The Jon Sanchez Show
09/12-How to make money with a vacation home
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(laughing) - I hear you, but you'll figure something out. I have a feeling. You will figure something out. - I'll try, I'll try. - Love it. Cori edge of injury lady, how you doing? - I'm doing great. How are you doing today? - Doing great, man, doing great. Another nice day in the market today. So yeah, got a smile on the face. Tomorrow's Friday, life is good. (laughing) Oh, good deal. All right, let me tell everybody what we have lined up for you this evening. We're of course gonna recap today's stock market activity. Not quite as volatile today. I'll just give you a little hint. Not quite as volatile today as it has been the other days. But we had our intermittent periods, of course, of weakness and strength. But good news is we closed near the top of the session today. So that's always a positive leading end of the next day. Had a little bit of PPI data today. Really was non-market moving. We had the big report, of course, yesterday, which did create a significant amount of volatility. I won't even bore you with the details up to 10% that's pretty much in line on the headline number with Wall Street's expectation. So yeah, it was just a good, strong day today. But let me tell you what we have lined up for you today. You know, owning a vacation home has many, many benefits, financially and personally. And so what I've tasked the boys to do tonight is let's explore this. I know it's the end of the summer. We probably should have done this topic at the beginning of the summer, but here's the reason I wanted to discuss it tonight, guys. It is the end of the summer. Many of you, of course, may have spent some time maybe renting a home via some of the short-term rental companies that I'm not allowed to say, but you know who I'm talking about. And said, you know, this was probably one of the best weeks of our life, right? We had our friends together. We had our family together. We really enjoyed this. Boy, wouldn't it be nice if we had a place in whatever the location is that we could go to whenever we wanted to, bring the friends, bring the family, celebrate Christmas, the holidays, the birthdays, the anniversaries, and it was a place that we called our own, and oh, by the way, can we make some money on it? And that's what we're gonna discuss tonight. Owning a vacation home, right? There's a lot of things to it. And when we've covered this topic, and it's been quite a while, Corey will highlight tonight some of the things that you're looking at differently with a vacation home than you'd look at for your personal residence. Yeah, obviously location is very important. You'll go into homeowners associations and I mean, so many different things. But then also, Corey's gonna talk about how we can make some money on this. How do you rent out a vacation home? What are some of the pros, some of the cons of doing that? Because again, if you don't do it correctly, it could be a disaster, it could cost you a lot of money, you may be in violation of local codes, et cetera. So Corey will cover that side of it. Dwight will then pick up the ball and run with how the heck do we finance this? And hopefully, and I didn't get a chance to ask Dwight this, but hopefully the rates are not significantly different for a vacation home as they are a primary home. I remember that stood out of my mind, Dwight, don't answer that question yet. I'll keep it to ya. But I remember last time we had this discussion months and months ago, I was quietly surprised that the vacation home, second home mortgage rates were not that different than the primary home. So hopefully that will remain the same. So anything, Corey, you wanna add to this topic tonight? 'Cause I think it's gonna be a real good topic as we wind down summertime. - No, I think you hit it. We'll get into that there are some differences. There's different ways you gotta think about it. You gotta make sure you like going on vacation because that's one of the things I always hear that we went through, personally is like, oh yeah, I have this vacation home, but I actually don't have time to take a vacation. So now I feel guilty for not using my vacation home, but that's where the rental market comes in. So we can answer both ways. - Yeah, exactly. And Corey, do me a favor. I know, like I said, whenever we've had this topic, you always bring up that personal story that you had when you had a rental up an incline and you kind of ran into that scenario. So I think the audience could learn a lot from you what you went through personally on that. So Mr. Mallard, the financing side of things, you've got a lot of good details for us on that, I assume. - Absolutely, absolutely good and bad, but yeah, absolutely. - Uh oh, uh oh. Maybe I'm wrong that the rates aren't that big. - I mean, the GSE is the government sponsored entities, want your money, right? So yeah, we'll go through it. It's the, what do you call it though? It's the in-between, the just right lukewarm, so it's not-- - Yes, golden arms. - It's fake, but it's not the worst, yep. - Yeah, it's perfect. - Yeah, but at least there's lots of opportunities. - Yep, you better believe it, love it. All right, excellent. Okay guys, well let me take this