Climate_change
00:00:00.000 | Hello everybody, it's Sam from Financial Samurai and I am recording from the hot tub because
00:00:05.880 | I'm trying to get some work done and relax at the same time.
00:00:09.800 | And it's funny because one of the things that has exploded in terms of spending during the
00:00:15.160 | coronavirus pandemic and the lockdown is one, online purchases, right?
00:00:21.080 | But two, it's home improvement stuff.
00:00:24.240 | So a lot of people are doing a lot of work on their homes and a lot of people are spending
00:00:28.640 | money on hot tubs and pools and so forth.
00:00:33.080 | So if you're thinking about getting a hot tub and you live in a moderate climate area
00:00:37.480 | or a couple of the seasons are kind of cold, like below 60 degrees, I highly recommend
00:00:43.160 | getting a hot tub.
00:00:44.160 | The hot tub is amazing.
00:00:46.280 | It's a place to relax.
00:00:48.080 | It's a place to meditate.
00:00:50.160 | I think about a lot of ideas from my hot tub and it's really, really helpful.
00:00:54.800 | So the topic I want to talk about in this episode is on climate change and how it might
00:00:59.280 | affect real estate values.
00:01:02.380 | Because for the longest time, well not the longest time, for the past, I'd say five or
00:01:06.160 | six years, since 2014 at least, but actually since I was a kid, I've always wanted to own
00:01:11.640 | beachfront property.
00:01:13.720 | You know, beachfront, you walk out onto your deck and then you go down the stairs and then
00:01:18.560 | you just take a dip in the ocean and then come out.
00:01:21.640 | Or you just walk across your lawn and into the ocean.
00:01:24.840 | I mean, that was always a dream of mine and it always sounded so amazing.
00:01:29.600 | However, what I've realized after looking at beachfront properties and talking to my
00:01:35.680 | parents and experiencing several natural disasters is that there's just more maintenance and
00:01:41.520 | risk required.
00:01:43.360 | So if you are able to walk out of your home, you know, you're on this nice lawn, of course
00:01:48.000 | there's a pool and a jacuzzi spa, and you just walk out off your lawn into the sand,
00:01:54.360 | I mean that's amazing, right?
00:01:55.960 | Amazing.
00:01:56.960 | You can see those little crabs, you know, going sideways, crawling up and down.
00:02:01.480 | You can see these little fish, the small fish swimming around.
00:02:06.000 | It's pretty amazing, but the water, if it just rises like a foot, I would say your home
00:02:12.120 | might be flooded.
00:02:13.880 | And so flood insurance does cost money.
00:02:16.960 | I did talk to one of these agents in Hawaii in the Kahala area, which is a really nice
00:02:22.160 | area in Oahu, about how much flood insurance costs for this one home.
00:02:27.400 | And he was saying it was about $3,000 or so.
00:02:31.080 | And this was an expensive home.
00:02:32.520 | I was just looking for fun.
00:02:33.520 | It was a $7 million home.
00:02:35.280 | But it's always fun to look at these nice homes, right?
00:02:37.560 | And just kind of dream and imagine to motivate yourself.
00:02:41.720 | It motivates me to try to, you know, think about these things so that I can just figure
00:02:46.560 | out a way to get there.
00:02:48.040 | So flood insurance is something important to think about.
00:02:52.360 | And the other thing is just the maintenance of owning this home near the beach or on the
00:02:58.040 | beach, right?
00:02:59.040 | You've got wind and maybe more moisture, actually definitely more moisture, pounding away at
00:03:06.160 | the walls and at the windows and the seams that are going to crack.
00:03:10.480 | So when you've got wind and you've got sun just baking the stucco or the wood, causing
00:03:16.360 | it to expand and then shrink at night, there's just a lot more maintenance work to be done.
00:03:23.240 | So the question is, is owning beachfront property or lakefront property worth it with climate
00:03:28.760 | change on the horizon?
00:03:30.880 | It's tough to say because climate change is a slow-moving phenomenon.
00:03:35.880 | And there's this one study that I highlight in the Post that says they estimate maybe
00:03:39.600 | 13 million people will move away from the coast and head inland by the year 2100.
