05.23.23 Unethical Real Estate Investors - It Gets Ugly / Unused Vacation Time? NO!

I'm so glad that you're here with us on the Clark Howard show where our mission is to serve you and empower you to make better financial decisions in your life. In this episode, I'm going to talk about two ugly things. First, those signs you see saying, we buy any house, are they on the up and up? What's it all about? Second thing, something that's truly ugly to me, not taking your vacations, not taking them? Oh, come on, we got to talk. So for decades, I've had question after question from people about what do those signs mean? What do the billboards mean when they say we buy any house? Well, I've talked about what that's about and who that's for and who benefits from those signs that are freeway exit, those billboards, those online ads. ProPublica did a thing on the people you see the signs say, we buy ugly houses and their report was really, really ugly. And I've read their report and I want to say something. There are clear abuses going on, but these are franchise organizations and there are some that specifically have been dishonest and taken advantage of people and there are others that are just trying to make money as investors and not trying to take advantage. But I want to tell you the signs and what you need to be aware of and careful. So there are unethical people who are real estate investors that look for people that are desperate and take advantage of them. In the ProPublica piece, they were repeatedly profiling people who were elderly, maybe of declining mental capacity, who were having their houses essentially stolen out from under them, being paid pennies on the dollar what their homes were worth and then being evicted from their homes. It's an ugly, ugly story. And as so often happens with things when older people are taken advantage of, it's because those of us that are younger, that are their friends or relatives aren't being nosy enough, not being involved enough and so often it's because people and families have scattered across the country, not living where the aging relatives are. They lose touch, lose track and don't really understand what's going on in their lives. And also a lot of people don't like their adult kids asking questions. The reality is, if you see signs that you're aging mom or dad or grandmom or granddad showing signs that they're not okay, but they're pushing back against you, you've got to be nosy, you've got to be pushy, you've got to be involved. Because what's key is I read this report was the people are having their homes stolen from them essentially, having their equity stolen from them overwhelmingly or older people that are isolated that need the influence of their younger loved ones to prevent the train wreck from happening. You know, a salesperson can really sweet talk and that's a friendly face for someone who's isolated and lonely and may be scared. When they're isolated, that individual wins their confidence, has them sign a contract that only a lawyer could love. They have no idea what they've done about having their home taken away from them for pennies on the dollar. I want to make it clear the pro publica story obviously has identified some really bad apples in real estate investing. I find that most real estate investors are good decent hardworking people just trying to build a portfolio of investments. There are always going to be those in any industry that prey on the weak, take advantage of the vulnerable and steal. And unfortunately, the law is not equipped to fix those wrongs and make them right. The only thing the courts really care about is that your signature right there and even all these elder abuse statutes that have been passed in states around the country, they look better on paper than how they're being implemented in practice. So that's why it's so important for you to be involved on real estate investing, selling to someone who is an investor and hitting the easy button. You know, one of their primary markets are when adult children inherit a house from a loved one parent who's passed away. And again, with families spread out around the country and in the last years of time in that house for your parent, the house deteriorated, the paint's peeling, driveways cracked, the gutters have fallen off, the roof needs replacing. It can overwhelm adult children, particularly if they live somewhere else in the country. They're grieving about the loss of their parent and they'll decide that rather than going through the process of hiring contractors across the country, having the work done, they just want to be done with it. Now understand that's not a free ride for you. Yes, you will have avoided the work, but the investor buys that home from the adult kids, that investor is going to make money on the fact that you don't want to do the work. That to me is not a scam. That is not a con and that's not a thief. I actually have a related question. Oh, let me hear. If you might start with the first one. I think it might be related. Frankie in Vermont says, can you sell a home that's not decluttered as is? And if so, how much of the appraise value can I expect to take off? So Frankie, that's an interesting way you put that. So you are paying a convenience charge. You're paying a big convenience charge