time right now, let's do a little stock market recap. Like I said, it was an interesting day-to-day, they're, you know, remember, let's go back to yesterday, yesterday was a day that everybody was so concerned about the CPI number, and as Jason and I went through in great detail yesterday, it wasn't the headline number where they include everything, it was the core year over year that was up 3/10 of a percent, Wall Street was looking for a 2/10 of a percent increase. So that one was slightly hotter, that was the only number out of yesterday that was slightly hotter than anticipated, and boy did it create volatility. As I mentioned on the show last night, we had over an 800-point swing from the lows of the day, which was down a little over 700 on the down to where we closed, I think we were, what, 123, 124 or something around there, so it was a massive day. Today, PPI, the measure of inflation on the wholesale side, not quite that earth shattering by enemies, like I said, just 2/10 of a percent month over a month, so that's pretty much all you need to know. Now, the tone today was this, something happened yesterday as this market rebounded that the optimism began to find its way back into this market. And matter of fact, we're, we now, after today, we have had four consecutive days of positive closes on the S&P 500. Today, we had 23 of the 30 stocks that make up the Dow Jones Industrial Leverage close positive. Today, we had 11 out of the 11 of the S&P 500 sectors register gains. Communication services up 2% discretionary up 1.2, so on and so forth. And then, of course, we had the mega-cap tech names definitely participated. NVIDIA looks like the selling has subsided, at least for the time being. NVIDIA was a strong performer today, up $2.24, 1.9% gain to 1.1914, which, by the way, between today's gains and gains earlier in the week, that stock is up 16% from last Friday's close. So again, everyone's been watching that one extremely closely. On the economic calendar, besides the PPI data, we did, of course, have weekly initial claims. Again, number came in at 230,000. There revised the previous week to 228, so a whopping 2,000-person increase on the filing for the state unemployment benefit. And then, of course, the continuing claims, those continuing to receive the state unemployment benefit, came in at 1,850. They revised the previous reading to 1,845, so up only 5,000 on that one. So, like I said, the economic data was decent today, not bad, not great, but it wasn't anything to worry about. And hence, why the market went into a bit of a buying mode today, a little bit of a rally. Here's how we finished up for the session. A 235-point gain on the Dow, 0.58%. Back above the 41,000 market, if you can believe it, 41,097 was our close, the NASDAQ gained 174 points, a solid 1% rise, closing at 17,569. S&P for the day at 42 points, 3/4 of a percent, closing at 5,595. And the Russell 2000 was actually the best performer on a percentage basis of all the major averages with a 1.22% gain up 26 points to 2,129. Now, if we turn things over to the bottom market, Mr. Mard, hey, not bad. Three basis point increase on the 10-year, a 368 close, how did we do on the 30-year mortgage side of things today? Yeah, well, it was a little choppy today, John, but the 30-year fixed mortgage rate, according to the mortgage use daily, 6.15. So, I mean, that's just four basis points. Yeah, that was just four basis points up from yesterday, which was 6.11. So, I mean, we're right there in that low sixes, which is, and, you know, John, I quoted a rate yesterday for a client and it was in the low fives, so. No kidding. Oh, fantastic. Yeah, yeah. So, 'cause the FHA, according to the mortgage use daily, is at 5.69. I would argue that that number is slightly lower. So, you're in the mid-fives. Okay, mid-fives. Yeah, you're in the mid-fives on FHA with, you know, based on the most FHA profiles you're in the mid-fives. Hey, Dwight, real quick, I wanted to ask you on Tuesday and we didn't get a chance very quickly before we go to break. Educate the audience a little bit on the FHA and why that rate, number one, why that rate's lower than the 6.15 that you just quoted on the traditional 30-year. But, you know, who should be looking at an FHA and real quickly the pros and cons? Can you squeeze that in in about a minute or two? Yeah, yeah, so right now, in my understanding, is the mortgage-backed securities market, the Gini Mays are trading better than the Fannie Mays. There's more appetite for. There's more revenue in FHA loans if I could say that. So, it tends to be a better performing mortgage in terms of interest rates and fees. FHA is notorious to take people with lower credit scores and higher debt-to-income ratios, where your conventional loans, Fannie and Freddie, will only go to a 49, John 49.8, 49.7. However, I've seen FHA go as high as almost 60% debt-to-income ratio. You're talking debt-to-income ratio, yeah, there you go. Yeah, yeah, so they're a little more lenient on that. They're a little more flexible on employment. Everything can be a gift. It's just, they're just a little more, you know, if you remember after the meltdown, remember, they always said FHA was the new subprime. You know, I don't buy into that, but it does create a little more flexibility, and