David Sidoni - Specializing In A Desperately Underserved Group - First-Time Homebuyers
After seeing how the real estate industry was screwing over first-time homebuyers, David Sidoni decided to take action. While most real estate teams give the first-time homebuyer clients to their newest agents, because they "take more time" and "ask a lot of questions", David decided to focus his niche on serving this group. He has been helping first-time home buyers since 2006. He's also created an educational platform to empower and educate this group of people. He is also the host of the How To Buy A Home Podcast, the #1 place for renters to find the answers they are looking for!
In this episode, you will be able to:
- Discover the Benefits of Buying Over Renting Homes: Learn why home ownership could be more financially advantageous and fulfilling than renting.
- Dive into First-Time Home Buyer Education Resources: Explore valuable resources and tools to help you navigate the complexities of purchasing your first home.
- Explore Real Estate Investment Strategies Post-Pandemic: Uncover the latest trends and strategies for making smart real estate investments in the post-pandemic market.
- Navigate the Mortgage Interest Deduction: Understand how to maximize the benefits of the mortgage interest deduction and save money on your taxes as a homeowner.
- Find the Right Real Estate Agent for First-Time Buyers: Learn how to identify and work with a real estate agent who understands the unique needs of first-time home buyers.
The key moments in this episode are:
00:00:00 - Finding Passion in Real Estate
00:03:41 - Importance of Education in Home Buying
00:05:11 - Renting vs. Buying in the Current Market
00:08:50 - Building Wealth through Homeownership
00:14:41 - Tax Benefits of Real Estate
00:23:46 - Finding the Right Realtor
00:26:28 - Overcoming Hesitation
00:26:58 - Importance of Professional Guidance
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Read the full transcript:
David Sidoni
I had a team. I was doing all the stuff, big real estate stuff, and my wife looked at me because I'm by Disneyland and she goes, you're only happy when you work with the Disney people. And I started working with the Disney people during the crash and helping them become first time home buyers. But then because the mantra was, great, when now you're done with that, never work with those people again, become a big listing agent. And I just thought that sucked.
Mike Swenson
Welcome to the Real Freedom show where we inspire you to pursue, pursue your passion to gain time and financial freedom through opportunities in real estate. I'm your host, Mike Swenson. Let's get some real freedom together. Hello everybody. Welcome to another episode of Real Freedom, Real Estate Leverage Freedom, where we talk about how you can build time and financial freedom through different opportunities in real estate. I'm your host, Mike Swenson. If you want to get started figuring out kind of what real estate might look like for you, check out our website, Free freedom through real estate.com. we've got a lot of great articles, podcast episodes, you name it on there. And really it's all about being able to find your path in real estate. You know, there's a lot of times where wealth is built in different opportunities in real estate. It kind of depends on your background, your interests, what you love doing. And so today's guest certainly has carved out his own niche in terms of working with first time home buyers. So we've got David Sidoni here. He's been helping first time home buyers since 2006. You are the host of the how to Buy a Home podcast and really focusing on providing education and resources to first time home buyers because, you know, as you say, like, they're often screwed over. And, and when I first got in real estate, it was always the newbie agents, you know, like, oh, let's have you work with first time home buyers because they take up a lot of time, they have a lot of questions, but that doesn't mean they're the best resource for them. So happy to chat with you and learn more about what you're doing today. David.
David Sidoni
Awesome. You know, I love what you're doing. And I actually started as a real estate investor before I got into residential real estate. And that was just one of those pivots I made in my 30s. And one of the things I saw was I see all these people out there talking about using real estate as an investment. And then especially over the last five years, post pandemic, the rents have gone crazy and I see People driving rich cars, big fancy cars and living in a two bedroom apartment and trying to buy multiple investment properties and the math just didn't make sense for me. And so because there is so much straight up on the job training from the brokers where they toss the newbies to the people that need, yeah, they need the most time, but they also need the most experienced people. So I thought I would just spill the beans, pull back the curtain and give everything I ever know about how to do this process right. To educate and empower the people who need it.
Mike Swenson
On my first residential team, there was an agent, her name was Susan and she loved working with first time home buyers. She was middle aged, kind of like the mom personality. And so it felt like she was helping her kids. And so she just loved being able to take extra time to help them. They obviously really appreciated what she was doing. She loved the education piece. And so there's so much that goes into buying a home and being smart with it. You know, when we bought our first home, I just knew that was the next thing to do. And so it's like, okay, this house looks good and the price seems fine and then, you know, come to find out the market crashes right after it, you know, now I couldn't have necessarily seen that coming, but it just goes to show, once you buy this house, like you're, you're in this thing for a while. And so better to get educated, better to have some resources and somebody that can really help guide you through that, through that process. So you make a smart decision, as smart as you possibly can.
