state, right. And accumulation of wealth is something that we all kind of are aspiring to have in retirement, and the fact that we could get rents coming in on a property we don't have a mortgage on it's a great 10, 15 year vision. But I'm with you Like I think it takes a lot of your own time to deal with something out of state like that, and I always I'm not a financial planner, but we get those questions a lot and that's definitely my. My stance is like we don't know the real estate market there, you don't know the insurance market there and there's a lot of variables that you have no control over, like weather, right, like it's unbelievable, and if you don't live there, you don't know what it's like. But I mean that's definitely something. I mean we've been looking at Nevada. My parents live out in Nevada. It makes sense for me, right.
Speaker 2:Well, that's a good question. What's insurance like in Nevada?
Speaker 1:Nevada is actually pretty easy because they don't have like the you know, the Midwest kind of weather patterns Similar to California. They have a little more four season climate in certain parts but they don't. They don't get the same kind of fire problems that we have. A lot of it's desert there. Insurance is is pretty affordable. So you know, out here in California it's a big part of your purchase decision to look at Like I mean, we have so many deals that have fallen through because of insurance just not coming through. But in Nevada, you know, $800 will get you a homeowner's policy, so it doesn't really come up a whole lot.
Speaker 2:I'm thinking Nevada.
Speaker 1:Yeah.
Speaker 2:So just a. This is a little bit different but Jerry, being an insurance at Farmers, just tell us really quickly just a little bit on inflation how much how you have to grapple with questions of when is this going to end and your own insurance experience.
Speaker 1:I had a guy last year paid $3,600 for his fair plan homeowners, and this year it's $9,600. So in one year, you know we're seeing triple rates. And this is not just homeowners, it's everything. And so, from my perspective, you know, when you're talking about financial planning, like those are the variables that we don't really plan for. You know, when you look at that time horizon, like nobody guessed auto insurance was going to be five times the money in 10 years. I mean, I could rewind time 10 years ago and we'd pay 350 every six months for our auto policies for full coverage. It's not a nice car and now I'm paying 1500 to 2500 every six months. Those are things that nobody could have predicted. Right, it's on a nice car and now I'm paying $1,500 to $2,500 every six months. Those are things that nobody could have predicted, right, like that's something that we never dealt with before and it's homeowners auto umbrella.
Speaker 1:All of it falls in line. The only thing that's really stayed stagnant, I guess, is life insurance, thank God. But everything else has gone up and I think, from my perspective, even buying the house that I'm in right now it's put me in a position where I'm like man, maybe I didn't need this much home. Right, I didn't need a 20 acre property in the woods. Like I could have bought something in town and not not had to pay $24,000 a year for insurance, you know. So those questions are coming up and at a time also for people who moved to the mountains. You know, in retirement phase on a fixed income and now they're like, why did we move here? You know this is costing us more money. Maybe they're on a NAGAM loan, I don't know. Like there's a ton of stuff that's happening that I think that we haven't seen the culmination of yet.
Speaker 2:And you don't have a crystal ball.
Speaker 1:but it changes weekly. I mean, this week has been incredibly tough. Like carriers have all of a sudden been asking questions about fuse panels and I mean, like I had emailed you, ryan, like hey, what do you have a Zinsco panel in that house you're looking at? Like that's one of the things that we're looking at now is like what panels they have and what year the last updates were, and also if it's built within the last 20 years, which around here we don't have the luxury of having new construction. So I was. If you asked me two weeks ago, are things getting better? I would have said yeah, absolutely they are. This week I don't really know, like I'm not really sure what's going on. It feels like things are tightening up again and I'm I'm just curious like where we're going to be in a year from now.
Speaker 2:So I know when we're in a transaction, there's an appraiser that comes out when you get these calls, or these calls for people that currently live in their home, or is it? Are these calls for in a purchase? I mean who comes and looks.
Speaker 1:It's usually a third party, somebody who is hired, you know, locally to work for this company and they're usually a property management I'm not property management, property inspecting firm so they do real estate appraisals, they do insurance appraisals. They're kind of like a one size fits all kind of inspection. But they get their orders of what they need to inspect and they take photos and they go in and usually it's, you know, just to drive by. Sometimes it'll warrant, like a in in the house internal inspection, depending on the value of the property, but most of the time it's you know they'll go by, take photos. As long as there's not a tree falling on the house, you know it'll go through. Okay. But occasionally, like I was dealing with one this morning that had a you know decorative bush out in front and they wanted it removed, you know, and the lady is like this bush, I've been growing for 25 years Like I'm not going to remove this thing, and then you got to get in a battle of that Right, like that's.
Speaker 2:It's difficult, it's difficult time and this sounds like the squirrel being arrested, but yeah, 100 percent.
Speaker 1:I mean it's, it's. I think we're, we're. We're kind of looking at the wrong thing right now in our industry. I think we just need to, like you know, have have better front side underwriting and and not quarrel over things like, yeah, you have a garden next to your house, but that's what they're focused on right now. You know they want to hardscape everything and make sure that fire is not going to be a an issue. But we've seen, like Santa Rosa, napa, like fire doesn't really care whether you have vegetation close to your home or not. If it happens and the winds are right, it's going to take the house out. Palisades is a great example.
