investing

Navigating Uncertainty: October Market Review and Outlook

October Market Review

In this October market review and outlook, we provide a summary of recent events in the economy and financial markets and offer insights into what this may mean for investors moving forward.

For the last year, forecasters have been predicting an economic downturn in the United States as the Federal Reserve (Fed) strives to control inflation by raising interest rates. Historically, the Fed has had difficulty achieving an economic “soft landing”—that is, taming inflation without causing a damaging recession—when raising rates.

However, more than a year into the Fed’s rate hike cycle, the U.S. economy remains resilient. In fact, the first estimate of third-quarter GDP growth came in at an annual rate of 4.9%, its fastest pace since 2021.

Meanwhile, financial markets have taken a hit in recent months. Both the S&P 500 and Nasdaq dropped more than 10% from their July highs in October, placing both indexes in correction territory. The bond market has also struggled recently as interest rates climb higher.

As we near year-end, many investors are concerned about what a potential recession and ongoing market volatility may mean for their money. Here’s a recap of what’s happened lately and what that may mean for investors heading into 2024.

The Economy Remains Resilient

Since March 2022, the Fed has hiked interest rates 11 times, raising the federal funds rate from near-zero to a target range of 5.25% to 5.5%. However, the Fed has held rates steady since July 2023 in light of moderating inflation and a remarkably resilient labor market.

According to the latest reading of the personal consumption expenditures price index, the Fed’s preferred measure of inflation, core inflation is now 3.7% year over year. While this is significantly lower than its peak reading in June 2022, it’s still a far cry from the Fed’s 2% annual target.

Meanwhile, the unemployment rate continues to hold steady at 3.8%, and third-quarter wages and benefits grew 4.3% year over year. Due in part to ongoing labor market strength, consumer spending increased by 4% in the third quarter, propelling GDP to an annual rate of 4.9%.

October Market Review: Financial Markets Continue to Struggle

Despite strong economic performance, the U.S. stock market continued its decline in October, marking three straight months of negative returns. A variety of factors are in part responsible for the recent pullback in performance, including:

  • Soaring Treasury yields. The yield on the 10-year Treasury note approached 5% in October, the highest level since 2007, curbing investors’ appetite for risk and creating headwinds for big tech and other high-growth companies.
  • Tax-loss harvesting. The recent pullback prior to October created more opportunities for tax-loss harvesting, which put additional pressure on the market in October as investors sold underperforming stocks to offset gains. On the bright side, research from Bank of America shows that although tax-advantaged selling typically pressures stocks at year-end, it often sets the stage for a strong rebound in January when traders repurchase.
  • Higher-than-expected GDP growth. Third-quarter GDP grew at a surprising 4.9% annualized rate, quashing hopes that the Fed will lower interest rates in the near term.
  • Ongoing geopolitical tensions. Russia’s war in Ukraine and the Hamas-Israel conflict continue to add to market uncertainty.

The bond market has also seen weakness as interest rates continue their ascent (in general, bond prices fall as interest rates rise, and vice versa). Both 10-year and 30-year Treasury yields increased more than 0.3% in October, causing longer-term bonds to underperform.

Looking Ahead: Underlying Economic Concerns

Although the U.S. economy continues to hum along, concerns of a potential downturn persist. Some of the factors that could contribute to an economic slowdown include:

  • Declining real disposable income and household savings. Personal income adjusted for taxes and inflation fell 1% in the third quarter after rising 3.5% in the second quarter. Furthermore, personal savings as a percentage of real disposable income fell from 5.2% in the second quarter to 3.8% in the third quarter. As consumers eat through their savings, they may not be able to spend at the same rate going forward.
  • Rising long-term interest rates. Long-term interest rates recently saw their highest levels since 2007. For example, 10-year Treasury yields briefly passed 5% in October, while 30-year yields traded north of 5% for most of the month. Higher rates may be problematic for consumer spending and business investment, as well as several business sectors including the housing market.
  • Tighter credit markets. According to a recent survey from the National Federation of Independent Business, more small businesses reported difficulty accessing credit in September compared to the previous month. The inability to secure capital could lead to a pullback in business investment and hiring.