you can actually do a manual underwrite on FHA. So, unlike conventional, most lenders won't do manuals. You can do a manual underwrite on an FHA loan. So, it gives the borrower a better chance if you've had some struggles in the past. I mean, if you've got current struggles, it's probably still gonna be tough, but if you've had some issues and savings and whatever, it's a little more forgiving. But we have a cap based upon the area that we live in. Yeah, every area is gonna have a cap, and you know, those caps have been very, very generous over the years, and I'll share with you after the break. I'll give you the Reno Carson City and Lyon County caps, but yeah, they just limit, but like I said, most of your FHA buyers are not going outside of that cap. That's the good news, 'cause they've kept up with the times, so they've kept up with the times, so yeah, it's a very, and that's probably the best word for giving, it's a very forgiving product. Okay, perfect, thank you, appreciate that. Yeah, tell us those caps when we get back. So, we're gonna get back first, let's go to Kristin Snow. She's in the right now, traffic center, Kristin. Welcome back to the John Sanchez Show on the News Talk 780 KOHR's very, very special co-host that I love being with every Tuesday and Thursday. Corey Edgier lived Dwight Mallard. All right, my guys, Dwight, let's go to the scenario again, FHA's we're talking about very quickly before we get to our vacation home subject of the day. What's our limit right now in Reno Carson, Lyon County, et cetera, for FHA's. Yeah, so yeah, let's start with Lyon County. Lyon County's 498-257, that's the base loan amount, so I mean, you can buy a house now, you're gonna buy it at 5'10", 5'15", you're 3.5% down, so that's the sales price. Carson City's at 5'10", 600, Washoe County's at 621 and Douglas County, 657-800. So, I mean, for first-time home buyers, John, those are very generous, I believe, maximum loan amounts for those counties. The other thing to keep in mind, not only is FHA very flexible and a little more forgiving. When you get into multi-units, if you're willing to occupy one of the units, you can buy a duplex, a triplex, we've talked about this, 4plex, as long as you're willing to occupy one, with the same 3.5% down, and the loan limits do go up as you go into multi-units, but it's a fantastic program, you know? I mean, they got a little sideways when they did life of the loan mortgage insurance, but you know, that hopefully will settle down there. They've got their rainy day fund re-established, so, but FHA's fantastic. In a lot of areas of the country, that's all they do. You know, they don't do a lot of conventions, you do a lot of FHA's, so, it's a very viable product. Indeed. Indeed. Good. Yeah. I just had a question for you. So the life of the loan mortgage insurance, if I'm a buyer and I have 20% down, then am I not subject to that? Is there any reason I wouldn't go FHA if I can put 20% down? Yeah, so FHA doesn't matter how much you put down. Now, it does have some flexibility with down payment. And again, I can come back after the bottom of the hour and give you those numbers. But if you're just doing the three and a half percent down, it's life of the loan mortgage insurance. So you'd have to refinance it or sell it at some point online. But if you put 50% down, I'm still gonna have mortgage insurance. Upfront mortgage insurance and monthly. Yeah, so, yeah, if you're putting a big chunk down, it's not usually the method that we would choose, but there might be no other reason that it might be the only way to be able to go. But as you've always said Dwight, with that 20% down in the PMI, et cetera, that is always something that you can come back in and basically appeal down the road when you start obtaining some equity in the property and try to get rid of that. Only unconventional, only unconventional. Only unconventional, okay. Glad you clarified that. Yeah, FHA has a much stricter, longer term. Like I said, you're just in the minimum down, it's life of the loan. So most of the time when you're getting somebody in under an FHA loan, minimum down, you're strategizing somewhere down the line, especially if they're gonna stay in the house, you take 'em out and refinancing into a conventional, get rid of the mortgage insurance. Okay, so here's the question. Let's take our topic, guys, or go ahead. Glad you're gonna say, but if you remember, one of the things that FHA did do that was positive several months back is they lowered the monthly mortgage insurance premium down to 0.55 annually, which is significantly lower than any mortgage insurance you're gonna get on any conventional loan. So, especially with just three and a half percent down, so they did, but they still have the upfront that they tack on the base loan 'em out, but it's still a fantastic loan. I mean, I would never discredit it. Yeah, all right, so let's get into our topic, guys. We have a lot to talk about on the vacation home side of things, but why we're on this subject to why, could a vacation home be, could it qualify for an FHA loan? Nope, easy answer, no, it has to be, yeah, it's gotta be a conventional Fannie Freddie. Okay, very good. All right, well, let's get down to our topic tonight, guys. Vacation homes, right? Once again, something