00:03:46.680 | And unfortunately, most of us will be dead by 2100.
00:03:50.720 | So it really doesn't matter to us.
00:03:53.000 | And that's just kind of the thinking a lot with climate change for many people.
00:03:56.600 | Is it really going to matter if we're not going to be here?
00:03:58.640 | You know, it's so slow-moving.
00:04:00.940 | But as an investor, you've got to think about the future, especially if you want to buy
00:04:04.880 | real estate for generations to come.
00:04:08.460 | So if you're buying real estate, if you're going to follow my strategy of buying, let's
00:04:12.240 | say, one property per child you have to make sure that at least when you're gone, you can
00:04:19.160 | provide shelter for them if they need shelter.
00:04:22.880 | It's an insurance mechanism that many of the people that I know have done, buying one property
00:04:29.160 | per child.
00:04:30.160 | You know, some people buy dozens of properties.
00:04:32.520 | I don't know who these people are, but hey, you can go that route and build passive income
00:04:36.820 | through real estate that way.
00:04:38.680 | But I like the goal of everybody who has kids to try to buy one property per child.
00:04:44.280 | And if you do buy one property per child, then you've got to think longer term.
00:04:48.680 | You know, your life is probably going to last maybe until 80 to 100.
00:04:53.440 | And then your kids' lives are probably going to last 80 to 100 or maybe longer.
00:04:57.360 | Who knows?
00:04:58.360 | So you've got to be thinking about 30 to 100 years from now if you want to keep these properties
00:05:04.360 | in the family.
00:05:06.220 | So I was thinking, instead of owning beachfront property or lakeside property, it's probably
00:05:12.520 | better to own hillside property, property that has a wonderful view of the ocean or
00:05:19.360 | the body of water you're thinking about.
00:05:21.880 | From a price comparison point of view, you can see how eventually, or maybe right now,
00:05:28.880 | ocean view property, properties with a view on a hill might start outperforming beachfront
00:05:34.680 | property.
00:05:35.680 | People say there's only so much beachfront you can build on.
00:05:39.680 | And that's true.
00:05:40.680 | So there's less of a supply of beachfront homes.
00:05:43.240 | But you can see that balance change over time, especially if there's more disasters, warmer
00:05:49.240 | climates and so forth.
00:05:51.400 | So it's just something to think about as you go and pursue your next property, your next
00:05:55.520 | dream property where you want to retire or just enjoy life.
00:05:59.080 | It's really interesting during the coronavirus pandemic that we've been locked up for so
00:06:03.600 | many months.
00:06:05.320 | There's this palpable and I think obvious through the data desire to own a nicer home,
00:06:11.800 | to live in your nicer home because you're spending more time in your home.
00:06:15.440 | This is what I've been going through since 2012.
00:06:18.100 | In the past, I used to spend, I don't know, eight to 10 hours a day in the home.
00:06:23.660 | After 2012, I'm probably spending 20 hours a day in the home.
00:06:27.720 | So that's a doubling of the time I spent at home.
00:06:31.720 | And that means, hey, why not spend more on the things you spend more time on and that
00:06:36.280 | you value more of?
00:06:37.280 | So I think most people are going to place a higher value on shelter.
00:06:41.560 | And given you place a higher value on shelter, the value of shelter should go up.
00:06:46.360 | And you are seeing demand spread out towards less centrally located parts of your city,
00:06:52.480 | right?
00:06:53.480 | If you don't have to commute every single day downtown, then what's the point of living
00:06:56.940 | close to downtown?
00:06:58.600 | So definitely take a look around your city and see if there are better deals on the outskirts
00:07:04.640 | of your city or the suburbs of your city.
00:07:06.760 | If you can get more space and pay less, that's a no brainer.
00:07:10.000 | I think that trend is going to continue concurrently with the trend of relocating to different
00:07:15.040 | cities and states to really lower your cost of living.
00:07:18.320 | But I think first of all, you got to look within your city.
00:07:21.400 | And I'm sure you can save 20 to 40% on living costs because that's what I did.