David Sidoni
Yeah, it's, you know, 95% of people in North America, it's the largest transaction they're going to ever make and, and the biggest accumulation of wealth that they're going to get in their life is going to be coming in some way or another from this particular transaction. And whether you're getting emotional because you're into hgtv, whether you're getting emotional like you did back in the day when everyone was buying houses and they were doubling every year, having the education and the understanding from a true advocate, not just a door opener, that's huge. And part of what I did was I had a team, I was doing all the stuff, big real estate stuff, and my wife looked at me because I'm by Disneyland and she goes, you're only happy when you work with the Disney people. And I started working with the Disney people during the crash and helping them become first time home buyers. But then, because the mantra was great, when now you're done with that, never work with those people again, become a big listing agent. And I just thought that sucked. And so I thought I'd just give it all away and help people figure out how to navigate this process in the best way possible.
Mike Swenson
So, you know, kind of getting started here where we're at today in the market, you know, for people that, number one, you know, people considering, should I be buying a home or should I be renting? What are some things that you can give them to, to think about to start that thought process?
David Sidoni
The last couple years have been such a frozen stall in the real estate market. And you know, every time I'm talking to first time home buyers, especially over the last 10 years, the discussion always goes to rent versus buy. The biggest mistake that I see people do in Rent versus Buy is one trying to time the market. But the main reason that the timing the market, because timing the market isn't going to matter because we have low inventory. End of story, period. The end curtain. The market is not going to crash. Everything is a million times different. I've got hours of podcasts that explain that. No time to do it right now, but we're 4 to 7 million homes behind. And it's economics 101, supply and demand. But this stall we've had for the last couple of years has created. And because there's so much recency bias, if you're thinking about buying a home now, you might have been thinking about it maybe 12, 24 months. You weren't thinking about it eight years ago. I was in the game back then and I was helping and seeing that people were taking their monthly rent and just comparing it straight to their monthly mortgage. And to me, you know, I'm picturing Beautiful Mind chalkboard of equation where there's a thousand different variables that go into this and people focus on just one in the top left corner. And then they go, nope, it's not affordable to buy a home because the rents are so high right now. If you're sitting in a situation waiting for things to stabilize and 2025 is going to be a mess. So looking at trying to stabilize versus spending another two, three, four years of rent, there's no math that doesn't make sense if you're in the average position where you're renting for the average price to buy a home, even though most likely that mortgage payment's going to be more than your rent. But the big mistake I see is people go, I'm only paying 2200 and if I go get a home it's going to cost me 3,000, so it's not affordable. I'll wait till the number drops below that. Huge mistake there.
Mike Swenson
And we're certainly in a spot right now where I think people are realizing, okay, the rates aren't going to come down anytime soon to the threes. Right. Or the 2.5 that we had, you know, a few years ago. So there was a moment where people are like, okay, rates are going up. I think I'll wait and see. Now they know, okay, the writing's not on the wall. It's going to be higher than what I would like to have bought it for five years ago. But we talk about the two best times to plant a tree, 20 years ago and today. So if you didn't plant a tree 20 years ago, you got to look at, okay, here's where we're at. What can I do now? Because you're right, if, if you do try to time the market, you're not going to be able to see that well enough. And if you're wrong, you're wrong. But I think the opportunity cost of not buying when you can buy, you know, I, I look at, you know, being able to build equity into my home, being able to buy the future home with the equity built, being able to do a home equity line of credit for starting a business, like there was so much value in that first purchase. And the thing that I told you offline and I've shared this on the podcast is, you know, we started out and we bought right before the market crashed and turned that first property into a rental, bought a second property. And so it set us back a little bit, but, you know, we held onto that property, kept it as a rental, and it, it opened up a lot of doors for us financially, even though the first couple years were like, oh, shoot, what do I do? But because that, that home ownership provides stability and wealth building over time, if you're holding for a long time, you're going to tend to do well. But obviously you can look at snippets of time where you wouldn't have done well. I get it. It's a risk and it's, it costs a lot of money and it takes a lot of hassle and there's things you got to do when you're owning versus renting, but it is what it is.