If these concerns come to fruition, financial markets and the economy might falter accordingly. On the other hand, an economic slowdown could alleviate the need for further Fed intervention, paving the way for future interest rate cuts.

What This Means for Investors

Although recent GDP data is encouraging, these growth rates may not be sustainable as underlying economic concerns create pressure for consumers and businesses alike. While a full-blown recession may not be imminent, many economists expect the economy to cool in the coming months.

Meanwhile, the Fed will decide whether future rate hikes are necessary as new data becomes available. Despite holding rates steady since July, another increase is possible before year-end.

For investors, this lack of clarity may mean heightened market volatility in the near term. At the same time, November is historically the best month for the S&P 500. Indeed, strong performance from U.S. equities could help offset recent losses.

Ultimately, we don’t know what the future holds. However, we do know that patience tends to reward long-term investors. Those who maintain a diversified portfolio and stick to their investment plan typically fare better than those who attempt to time the market.

In the meantime, I encourage you to focus on what’s controllable—for instance, your spending habits, savings rates, and investment decisions—and avoid knee-jerk reactions to negative headlines.

If you found this October market review and outlook helpful, head over to our free resources page for more financial planning tips and guidance.

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S5E4: Mastering the Art of Real Estate Staging & Interior Design with Ruth Krumbhaar

Real Estate Staging & Interior Design

Real Estate Maven Ruth Krumbhaar Shares Her Winning Formula for Staging and Interior Design

Today, Ruth Krumbhaar returns to the podcast to generously share her real estate investing wisdom and unique staging and interior design insights with us. As you may recall from our last episode, Ruth is a successful therapist, coach, and part-time real estate investor who’s built a reliable source of passive income through her investments.

However, while our last conversation focused on many of the technical aspects of real estate investing, today’s episode explores the softer side of real estate as we dive into the world of design and home decorating. Specifically, Ruth is here to share her distinctive approach to sprucing up investment properties, including Airbnbs, long-term rentals, and homes she intends to flip.

In this episode, we discuss the balance between budget, trend awareness, and tenant preferences that forms the cornerstone of Ruth’s process. We also delve into the importance of knowing your audience when it comes to decorating a property. In addition, Ruth explains how a touch of whimsy can transform an Airbnb property from forgettable to memorable.

And if you’ve ever wondered where to find the best decor or how to balance high-end and affordable items for a cohesive aesthetic, Ruth has you covered. Indeed, you’ll gain insider knowledge on how to shop savvy, mix and match classic pieces with modern accents, and curate a unique look that stands out without being generic.

Later in the episode, our conversation shifts to the practicality of design. Because good design isn’t just about how a space looks, but also how it functions. For example, Ruth and I talk bathroom renovations, room refreshes, and the vital importance of a welcoming entryway. We also discuss the value of investing in quality pieces, the significance of an elevated element in every room, and the benefits of staying in your own Airbnb to gain a better understanding of your guests’ needs.

Lastly, Ruth shares her thoughts on how to undertake a themed decorating project without overdoing it. The key, according to Ruth, is finding the right balance and knowing when to pull back.

Ruth’s philosophy is that your home should bring you joy—and she’s here to help us discover how to do just that. Whether you’re a seasoned real estate investor, a curious novice, or simply interested in decorating tips for your own home, I think you’ll find this episode to be a treasure trove of creative insights and practical advice.

With that, I hope you enjoy mastering the art of real estate staging and interior design with Ruth Krumbhaar.

Episode Highlights

  • [00:04:00] Ruth shares her decorating philosophy and why she always starts with a blank canvas when designing a space.

  • [00:14:06] Why every room doesn’t necessarily need a showstopper when it comes to home decorating.

  • [00:20:09] How Ruth determines her decorating budget and where she shops to find cost-effective, quality items.