Speaker 3:So, jerry, is there anything that you can do in order down the?
Speaker 1:policy amount. Like, for example, we talked about the water device that turns off the water. The water shut off running. So if you are in a Firewise community, so you know there's. I know on Old San Jose Road at the Seventh-day Adventist campground, every month they have a Firewise meeting and you can file the paperwork to get your community in a Firewise community. That gets you a decent discount with most carriers. The other one is hardscaping around your property, like they will tell you all day long yeah, if you get 10 feet around your property, that's non-vegetation, we'll give you a discount. But that really depends on the carrier. You know, if you're fair plan, yeah, that stuff makes sense. But if you're with farmers state farm, whatever, it might not matter, you're just not going to get renewed this year. Whatever it might not matter, you're just not going to get renewed this year. Right, so it's, it's definitely.
Speaker 1:I think I see a lot of insurance carriers dictating what people do that cost huge amounts of money and then they just don't renew them the next year. Like I had a guy put a brand new roof on his house, paved his driveway, did everything they asked and they came in and said we're canceling anyway. You're just not in our appetite. That's devastating. This guy paid a hundred grand for all this stuff and he's a friend of mine, called me up Like I did everything you guys asked.
Speaker 1:I know it's out of my power, right? So we're in this like nonsensical time of insurance where I don't really think that they understand what the end game looks like. And I think when we were talking earlier I've seen it's like bad management. I think they're just too top heavy and they can't really look at anything. But they're saying we've got to cut waste, we've got to cut losses and we've got to cut commissions and make you know, you know, make this business healthy again. But they're looking at it from the top down, or or I should say, bottom up. They're not looking at it top down like they should be.
Speaker 2:Well, I mean, it kind of reminds me of 2008, when the banks you know crashed and who suffered the most were the people at the bottom, with their first house it's very similar.
Speaker 1:It's honestly very similar and I could see any day now a bailout package coming.
Speaker 2:Oh, that would be our next topic.
Speaker 3:Do higher deductibles matter.
Speaker 1:Higher deductibles are great. I mean, I've been doing so. When I started this it was like, hey, $1,000 deductible is what you should do, and that was high. And you know your grandma, grandpa, they're used to $100 deductible. And they'd go on a cruise and their camera would get stolen or they'd lose it. And they'd call you and say I need to report my camera stolen. And I'd turn to report my camera stolen and I turn it in. You know, never give it a second thought. Nowadays I'm talking people out of putting in $10,000 claims because I don't know if that policy will renew, right. So I'm, I'm cranking the deductibles, I'm saying, hey, 20,000, like if you can afford a $20,000 deductible, go to that, take that money up front, and it doesn't really matter, because I'm going to tell you not to turn that claim in unless your house is burnt down, right? That's a sad time we're in, but yeah.
Speaker 3:What's up. So my wife and I do like home warranty plans. So anything small that breaks in the home we'll send it to home warranty. Anything major flooding, anything, fire related, anything we would turn into insurance. So we kind of try to segregate the two to hopefully keep our policy.
Speaker 1:Yeah, and then you probably have a risk mitigation. You know part of your brain that says like, hey, if it's under five grand I'm just going to call my guy and fix it. That's really how you need to be moving forward, because they're looking at claims frequency. It doesn't matter the size, they're going to look at you and say you're a dangerous risk for us. We're going to get rid of you. So I'm telling all my clients like, save it for the big one, right? Don't worry about the floor buckling because your ice line broke on your refrigerator or whatever. Try and fix what you can. If you can't afford it, let's turn it in. But you know, just know that you might jeopardize your next renewal. Yeah.
Speaker 2:That's a tough one, because those ice makers do do that.
Speaker 1:I had it happen this year on a newly remodeled home.
Speaker 2:And then you have water. So then you're afraid as a homeowner, like, well, what about mold if I don't do this? And yes, we're going to say Ryan or Chris?
Speaker 3:Yeah, that water shut off valve is awesome because it tells me, hey, something's going on and it'll shut off the water Immediately. Yeah, exactly that. Yeah, exactly that's nice.
Speaker 4:My question was what's the break-even when you take one of these high deductible policies? You know, is it a 12-month or 24-month?
Speaker 1:I just did one for a guy. That guy I was talking about that had the $9,600 premium and it saved him $2,100. And he was like ecstatic about it. You know, like, and to me, I'm looking at that it's like 10 years right. And to me I'm looking at that it's like 10 years right, like you're clearing your deductible in 10 years, but right now it's affordability and really that's what it boils down to.
Speaker 1:This guy got into this home. It's his first home. He's a old beer rep of mine that when I own the taproom and he bought this house for like $480,000 in Magalia, california, which is near Chico, and he's made it beautiful, I love it, it's great. And but he's now at that point where he's like I can't afford the insurance, I don't make that much money. And there's a lot of people like that right, like we. You know we've had deals how many deals like have you guys worked on? Where you know the debt to income goes fine, and then the insurance comes in and you're like man, I don't know if I'm going to make this happen for you. Yeah, right, that is becoming a real life issue for people, not just on a underwriting basis, but in real life. They're going like man. My auto went up, my home went up, my health insurance went up Right.