David Sidoni
Yeah, I look at the, the historically, there's only been one 10 year period. If you picked any 10 years on a timeline since the Revolutionary War, and that was 2008, you know, to, to 2018 and, and that obviously was a mess and it's never going to happen again because they changed the regulations. But you know, I see people looking at, at renting versus buying and sometimes they get too smart for their own good and they don't realize. That's why so much of what I like to talk to people about now is the largest monthly out that you have on your spreadsheet is your rent and it goes to nothing. So any investor, any financial person can help you figure out what we like to call a rent replacement strategy. So yeah, it doesn't look like it. Cash flows, it's $800 more than your rent right now. But a home is a for savings account and now Instead of losing $25,000 a year, that goes to nothing. You have $25,000 into a long term investment. And like you said, I mean, gosh, I wish people would understand that even buying at the height before the crash, keeping that first home still gave you tons more options down the line. And you know, it's not timing the market, it's time in the market. Planning that tree options is everything. You can't play the game if you don't have a game piece.
Mike Swenson
And I think for us, I can't remember if we were zero down at the time when we bought our house or if I was 3%. But I think we went FA, we went FHA for our next property. But then we, because we had the one rental, it allowed us to put 20% down on our next home with no more cash into the house, just simply through the equity that was built. And so to be able to put 20% down without having specific savings set aside for that down payment simply came through the value add that we put into the property. Now I did some house projects and stuff like that, so I put in a little bit of sweat equity, but I didn't have to save additional money to get that 20% down for my next house after that because of the equity gain. Like those are the benefits where it starts, a waterfall that builds and grows over time.
David Sidoni
Yeah, I think a lot of people look at the, you know, they're getting a little bit more difficult right now. The old school investment strategy, buy a home, let it appreciate, and then use the equity from that in either a line of credit or a heloc and then purchase your next one and then just keep building. That same strategy can be a replacement strategy for the traditional buy my first house as a stepping stone, sell it, take all the equity and then buy the big forever house that we want, you can do the same thing that investors do. If you buy that first house and do exactly what you did and start thinking about, okay, I have to wait for the equity position to get to a certain point and when it does, maybe I can pull money from this house and use those low down payment options. And now you've, you're sitting in your forever house, but you've also got the beauty of that original property that now is gaining even more time. And you buy one and you do this in seven years. Next thing you know, it's 20 years from now and you've got one property that's got 13 years worth of you paying a fixed down payment on that one. Even if it was a low down payment, it's still going to get easier and easier over the years. And the other one is sitting there with 20 years. So that appreciation is going to be off the charts, not to mention 20 years of rent increases. Can you imagine going back today and looking what rents look like in 2005?
Mike Swenson
Mm.
David Sidoni
You know, I don't know if it's going to continue on this streak, but the concept of being able to buy your first home and using that as your game piece, it has so much potential. Just even if you're at a low down payment because you're going to be able to get so much rent for it as we move forward.
Mike Swenson
And you had mentioned about, you know, kind of the forced savings account. I remember thinking when we turned our property into a rental and I was really looking at just kind of can I cash flow, you know, somewhat even here, because I knew the value wasn't going to return after the crash. It was half of what we bought it for. So it's not like each month I'm looking at is this the month we sell. I knew I was in it for the long haul. I think I'd estimated, you know, probably minimum eight years. It came back and returned to the value, but I think it's 11 before he sold. But anyhow, yeah, looking at the cash flow, we probably lost 50 to 100 bucks a month in cash flow. However, it was close enough that it was okay. And then we also were able to refinance to a 20 year mortgage from a 30 year when rates were really low at a certain time. And I remember looking at that mortgage statement and, and I'd done the calculations and it was about 350amonth that was getting paid off the principal on the loan. And so it's like, even though I'm losing 50 bucks, you know, whatever it Might be I'm still gaining $350 a month in that principal getting paid down by my tenants. And so one of the things that I talk about with people looking to rent is there's all these different buckets of ways that you can win owning real estate and also renting out real estate. And you don't need all of them to go in your favor. You just need one or two here or there or yes, sometimes the appreciation might flatline for a year or two, but you're still getting that mortgage paid or if you're paying it yourself, right, that principal still going down. So you may not see that benefit as a homeowner versus renter right away, but over time, with those mortgage paydowns, every month is a little bit more and a little bit more and a little bit more. So year one doesn't look super cool. But when you get to year three, year five, year seven, you're starting to, to win in bigger ways.