00:07:25.920 | And I see it all around in many cities, you just drive 15, 30 minutes further and you'd
00:07:31.200 | save boatloads of money.
00:07:33.440 | And further, you won't be at risk of a salary cut as some companies will wisely try to do
00:07:39.120 | if you decide to relocate and work remotely forever.
00:07:42.600 | So back to climate change.
00:07:44.640 | Climate change, it's going to take a while to really take effect.
00:07:47.560 | But you are seeing erosion of land on lakefront properties, beachfront properties.
00:07:52.340 | So that's something to be aware of.
00:07:54.040 | You will have to pay for flood insurance if you're in the flood zone.
00:07:57.300 | And if you're in the hills, be aware there might be fires if you're surrounded by a lot
00:08:00.920 | of trees.
00:08:01.920 | So you've got to inquire about fire insurance as well.
00:08:05.160 | So at the end of the day, nobody knows exactly what's going to happen, which is why we have
00:08:10.220 | homeowners insurance.
00:08:12.520 | Ask your insurance carrier what type of homeowners insurance you have currently.
00:08:17.000 | Hopefully you do have homeowners insurance and what it covers.
00:08:20.760 | During this lockdown, it's good to get an idea of what your policies are covering.
00:08:25.640 | Life insurance, homeowners insurance, renters insurance, auto insurance, umbrella policy,
00:08:32.160 | personal liability insurance, and so forth.
00:08:34.460 | You got to get these insurance policies downright because as we have all realized now, anything
00:08:39.800 | and everything can happen and you just have no idea so you might as well get protected.
00:08:45.400 | As for future property purchases, I think I'm just going to stick with what I like and
00:08:51.000 | that is owning a single family home on the top of a hill with a view of the water.
00:08:55.840 | I didn't realize, I didn't realize until just now that every single one of my properties
00:09:01.800 | is on a hill with a view.
00:09:03.280 | You know, we're talking Lake Tahoe, Honolulu, San Francisco, they are all on a hill and
00:09:08.080 | they're elevated.
00:09:09.240 | And I think it's because my grandparents bought a property on the hill in Honolulu
00:09:15.440 | and I've been going back there my entire life and I've just been accustomed to that.
00:09:19.400 | Driving up the hill, sitting on a deck, just kind of surveying the landscape and relaxing
00:09:24.800 | outside.
00:09:25.800 | It's just that indoor/outdoor living that I really like.
00:09:27.960 | And you've got to find what's good for you.
00:09:30.620 | If you've been used to just looking outside the window at another building, I'm telling
00:09:35.500 | you straight up folks that it is so much better and so much more relaxing and so much more
00:09:40.880 | calming to have that view.
00:09:42.840 | So I do believe that view properties will outperform going forward.
00:09:47.420 | And it's funny because the only property I did sell in my portfolio was in 2017 and it
00:09:52.280 | was a house without a view.
00:09:53.760 | It was just facing another building.
00:09:56.400 | And so the feng shui, as I really, really care about, wasn't really there.
00:10:00.640 | Yeah, it faced east-west, it had three bedrooms on one floor and stuff like that.
00:10:06.080 | But there's really a difference when you enter a property and you can just feel the positive
00:10:11.260 | energy and the negative energy.
00:10:13.720 | And this is why anybody listing a property during the coronavirus pandemic and the shelter
00:10:17.880 | in place is probably not doing themselves a good job in terms of getting the maximum
00:10:23.680 | price.
00:10:24.800 | It's very hard to buy property without walking through the property and feeling the property,
00:10:30.140 | seeing the property, touching the property.
00:10:32.760 | And so if you're listing now, it's tough because open houses aren't back to normal.
00:10:36.780 | You just can't rush in to take a look at a property on a Sunday afternoon between 2 to
00:10:41.920 | 4 p.m.
00:10:42.920 | You've got to make a private appointment.
00:10:44.280 | And so when you create that friction of buying property, that demand is just not going to
00:10:48.920 | be there.
00:10:50.160 | And that emotional buying that many sellers count on to get that top price is not going
00:10:55.160 | to be there.