because if you get a house cleaned up and dressed up, get it back to having curb appeal, getting the law and fix and all that, you will get market value for the home. But there's a double loss in market value when you sell a home that as you said is not decluttered because the buyer of that home has to calculate in what it's going to cost them to get the home market ready or move in ready. Let's say they're buying it for them to occupy or they're buying it as an investment property or when they hope to flip. In any of those cases, you're paying their estimate of the cost of getting the property right and you're paying their markup, their margin for it. So it's worth it if you have the energy to get the home decluttered as you said because you'll make enough additional money for the property that the effort to do it is worth it if you can do that effort. I would probably work with a realtor too if you're willing Frankie because they often have contractors and people that could potentially help and then they'll get a bigger commission of the house sales for more if it makes sense. They could probably tell you and they even stage homes depending on how valuable the home is, it might be worth it. I don't know if you remember during the heyday of the I buyers, the I buyers where you, that's pretty much faded into oblivion of late with the higher interest rates. But I ended up selling one of my investment properties through an I buyer service and they came in and said, okay, these are the things you need to do to this property to get top dollar for it. And they said, you can do them or we can do them. This is what will charge you to do them and we'll collect that from you at the closing. And I chose to do that because they have a whole staff of contractors and they got work done that would have taken me about 10 weeks. They got it done in two weeks. The house went on the market and sold within an hour. That tells you what the market was like. Definitely. Okay. Amy in Florida says I'm a school teacher and a single mom in a fast growing part of Florida wanting to sell my 100 year old house since it's worth double what I paid for it. Is that the oldest house in the state of Florida in 100 years? It'll be worth about double what I paid for it about $170,000 profit. Obviously, it's not a great time to turn around and buy again. So how long would I have before capital gains tax to rent somewhere and hope the interest rates will come down and do you think that they will? Amy, the way you phrase the question, this is the house you live in. So you pocket that money tax free. If you have a gain of up to 250,000 as a single individual, 500,000 as a couple, you just pocket that money. You don't have to buy another property. As long as you've been in it two years. Two years or longer. Yeah. Two of the last five. Right. So this 170,000 is tax free money to you. And you can rent as long as you want after that. You know, there used to be the rule that you had to buy a new place within a period of time. People were gaming that so much. Congress finally was like, let's make this simple and came up with this new system that you just pocket the money and that is your money free and clear. It's almost like a house has become its own version of a Roth IRA if you live in the house. So that is your money to keep and you go live where and how you want to. Okay. How about your crystal ball? How long should she wait, you think? And do you think rates will go down? So race will go down. They're never going back to the artificially manipulated 2% range, pouring some extremely unexpected event in the world. And mortgage rates, I should say that the rates the Federal Reserve is charging now are slightly above the rate of inflation, which is where they should be. So inflation is continuing to go down. Hopefully that trend line will continue. Inflation is roughly half what it was at its peak. And so mortgage rates should settle lower than they are now, probably somewhere if I were to guess, there's a dangerous guess. I'm putting this in the complete danger category. I think we could see rates back in the fives again, could be where they're going to settle very unlikely back in the fours, could be 15 year loans go back into the fours. Jason in Iowa says I'm looking to buy a house on waterfront property in the US. It will be a retirement slash investment home in the next five to six years. Where can I go to ask about new or future lake locations? Okay. So what's not clear is Jason, where you have narrowed your search, it's too wide a search from your question right now. You need to go take vacation time and go visit lakes in different areas of the country that you're targeting. You'll narrow down what parts of the country. You'll come up with your favorite lakes that you might want to live on. And then you get to know the housing markets on those lakes. It's not something that you should just take an entire map of the United States and say, oh, well, I hear there's great lakes in Tennessee. I think I'll go there. You need to know if an area is appealing to you. And is it a place that even though it would be part time next five or six years potentially investment slash part time and then in retirement, maybe half time or full time, you need to be comfortable with the area. And so I like