David Sidoni
One of the things, you know, there's been changes in the tax laws over the years and it's going to continue. But when I started in real estate, just the mortgage interest tax deduction was something that I was selling to all my Disney people. We got to the point where if I'd sit down with them and they were like, yeah, you know, I've got a strong W2 employment and you know, I don't claim anything because I'm just a single guy or a single gal, they get $5,000 back. We would go in and talk to the tax person and adjust their dependents from 0 to 2 or 3 or 4. And instead of getting $5,000 back in March, April and May, these people would end up getting a bigger paycheck every week. And therefore the jump from their two bedroom apartment to $500 more for a little three bedroom house, not to mention the fact they were getting a yard, you know, they got a garage. But one of the big factors now, you know, we've got the ordinary tax deduction right now that is, has kind of taken away the mortgage interest deduction. All the benefits of that for low end. But with the average price of $427,000 right now, your first year, it's like 25, $26,000 that you've got in a mortgage interest deduction because you're paying so little on the principal. So as a homeowner, if you are trying to figure out, okay, should I be a renter or should I be that homeowner, maybe you pay more. But not only do you get the benefit of using your rent into something that's going to be a long term investment? You're going to get a gigantic tax benefit. And it's a little bit too complicated to explain on Tick Tock or Instagram. So a lot, not a lot of people know about it. And then they get sent to these newbie agents and, or they go online and the lender tells them you can do this, that, and that's all. And it becomes a stop sign or a green light instead of a starting line. So that's what I'm trying to do is get people to understand this is your starting point. Let's get you there.
Mike Swenson
You know, similarly, you know, that's the thing that I, I share with people looking to invest in real estate is the tax benefits of that too. And I think sometimes when, when you hear people talking about tax benefits, you often hear them just say like, hey, talk to your cpa. They can help you with that decision. And what I'm trying to do is, is tangibly show them because every situation is different, but it is substantial. And so when I'm doing some seminars now where I'm showing people we were working with an investor and we bought a small apartment building and I show a picture of my statement at the end of the year of what I was able to deduct from my taxes as an investor by partially owning that building, you know, and I can't say for, for you this is what it's going to be, but for me this is what it was that write off was, was very significant. And so when people are comparing investing in real estate versus investing in the stock market or other industries, that's one of those secret wins as well that it's hard to quantify because everybody's story is different. And so, you know, I think that's where sitting down to somebody like you, where you can show on paper, here's the value here of owning a home versus renting, that tax benefit is, is big.
David Sidoni
Yeah. And boy, depreciation, the ninth wonder of the world if compound interest is eighth. But you know, the, one of the hardest parts now and one of the reasons why I got so passionate about this as like my, my giving back and my labor of love is, I get it, I understand people have the world their pocket and they are used to being able to research and get quick answers. The customization, the personalization of your own individual process. That's where there's such a disconnect. When people go on the Internet, they find all these stop Signs because they're just putting in three or four factors when it's a chalkboard full of stuff. Not to mention personal things. I mean, another reason I do this is my own personal story. I in the 90s, lived in Hollywood. I was on TV and in movies and living a pretty good life. And I stupidly rented the whole time I was there. I spent $104,000 in rent in 1990s money. And you know, probably at one point if someone had come to me and said, go buy a house, I would have looked at that as a big difference and too much money. And why should I do that? Why don't I just stay here? The lateral move from a two bedroom apartment to a two bedroom condo could have done that easily. $5,000 down, been in, paid the exact same thing. And then instead of getting fifteen hundred dollars back when I was 28 years old for my security deposit, you know, I would end losing $104,000. But that the concept of being able to help people understand you have so many different options that you can't just look at one person, you know, my God, the Reddit thread for first time home buyers. I read it and I just cry. I seriously cry. These people telling each other I did this. So what? It's, everyone thinks they're walking into Target and buying the same thing off a shelf and there's a best way to buy it. And I'm like, you're not all walking in with the same hundred dollars in your pocket. Everybody's walking in with something completely different in their pocket and it can totally change the way that you purchase.
Mike Swenson
Same with rentals. It's like, oh, I can go, you know, go watch some YouTube videos and I think I understand it, but, but everybody's situation's different. The locations and you don't know, the advice that people are giving might be bad advice. And you just take it as, oh, this person sharing the advice. And they might not even realize that their advice is bad advice. So that's why it's important to work with somebody that specializes in this stuff like you, to be able to get the right information, to be able to make a great educated decision versus trying to do it on your own. Because I feel like, yes, real estate agents are professionals that when done well, can provide you with some great feedback, some great advice to help you make a great educated decision. And especially that first time home buyer, you know, you just, you don't realize that it's the agent that just got their license last week advising you and you're like, oh, this is what they told me to do and it could be a train wreck.