  • [00:27:51] Tips and tricks for decorating an Airbnb for functionality and style.

  • [00:38:12] Why flipping a property requires a slightly different design approach than decorating a rental property.

  • [00:50:20] Ruth’s advice for handling home renovation projects, such as updating a bathroom or kitchen, and why a good contractor can make a world of difference.

  • [01:01:32] Tips for updating a space where you’ve grown tired of the décor, and why hiring a style consultant can be a worthwhile investment.

  • [01:07:35] What Ruth believes are the most important items to invest in when decorating your home.

  • [01:15:59] Why practical designs can actually boost your return on investment with an Airbnb property.

  • [01:20:30] The importance of understanding local real estate laws when investing in a rental property.

Links Relevant to this Episode & More Tips from Ruth

Windows: MilGard is a good and a reliable company offering a range of styles.

Hardware: Emtek sells high-quality products at a reasonable price.

Faucets/Fixtures: Grohe fixtures are stylish, high-quality quality and less expensive than designer fixtures.

Railings: AGStainless railings are gorgeous and don’t rust.

Doors: Eto Doors offers great designs at an affordable price point.

Countertops/Tile:

  • Lower End: Granite Expo, Best Tile, Uni Stone and Cabinet, and Floor and Decor (be careful not to buy the cheap, trendy tile; you will see it everywhere).
  • Medium: Floorcraft
  • High End: Galleria Tile near the Design Center

Favorite used furniture resources:

Fun resources in Los Angeles:

Other inexpensive ways to add style to your home: 

  • Plants
  • Bohemian pieces like the African JuJu hats
  • Forage for wild grasses and then spray them with hairspray so they don’t create a mess
  • Go to book sales and buy old books for your shelves (and to read)
  • Treasures from trips (I always buy textiles when I travel and use them as table cloths, decor, blankets, pillow covers, etc.)

Enjoy the Full Episode

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S5E4 Transcript: Mastering the Art of Real Estate Staging & Interior Design with Ruth Krumbhaar

In this episode, host Cathy Curtis and special guest Ruth Krumbhaar discuss real estate design and interior decorating best practices.

[00:03:32] Ruth Krumbhaar: Hi, nice to see you.

[00:03:34] Cathy Curtis: Good to see you again, too. I’m really excited to talk with you again about, this time, all things decorating homes and residences and rentals, etc. For our listeners, you and I spoke a couple weeks ago about buying properties. You have a lot of experience. You started doing it as a single woman and you’ve built a nice portfolio for yourself.

[00:04:00] Ruth shares her decorating philosophy and why she always starts with a blank canvas when designing a space.

[00:04:00] Cathy Curtis: And of course, when you buy properties, you have to decide what you’re going to do with them once you either move in or decide to rent them or flip them or whatever your goal is. So I’m excited to talk to you about how you think about that. In general, an overview how you start thinking about it. And then we can get into the details of each type of property. So why don’t you talk about your philosophy about home decorating?

[00:04:31] Ruth Krumbhaar: It’s come to me over many years and many missteps, and I have a formula at this point of how I approach properties. And the formula is one that’s, it’s easy. It’s basically, I have a particular white paint that I love: Benjamin Moore Cotton Balls. Warm white, it’s got a touch of yellow, so it looks, it’s warm, but you could paint the whole interior of the house that color, and different rooms will take on slightly different feels.

[00:05:03] Ruth Krumbhaar: So I always like to start with a really blank canvas, and just…  

[00:05:08] Cathy Curtis: I’m gonna ask, because this white thing is so important. So truly, the Cotton Balls, even with rooms facing different ways and all that, it looks good? And you don’t have to paint the walls to see what it looks like in different light?

[00:05:23] Ruth Krumbhaar: It always looks good.

[00:05:25] Ruth Krumbhaar: I, at least I think it always looks good. It’s warm, but it’s not cream. It’s white. And so it doesn’t have that cold sort of sterile feeling that sometimes an all white house can have.