for you to sample areas on lakes, lakes have wide variety of homes available in short term rentals, month long rentals, seasonal rentals, you sample places before you buy because even a place that you might enjoy for a weekend, you might not enjoy for a month or more. So narrow down area, narrow down lakes, try them out. Don't buy for a good while till you're really, really comfortable. It's where you want to be. Now in terms of vacations, I had to talk about it. We Americans are like the only people in the developed world who don't use our vacation. Drives me crazy and as the summer vacation season is about to kick off, I want to get in your head to use your vacation when I talk about it. It's time to reboot your credit card with Apple Card. Now when you get a new Apple Card by May 31st, you can earn $75 back at Nike. Just spend $75 or more on qualifying purchases at Nike using Apple Card with Apple Pay within your first 30 days. Apple Card gives you unlimited daily cash back that you can automatically grow at 4.15% annual percentage yield when you open a high yield savings account. And more about Apple Card and the Wall and Apple on iPhone. Apple Card's subject to credit approval. Savings provided by Goldman Sachs Bank USA. Member FDIC and available to Apple Card owners subject to eligibility requirements. $75 daily cash valid only for new Apple Card accounts opened by May 31st, 2023. Qualifying purchases at Nike only within the US. Additional terms and limitations apply. Visit apple.co.com for important offer details. Okay, I can't handle this. Half of Americans who get paid vacation from work don't use all their vacation. They may use some of it. They don't use all of it. Bloomberg reports the number one reason that people give for not using vacation days that they will get paid to take is they don't feel they need to. Seriously? Okay. I choose to work and I'm working at an age that I was just at my high school reunion. And I was like the only working fool left. Krista, I know that distresses you. I'm like the only one still working who I talk to. Oh, as long as you enjoy it, that's what matters. I would exactly like it to work if you didn't enjoy it. Exactly. You have worked with me since 1997. That's something you have seen me do every single year from 1997 till today. Squeeze every penny and squeeze every vacation day. That's right. I never, never, never, not ever let a vacation day go unused. I love working, but I love my vacations and I take them. The number one answer is that people don't feel they need a vacation. Yes, you need a vacation. You become a better worker. You become a better business owner when you take time to clear your head, to step back, gain perspective, recharge your batteries. You know, the second most common reason, people are worried that they're going to fall behind in the corporate race, that they're going to miss that promotion or advancement if they take vacation. Okay. Now, let me tell you, you're being a lot more loyal to that employer than they are to you. Think how many people come into work and they think everything's great. They got up in the morning like any other day and they suddenly are called into a meeting and there's somebody from HR there and they say, we're having to right size. Okay. What an Orwellian word, right size, which means you're out and you never know no matter how hard you work, no matter how loyal you are when that employer will decide your surplus. If you think by not taking your vacation, it's going to prevent them from saying at some point that just callously you're out. Let me tell you, the mentality of corporate America, you could still be out no matter how hard you've worked, no matter how loyal. So don't let that be. Please, please take your time for yourself. Enjoy yourself. There's always more time for work. And as any longtime listeners heard me say this long time phrase, I never knew a dying man who wished he spent more time at his work. Doesn't exist. You hear me talk about this dichotomy, this thing they talk about in psychology that two things can be true at once. Yes, I love to work. And yes, I love my vacation time. Remember the two things are not mutually exclusive. They both work hand in hand. If all I ever did was work, I'd be more dull than I already am. And two, I wouldn't be a good worker. So take that time. Enjoy yourself. And if you say, well, I don't have any money to go do any kind of fancy vacation, do a staycation, go to a state part, do something for yourself, just enjoy yourself. All right, I'm out of here. Okay, I'll read the questions then. No, I love what I do too. But we are taking Monday off because it's Memorial Day, a vacation day, the unofficial kickoff to summer. But what's it really about that we lose sight of with any of these Monday holidays? To remember and express gratitude to the brave men and women who fought for our nation, for our freedom, and the ones who lost their lives doing so. And I am so grateful to these brave, patriotic men and women who made the ultimate sacrifice so you and I could be free. Absolutely. Okay, we'll go to questions now. This is from Karen in Alaska. Clark, I've heard you say many times what a scam time shares are. My husband and I love one particular area on Maui and go there time and time again, spending