David Sidoni
I had two interviews which are my favorite. They were both doctors. One was a psychologist with a PhD and she worked on her own to try to save things up. And when she called me and I said, let's stop trying to figure out how to, how to do the job. Let's spend a whole bunch of time on figuring out who you should hire and go through that process. So spent a lot of time on that. And in the interview she was like, I felt silly. And you know, I, I could have been doing this so much sooner. And then another one, we had this couple, he was a doctor in, in Vegas. He had $300,000 in student loan debt. So somewhere online he read the physician's loan was the only way he was going to be able to buy a home with the student loan debt because that loan was created with the understanding that most people in that field are going to have big student loan debts. So he did all this research on his own and when he came to me, I just said, here's some professionals I know in Vegas, talk to them. He got like halfway through the conversation and in an interview he went, oh my God. I realized I was being the patients who walk in with the WebMD stuff and try to tell me how I'm gonna do my job. And he ended up not using a physician loan, using a completely different loan, getting a different kind of property than I thought they were gonna do, and still was able to do that. With 300,000 in student loan debt.
Mike Swenson
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David Sidoni
Well, I know by your setup on your studio there that you're a sports fan. So you'll understand this. I was matchmaking people because I had been in the industry, you know, for 13 years when I started it. I'm almost 20 years now and go to all these events all over the country and I meet the people that aren't the new agents. They're not the 47% of agents who didn't sell one home last year. They're, they're the best of the best of the best in each location. And I was talking about them and people started asking me, well, how can I, how can I meet them? So I said, well, what you're looking for is here's everything you can do. And I gave a whole podcast on how to interview and hire the right realtor. And then I started saying, well, but there, there are some people I have personally vetted. And I said, they're unicorns because on SportsCenter they always talk about the offensive lineman who can run a 4, 440 and they call him a unicorn. And I was. And it stuck. So to this day, if someone reaches out to me in Orange county and you want someone in New York, I just sent someone to my Long island unicorn. I think Ann has, has helped like six or seven buyers in the. They never thought they could buy a home because she not only gets the mission of how to buy a home, which is to put the first time homebuyers first, but she also happens to be a badass in her area and is really dang good at her job and willing to take the time. Doesn't look at them as a bad return on investment. So that's what I've created now.
Mike Swenson
Yeah, that's awesome. I mean, what I tell people that are looking at, could I or should I look at buying a rental property? It's well, why don't you go talk to a few people, talk to a lender, start to look at some numbers and see if there's a plan that could make sense. Same thing for, you know, looking to buy a home. Once they see it's possible and they see the opportunity and the benefit of it, and they see the numbers on your chalkboard, then they start to make it a reality. And that doesn't mean they can buy the house Next week. But it could be, here's a plan over the next 12 months, or here's a plan over the next two years where I can turn something that I didn't think was possible into something that is possible. And so that's the beauty of that great education, being able to have a professional walkthrough, help them, show them that path. So I just absolutely love what you're doing. It's such a valuable resource and I love how you can put those unicorns in front of the people that really need it. The great education versus just the newbie agent. It's awesome.
David Sidoni
Yeah. And it's very interesting because you'll know this. In helping the people that you help, there's this weird thing that people don't want to bug us, they don't want to bother us. And what's hysterical to me is the people with the 812 credit score and all the money saved who watched a couple YouTube videos and did it all on their own, they reach out to you and you're like, well, we could have got an investment property last year when, you know, the homes were down 6% compared to the prices where they are now. Because you were ready back then. I've been doing the podcast five years now and 72%, I have all the data. 72% of the people that tell me they're 12 to 18 months are under contract in 3.2 months. And it's because you can't figure out the options Going down a Google rabbit hole. You just hire the right pro, take the right workshop for what you're doing, and you're going to find out you have more options than you think. And what's the worst that can happen? You find out you don't now you get guided advice instead of doing it on your own.
Mike Swenson
Awesome. Well, thank you so much for coming on. Thank you for sharing your wisdom. How to Buy a Home dot com. How to Buy a Home podcast. Just a wealth of information. So if you haven't yet purchased a home or you're looking to help a friend, point somebody in the right direction to be able to buy their first home, Absolutely. Check out what you're doing. And thank you so much for coming on and sharing and would love to have a ton of people from this episode that are listening reach out to you and get some great education. So thank you so much for coming on, David.
David Sidoni
Thank you. And thanks for the work you're doing too, my friend.