so many people desire. We deal with this a lot with our clients, especially as we all heard the saying, and many of you may experience the snowboard effect, right? You wanna get out of Reno and it's cold winters and you wanna go to Arizona or some other place where it's warmer and you don't wanna really rent, so what do you do? You buy a vacation home there and you go spend X amount of months out of the year there, X amount of months here in Nevada and life is good. But before you can get it all excited about this and say, hey, guess what, no longer am I gonna be throwing away money to some of these short-term rental companies, there's some things that you should be thinking about when we go through this. So, Corey, let's talk about our first point before we go to break, which is the personal enjoyment, right? I don't like sleeping in hotel beds, I don't like sleeping in other people's beds, so kind of the exclusivity where it's my own private little domain that I get to get away and go to. That's a huge benefit to me. The familiarity, I am a creature of habit. I like knowing where something isn't the cupboard, I mean, it's just crazy, the older I get, how I become more of a creature of habit. And then something, you know, along those lines too, the family tradition side of things, right? The great memories, I mean, when we had a vacation home in Tahoe or before we moved there full time for Bakersville, we had some of the most incredible family traditions and Christmases and things like that. Those memories will stick with me and with my kids, you know, forever. So, kind of lump all that together before we go to break about the personal enjoyment side of the things of a vacation home. - Well, and I think that is a bit positive. And it's the first thing that people think of, and not only the home itself, but the restaurants we go to, the neighbors that we need to use. Just kind of, the word to use familiarity is perfect because you can go there, you're in a different area, different climate usually, different, all these things, but you're still familiar with where you're at. And so, I think that's the first drill. Now, what we don't want to do though, is get so tied into unfamiliar with this. I don't want anybody else here, but then also be planning to get some rental income off of because that's going to kind of ruin it. So, if you've got the OCD, when we sleep in a bed that I'm the only person that's been, we're going to have to sleep in that out in your, you know, expense calculations of changing out that mattress every two months. But you're right. The biggest thing, I found a destination that I love. I can come here every year or multiple times per year, and I found a property that, that I can live with every time I come here, I got a smile on my face 'cause I know what I'm coming at. - Exactly, exactly, there you go. Yeah, 'cause yours truly hates, as you guys know, I hate traveling, I mean airports and all that stuff. And I like to know where I'm going to go and all those things you just said, Corey. So, yeah, I'm a candidate for that. (laughs) All right, we come back. We'll talk about the financial side of things of owning a vacation. I'm a lot of great points we're going to cover with the boys on that one. First, let's turn over to Greg Neff. He's got news, traffic and weather. Hey, Greg. Welcome back to the John Sanchez Show on News Talk. 780KOH with a core edge of Ed Drility. And of course, they're quite alarmed with his new company, Synergy One Lindy. All right, do we finish with the K&M 235 on the Dow to close up 41,096 NASDAQ gained one 74, the S&P higher by 41. All right, we're just beginning our discussion on owning a vacation home, right? Many of you are kind of sitting back going, hey, you had a great time this summer, renting a house on Tahoe, wherever you may enjoy going. So many incredible places in this country. And now we want to help make that dream become a reality. So we talked about the first thing you need to think about, which is the personal enjoyment side of things, right? I've got an exclusive place to go to. I've got comfort, familiarity, create family traditions, family memories, et cetera. Sounds great. Kind of, you know, warm and fuzzy, right? But this is a financial show. We have to talk about the numbers. Corey, let's talk about the financial investment side of things, and then we'll get to the white on how we can get a loan on this. So of course, Corey, when we buy real estate, we're doing it for appreciation, potentially some tax deductions, and of course, rental income. Let's go into detail on those. - So the appreciation is, you know, flip a coin, right? Nobody knows what's going to appreciate or not appreciate. So for that one, kind of, to me personally, I always take it with a grain of salt because unless you know a good fortune teller, then you're taking your best guess. The cash flow, we can somewhat control. If you're in a, if you're in a resort area or an area that has a lot of vacation rentals, then it's easy to get a history on properties around you or a lot of times the property you're looking at will have a vacation rental history. And you can look at the numbers and get a feel for what the income will be. - So let's, while we're on that subject, Corey, let's make sure that we