lots of money on Airbnb. To us, it seems to make sense to purchase the right to stay at a resort each year for one week. Looking at time share costs, it seems like in the long term, it would be far more cost effective than renting Airbnb's. Can you explain why this would be such a bad idea? All right, so Karen, what makes time shares a defective purchase is there's no market when your life changes or your priorities change and you don't make those trips to Maui anymore and the obligation goes on in perpetuity. You own that obligation. You don't really own real estate in a traditional sense. So you're responsible forever for the maintenance fees, which they can change at any time. Any special assessments they hit you with, you have no rights with those. The time share operator just says, this is what we're now charging you. That's why one of the reasons they're defective, the other, they're so hard to sell. So if you want to buy one, buy one from somebody who's paying you to take it over, the time share market is so broken that you should be able to find on your mini trips to Maui, the time share community you really like and you can rent at them and look at vacation and you can rent people's unused time share weeks. If you go to the time share users group online, you can find the properties and find who's trying to dump their week and may pay you several thousand dollars to take over their ongoing obligation. You never want to be the one who buys a time share from the original developer at their dreamt up fake price that only covers all their massive advertising and commissions expenses. You want to own one that you're not the first owner and they're paying you or at least giving it to you for free to take over that week. And then think about if you have to pay somebody a few thousand to take over their time share when your life changes and you don't want it anymore, you've already budgeted in because you got paid thousands to take it over. You already know whether you might have to pay thousands to get the next person to take it over from you. And people saw them on eBay as well and you mentioned Time Share Users group and the website is t-u-g the number two dot net. So t-tug2.net. Which is an odd and not user friendly web address but it's a very user friendly website once you're there. I have to say I would never ever ever as you would say even come close to a time share based on the fact that we get multiple questions every single week from people just begging to get rid of their time shares. It is prolific. And I completely understand why there's so much air service particularly in the winter from Alaska to Hawaii. Oh my gosh, I know what a great place. Derek in New Jersey says Clark, I wanted to give you a tip on saving money on wedding photography. We hired a graduate photography student from a local university. For less than $500 she came to hundreds of pictures and cleaned up about 50 of them. In addition she gave us all the photos that she took. She was happy to make some extra money and we got a deal on wedding photos. Derek, thank you. We don't have Derek's stinks although that would happen if we had it in this case because I remember when we were doing a wedding thing once we got all kinds of stinks from photographers later when we suggested exactly that that you hire a photography student to take your wedding photos. But it is a great idea and the good news for wedding photographers is we went through that big backlog of weddings for a good while and they were busy as could possibly be after the pandemic period when they had no money coming in. John in Wisconsin says just a quick follow up to my $40 monthly online news pair subscription you read on the podcast. I called a couple of days ago to cancel the subscription. I told them I liked the publication but it was just getting too expensive. Rather than see me go they gave me the new customer promotion of $1 per week. So for a five minute phone call I reduced my monthly subscription cost from over $40 to about $4 a month for the next year. Well worth the brief call. Okay I love this. So it's one of the oddest things with pricing. We say it with streaming services, newspaper and magazine subscriptions. Most any kind of subscription service disloyal people are rewarded more than loyal people. We've talked about this in auto insurance that auto insurers many of them use what are known as loyalty index scores. People who fit a profile of being extra loyal pay higher rates for auto insurance than people who they think might not stay if the price went up too much. So that's the way marketing works in the United States instead of rewarding loyalty, loyalty is punished. So with any subscription you play hard to get. Not always but often you'll get a lower price doing just what John did, gets the publication of a fraction of the cost for the whole next year just by saying I quit. So that does it for us today. So I'm quitting for today. Remember we serve you 30 hours each week with free one on one advice guidance and information at our 31 year old team cart consumer action center available Monday through Friday Eastern time zones 10 in the morning till four in the afternoon. The number you call for that free one on one advice 63649 cart and save more spend less and avoid getting ripped off. ♪♪