00:10:56.200 | So on the flip side, if you're a buyer and you're pre-approved, this is your time.
00:11:00.900 | This is your time to hunt aggressively, to look for those deals or look for those amazing
00:11:05.940 | properties that you couldn't have gotten before the pandemic because there would be just a
00:11:10.820 | bidding frenzy.
00:11:12.500 | This happens a lot in San Francisco.
00:11:14.580 | And I know it's happening in a lot of other places because I've surveyed my followers
00:11:18.380 | on Twitter.
00:11:19.380 | I've asked people on my newsletter, what are you seeing?
00:11:22.740 | And people from Connecticut to Michigan to Indianapolis to Seattle to Las Vegas to Tahoe
00:11:29.300 | are all saying that the uptick in buying interest is really high right now.
00:11:35.120 | And this is mid-June 2020.
00:11:38.220 | And you're seeing the U.S. Mortgage Purchase Index really ramp in May as well.
00:11:43.300 | So a lot of people are interested in buying.
00:11:45.480 | They're getting pre-approved.
00:11:46.480 | And it sure seems like there is a suppression and pent up demand for real estate.
00:11:51.940 | And the spring buying season is just going to shift to the summer and fall.
00:11:55.980 | So just be prepared.
00:11:57.180 | Watch out.
00:11:58.180 | Of course, who knows what will happen.
00:11:59.780 | But people do want to own nicer properties because they're spending more time in their
00:12:04.620 | properties and maybe they're thinking, well, stocks have had their rebound in their run.
00:12:10.140 | They're so volatile.
00:12:11.140 | Let's just spend money and buy something that we can actually utilize and enjoy.
00:12:15.900 | And it might go up in value.
00:12:17.660 | And if it doesn't, at least we'll have a good time in the process.
00:12:21.500 | So anyway, I hope everyone enjoyed this episode.
00:12:24.820 | It's really tough thinking about climate change and buying and all this stuff during this
00:12:29.040 | uncertain time.
00:12:30.040 | There's just more uncertainty, right, with climate change.
00:12:33.040 | And we really just have to think about the present.
00:12:36.060 | How well do we want to live right now?
00:12:37.940 | And I think more and more people are thinking we've been cooped up.
00:12:41.020 | Let's live a better life right now.
00:12:44.060 | And how should we think about our investments in the future if we're going to pass them
00:12:48.100 | down to our children?
00:12:50.020 | And finally, I just realized something.
00:12:52.020 | It's tough to continue to record episodes and write posts while taking care of two kids
00:12:56.900 | and all that.
00:12:57.900 | So if you're struggling to get your work done while taking care of a family, I feel you.
00:13:03.020 | I hear you.
00:13:04.020 | I've been waking up by 5 a.m. every single morning trying to write and record and stay
00:13:08.140 | committed to the Financial Samurai community and to stay committed to my goal of trying
00:13:13.180 | to bring knowledge and financial freedom to as many people as possible.
00:13:17.700 | So if you can couple something enjoyable with something that takes work, I think you're
00:13:23.500 | going to be able to work much easier.
00:13:26.440 | For example, I love going to the hot tub.
00:13:28.260 | I can be in the hot tub for two hours.
00:13:30.060 | It's kind of nuts.
00:13:31.060 | I don't know.
00:13:32.060 | Maybe in another life I was a hot tub critter.
00:13:34.500 | But from now on, I'm going to make it a mission to say that every single time I go to the
00:13:38.540 | hot tub, I'm going to record an episode.
00:13:41.440 | Maybe it's only five minutes or maybe it's 10 to 15 minutes.
00:13:44.700 | Whatever the case may be, what's 10 to 15 minutes of recording if I'm going to be there
00:13:49.420 | for one hour?
00:13:50.420 | So find something you enjoy doing and couple it with some work that you have to do.
00:13:55.700 | If you do that, I think you're going to do better work, more enjoyable work, and you're
00:14:00.140 | going to last for a much longer time.
00:14:02.300 | Thanks so much.
00:14:03.300 | If you enjoyed this episode and this podcast, please share it around and I'd appreciate
00:14:07.580 | a great review.