let the audience know about, all right, we got this great idea. We found the perfect home. All the warm and fuzzies are there. We're going to talk about the Lindian in just a moment with Dwight. But first of all, what are some of the things that we need to do as part of our due diligence before we sign on the dotted line with this as far as local codes that we want to rent this out and make some money, obtaining permits, so on, so forth? - So most of the time, I don't want to speak for every county in the country, but most of the time, a short-term or a long-term rental. - Can you hear me? - Hello? - Corey, are you with me? - Yeah, I gotcha. - Hello? - Can you hear me? - Yes. - Corey? - Hey, John. - Yes, sir? - No, it's me, Dwight. I think we just keep going on that point till it comes back. - Okay, Corey, why don't you go ahead and talk on that point? - Yeah, so a lot of times the short-term or the longer-term rentals aren't going to be an issue. Now you get into the Airbnb, the VRBOs, this and that, and that's where you got to be careful. I've had clients in the past, I see people all the time, they will take a property that traditionally doesn't have the short-term rental, the VRBO, the Airbnb, and their plan is they'll sit down, they'll draw it up, they'll say, I'm going to do the short-term is what's going to be boom, boom, boom, and they forget to check into all the local ordinances, and they're changing every single day. So then they go ahead and close on the property, then come to find out they need a permit. So that is a big thing, it's a John's credit, that's something you want to look into in the very beginning because not only do you want to see, is it feasible to do it right now, but what else is in the works in that local community where they're thinking of maybe changing it? So I thought it was a perfect example, they changed all the ordinances, and now you need permits, sometimes you can't even have the short-term rentals. My partner and I had a house in England for years and years and years, and as dumb as it sounds, we never used it. I mean, we live right here, we just didn't have time to go up there. And so we decided, hey, we're going to go ahead and short-term rental this and at least make some money off it and cover our HLA fees well. In the restrictions, it said you can't do short-term rentals for less than, I think it was a month was made to their restriction. We had no idea because we had never bothered to read them, so that kind of blew up that idea. So it is important that if you're, if your financial plan with the vacation house is to do short-term rentals, and let's call anything under a month, especially under a week, you want to make sure A, that your CCRs allow it, and B, that the local ordinances allow it. And if they do, do you need a permit? But on the Vegas now, people realize this or not, they have, you need a permit, but they only give out so many permits. So even if the community allows it, but all the permits are taken, now you're on a wait list to get a new permit. Washoe County is going that same route right now they're going through a permitting process. So it's just something to really look into and make sure you understand. - And Cory, I would think that's going almost nationwide. I've heard it going on in other areas, but I want to add now to the financial part of this 'cause I know you know the answer. So if you're going to look to buy a vacation home and you're going to finance it, there are good news with a vacation home as long as you can qualify, you can put as little as 10% down. That's big compared to 20 or 25% down with an investment property. But I can't, if you buy it at the vacation home, I don't even want to know if you're going to participate in anything outside of you occupying that house. You know, sometime throughout the year. I cannot do a loan, I cannot do a loan if it's in a mandatory, you know, sometimes how they have mandatory rentals, you know, you have to put it in a pool. I can't do it if we do it that way. So the difference, I think people need to understand this. I love the old school vacation second home, right, Cory? Where when we had them years ago, it was the same rate as an owner occupied, but you had to put a little bit more money down. Well, you know, Fannie and Freddie changed that rule what about a year or so ago, added more low level price adjusters to it. So quite frankly, between putting 10%, 20% down, you are somewhere between mid sixes to low sevens in terms of your interest rate. So, you know, if you think you're going to start, maybe, and I just use this as a caution, if you have the money to put down, and there's a possibility that you're going to participate in a long-term rental scenario, sometimes it doesn't make sense to actually go to a second home versus an investment property for putting enough money down because you're going to get about the same rate. So, we're going back to the John Sanchez Show on this talk, 788K, which so apologize for the technical issues all on my part. But we'll continue things on. Mr. Mallard had to render a meeting, but hey, you know what, that doesn't mean you can't reach him in his new lending office. Of course, of synergy, one lending, one number two four is zero, two zero two two. Mr. Ed, you're phone number