Speaker 3:Yeah, I have people that homes are free and clear and basically they can't afford the insurance because they're $2,500 per month Social security. They have a free and clear home worth a million bucks but can't afford the insurance. So they're having to sell and downsize from that. It's hard.
Speaker 2:So, chris, if somebody comes to you and they have investments and they say I can't afford my life right now because of all of you know, just the umbrella again is inflation Do you look at that and help them through that?
Speaker 4:Oh yeah, of course I mean that that is. That is a situation. I'm not finding that on the backend as much. I'm finding it more. You guys won't like to hear this, but it's more people who probably can't afford to live here and are trying to set down roots and they're in an industry that's school teacher. You know my wife's school teacher. It's a great profession, it's. You're going to get your 3% raise and you're going to top out at a pretty modest income and so, okay, I got to be here. My grandparents are here, my parents are here, all my high school friends are here and I say, okay, well, what do you want to do? I got, I got to buy a house. You can't afford rent. How are you going to afford a house?
Speaker 4:I just have to do it.
Speaker 4:You know I'll, I'll do whatever it takes.
Speaker 4:And it's it's kind of like that person who thinks they're going to drive eight hours to Nevada to, to to look at their rental property and you just gotta, you know, sit them down and just really run the numbers and say I think there's kind of three legs to the stool, right Like you get out of your lifestyle, you got to save for retirement and you got to put money in like your emergency fund, and they always end up kind of kicking one of the legs out and saying, well, if I don't save anything for retirement, I can just pull this off.
Speaker 4:Or if I don't, if I just eat at home and I don't, I don't go on vacation anymore, then I can buy the house and I can sort of, you know, put a few bucks in my 403B or 401K or whatever. And it's really important at that point just to explain how life works and how you're going to look up and be a lot less employable at 60 when you run out of money and really be struggling. And some of them, after that whole conversation, say I don't care If I have to move at 60, I'll move at 60. And that's a decision they're allowed to make, and my job is to lay out the facts and try to gently encourage them to consider other options.
Speaker 2:So we're going to wrap this up. I just want to know how can people find you? Where are you located? What's your contact information?
Speaker 4:I'm on 7th Ave, almost all the way down to the beach. I think it's like our building and then a couple residential homes and then the beach. It's Harbor Light Investments. We have a website, chrisharborlightinvestmentscom. My number is 831-291-3843. And I'm terrible. I don't do any social media. I don't promote myself at all. I hide in my office and work with my clients and that's the way I like it, so you're not going to find me on Instagram or TikTok or anything else.
Speaker 2:Snapchat.
Speaker 4:I'm very blissfully under the radar, but I am always looking to work with new people, and so please hit me up.
Speaker 2:Yeah Well, I want to thank you because I think people don't understand what a financial planner is, especially if they don't have a ton of money and or sometimes people come with their family financial planner and it's always nice to get a second opinion and or have somebody who, in my opinion, brings the humanity. With all the skill set that you've earned over a lifetime and living in this area, you understand the stresses and the stool. And then you know I love that you give people the autonomy. But any other questions for Chris, you guys.
Speaker 3:Yeah, Life's expensive. I definitely appreciate what you do. You know my kids 20 and 22, sent them to financial planners. Let's figure this out. Let's figure out what you need to save and where you want to get to. So it's never too early to start. But then again, it's never too late to start. So just sitting down and talking with you, I think, is the best thing somebody can do, Absolutely.
Speaker 2:Ryan, where can people find you?
Speaker 3:I'm at 831-818-2339 is my cell number and here at Cross Country Mortgage in Santa Cruz.
Speaker 2:And who's doing your social media right now.
Speaker 3:Oh, that's my daughter, my 22 year old daughter. When you 24, 24, when yours hit that that's. That's who takes care of it.
Speaker 2:You guys should check out her work, because it's pretty funny.
Speaker 1:She does a good job, she does a good job, Jerry.
Speaker 2:how can they find you?
Speaker 1:Yeah, I'm 831-464-1870. That's my office number. We are in Soquel.
Speaker 2:Soquel, soquel.
Speaker 1:I always have to say that too. Whenever I'm voice chatting right Like I'm like Soquel, they spell Soquel and I'm like no Soquel. Yeah, so been there 24 years now and yeah, call me if you have any questions. Even if you don't do business with me, I'm happy to to give you answers.
Speaker 2:Oh, that's, you know people do. When we did the radio show, people called. I had a lot of calls. Yeah, it was nice.
Speaker 1:No, I, I'm, I'm, I like to give advice. I hate, I hate when I give advice, it creates problems. No, but no, I I try to help people navigate. This is a tough time and, just like you know, you guys do with mortgages and financial planning it's hard for people to to sit down and think about this stuff, right, like they have other stuff they're dealing with and I can be your guy. That's great.
Speaker 2:And I'm Brandy Jones and I'm 21 years in the business with real estate. I am the same, like I would love to talk to you. It's not always a possibility to be a homeowner or a home seller and I'm at 831-588-5145.
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