sir. - 673-6700. - Beautiful, thank you. All right, let's get back on track. I assume I was listening. Looks like you guys got some of the lending side of things covered, Corey, is that right? - Yeah, yeah, just going over investment property versus second home properties, kind of right now with all the overlays. Sometimes it's pretty much the same rate, either way, if you have the-- - Okay, enough down payment. - Okay, perfect, perfect. Okay, let's move on to our next point, Corey. And this is something that we deal a lot with. And I'm talking about this vacation home that you want to purchase, right? You can use it as a vacation home, but there's really one other great benefit about this. And this potentially could be your retirement home. So let's say during your working years, or maybe when the kids are at home whether they're not at home, it doesn't really matter. You were using this again for all the various reasons we discussed tonight. You got some rental income coming in periodically. You've got a place to go to the holidays for vacations. Just to get away, right? There's a lot of vacation homes around our area, right? A lot of people go up to Grey Eagle or Frenchmen's, or obviously Tahoe and so on and so forth. But Corey, let's take a step further. What do people need to be thinking about if they're going to use it as a vacation home for, let's say, whatever, the next five to 10 years, but then they love it so much, they want to turn this into a retirement home. What are some of the benefits and things we need to be thinking about there? Well, I think one of the benefits is, and I've lived this myself, when you, if you're thinking about a retirement home, a place to settle down afterwards, after you don't have to go to work every day, it's good to have a place that you've been to before, because a lot of times I think in, you know, you're in our place, family, we look at magazines or we go on a vacation or this or that. I'm in a, I'm in a location for five days, and I think, well, I could spend the rest of my life here. And then you get there and, oh, this is nothing like it was when I was on vacation. So if you have the benefit and the fortune to buy something prior to retirement, really, you know, kind of sounds dumb, but test out the area, test out the house, show the golf course, test out whatever you think you're going to enjoy, and then kind of let the chips fall where they may and decide for you. I think that is a good benefit. The other side of that too, you need to have a good accountant, 'cause you need to figure out, okay, I'm going to transition from my primary residence. Now I've already owned this house probably as an investment property. I'm in tax returns, now I'm going to move into it. So at what point do I have to sell my primary residence? How many years do I have for the exclusion? Now I'm going to convert this investment property to a primary, what does that mean tax-wise? Always, always include your accountings and those kind of planning strategies. And your attorney too, because if you're smart, you have that vacation rental in a different entity than just your personal name. And so now you want to figure out, okay, but I want to move it back into my personal name or my trust or, you know, kind of all the right information things that people don't want to deal with. - Right, and this, along those lines, Corey, this also can fall into the standpoint that, so let's kind of go back to the basics, right? We have our primary residence. We all know, as long as we're there, two out of the last five years, if we're married, we can make a $500,000 profit and not pay a dime of capital gains tax. If we're single, it's a $250,000 profit. You don't get that benefit with a vacation home. You go to sell that for a profit, and especially if it was bringing in rental income, you're going to, of course, pay capital gains tax, short-term or long-term, most likely, long-term. And of course, depreciation recapture, which is 25% tax on all the depreciation you've taken. Now, would I have seen some clients do, Corey, I'd love to get your opinion on this. And again, with the guidance of their accountants and their attorneys, as you wisely recommended, they will, let's say they got property A, let's say in Reno, and their vacation home is in Tahoe, right? So they sell property A when they're ready to retire. They make that half a million-dollar tax-free exclusion. Then they move into the vacation home and do the same game. They stay there for the next two out of five years and wiping out any depreciation or recapture tax, capital gains tax on the hopes of selling it again and falling under that tax-free exclusion. What's your opinion on that? Absolutely, just with the advice of your accounting. When you get into timeframes, and I just want to spit out, I'm not an accountant, so don't listen to any of the advice I give you, but I've been around enough of them that there are gray areas. You know, the internal revenue code, it's specifically meant to trick you. So there are gray areas, and some accountants will say, okay, well, if you move into the vacation rent, so you've got to be there a minimum of two years. So I'm going to say five years, so I'm going to say a year and a half years. Go with the advice of your accountant. You go into these things, John, and I think a lot of people go into these special retirement homes and say, well, I'm going to retire here, so I'll never leave. Then life happens. A year and a half later, and you've got to get out of here for whatever reason. You need to know ahead of time what financial ramifications those decisions will have. Did you guys get a chance when I had my technical problems? Did you guys get a chance to discuss the question I posed to you? I'm sure you did, but I'd like to hear your answer again. As far as checking with zoning and various city and county regulations, if you were going to be renting this house out as a vacation home, can you go over that real quick with me? Yeah, so again, the short-term rentals, anything under at least 30 days, maybe even shorter than that, you have to assume nowadays that there's going to be some restrictions and whatever municipality you're looking at the house in. You have to assume you're going to have to have a permit. You have to go into it knowing all of those things. You really need to read the CC&Rs. I got burned by that personally. I'm not, I'm a CC&R guy. So you have to sit down and make sure you have a good understanding of what you can and can't do while you're doing your financial planning. If that is your financial plan for the vacation house, because it's not the, you know. In the old days, they let you do anything. Now the hotels are getting smart and say, "Wait a minute. "Let's crack back on these things "because it's hurting my bottom line." And let's add one to the point, especially like up in Tahoe, and I'm sure many of the areas core, I know Tahoe, for sure. And that is, many times there is a, the name escapes me, but it's similar to a room tax at a hotel charges. What's it called on the rental side? The tax that the user of the city will collect. And again, the name escapes me. - Oh, I'm talking about tax or something like that, but yes, I know exactly what you're talking about. - Yeah, so again, that's why it's very important. I've seen people make this mistake. Corey, let's make sure our audience doesn't do that. If you are going to, again, obtain rental income from this vacation home, make sure, I think you mentioned this briefly, Corey, but let's hit the point again, make sure you set this up as a business, right? Don't, you know, rent it to a bunch of buddies or say, "Oh, you know what? "I can scam the IRS and not report the income." No, do not do that. There's too many eyes to be Corey's point. Too many eyes watching you these days. Do it all officially. And make sure, again, you have your accountant and your attorney involved. Again, Corey briefly mentioned about an LLC, you know, we're all big, big fans of anything that we have, liability risk. We wanna hold that into an LLC, but again, it gets a little messy if you plan on moving there for primary residence. So this is where the whole team comes into play. And then Corey, I wanna throw a one more quick point that just came to mind. And that is on the insurance side. I've seen clients make this mistake and that is, they turn it into, you know, again, a vacation rental, but they don't tell their insurance agent, right? You would need to make sure your insurance agent has the proper insurance on there. This is a great time also to pick up an umbrella policy just for that extra liability protection because Lord knows things can happen with, you know, renters, even if they're friends or family. They're up to step, Corey. - Absolutely, yeah. So it's a great benefit, John. I mean, it can have a lot of years of happiness, but you just gotta set it up properly from the beginning so there's no lot of potential pitfalls. And then you don't have anything to worry about. - Yeah, exactly. - You don't wanna. - You don't wanna figure it out. - You don't wanna figure it out. - You don't wanna figure it out once you hold it. - You got it. Thanks everybody, we'll see you tomorrow. This program was sponsored by Sanchez Wealth Management. The material in this program was intended as general information only and should not be taking a specific investment tax or legal advice. None of the information on this broadcast was intended to be a solicitation for the purchase or sale of any security. Further information is available by contacting john@sansheswealthmanagement.com or 775-801-01. John Sanchez offers securities and advisory services through independent financial group LLC, a registered broker, dealer, and investment advisor. Member FINRA SIPC. Securities only offered in states, John Sanchez is registered in. Sanchez Wealth Management LLC and independent financial group LLC are unaffiliated entities. Synergy one lending equal housing opportunity. NMLS number 1907235, Dwight Mallard. NMLS number 24129, phone number 775240222. The information provided today is for educational purposes only. The position strategies or opinions of the show do not necessarily represent the position strategies or opinions of Synergy one lending or its affiliates. All information loan programs, interest rates, terms, and conditions are subject to change without notice. Synergy one lending offers home loan financing only. Synergy one lending is not affiliated with the John Sanchez show. 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