[00:05:40] Cathy Curtis: I know exactly what you’re talking about because I’ve picked bad whites before where they look chalk and you do not want that.

[00:05:47] Ruth Krumbhaar: Yeah. So I have found that this one, it just works over and over again. It works in modern houses, it works in old houses, it works upstairs, downstairs, you name it.

[00:05:57] Cathy Curtis: What a great tip, okay.

[00:05:59] Ruth Krumbhaar: So I generally use that everywhere to start off with and then I add color as I get to know the spaces. So maybe I’ll do an accent wall or maybe I’ll paint the powder room in one of my houses.

[00:06:12] Ruth Krumbhaar: I painted the powder room like this dark rich brown, which sounds awful, but it’s so incredible to go in. You feel hugged by the color.

[00:06:22] Cathy Curtis: Nice. Now, do you, and you wait to do that then? You paint it all white. And then you start decorating or? What phase do you start repainting?

[00:06:34] Ruth Krumbhaar: Generally, I like having mostly white walls.

[00:06:37] Ruth Krumbhaar: I’ve learned I’m different, like you’ve got that beautiful red wall behind you. And so that room must be so intense and beautiful. If that’s how you’re approaching the home, and I’ll get to that in a minute. It’s so important to maybe not do the white, not do Ruth’s formula, but to actually go in and pick a series of rich, beautiful colors that are going to be more personal to you.

[00:07:04] Ruth Krumbhaar: And if somebody else has a different formula, they should go with that. And I think in a primary residence, it’s so important to tap into what is truly right for you.

[00:07:16] Cathy Curtis: Yeah, I can see that differentiation where the white makes so much sense for rental.

[00:07:26] Ruth Krumbhaar: Yeah, and we’ll get to the primary residence in a little bit, but I generally love that Cotton Balls.

[00:07:32] Ruth Krumbhaar: I generally like thicker baseboards, nice thick ones. I think it feels, even in an older house, you can do more antiquey ones in a modern home. Just square, boxy one.

[00:07:44] Cathy Curtis: You always add those if a home doesn’t have them?

[00:07:47] Ruth Krumbhaar: I don’t always, but I like to. I find that it’s a really wonderful way to have something feel finished.

[00:07:53] Ruth Krumbhaar: It’s smart. It’s smart. And then, and especially if you can, if you’re doing the whole house, if you just are consistent throughout the whole house, that also makes the house feel more unified. And then I have certain floorings that I love. So for like cheap properties, I have vinyl, kind of wide plank, grayish vinyl flooring that I think most people, at least today, find appealing.

[00:08:18] Ruth Krumbhaar: And then I’m just putting it in one of my houses, a sort of medium plank, like a softer, lighter wood and a kind of more of a tan color, really warm and pretty. And it has a little bit of variation, but it’s also a manufactured wood.

[00:08:33] Cathy Curtis: Okay. And where do you source these kinds of things?

[00:08:38] Ruth Krumbhaar: For the cheaper ones, it’s just Home Depot.

[00:08:40] Ruth Krumbhaar: You can just go there, and they generally have pretty trendy things. You can find a lot of good things at a Home Depot or Lowe’s because they are staying current with the trends. So I wouldn’t be afraid to do that, and especially in a less, less expensive property or a rental property that’s going to have a lot of wear and tear.

[00:09:01] Ruth Krumbhaar: But the house I’m doing right now, it’s a little more high-end, so I’m doing it a really nice manufactured wood, which is easy to install, because it is a rental. And so just in case something happens, I want it to be something that isn’t going to cost an arm and a leg to take out, so I’ve done a floating floor there.

[00:09:25] Cathy Curtis: Describe the floating floor.

[00:09:27] Ruth Krumbhaar: The floating floor is when they don’t actually stick the floor onto your foundation or the base. Okay. They actually float it and they put a liner there and then they put the floor on top and then they put the baseboard around that. Okay. It’s easier because if it gets destroyed or distressed, you can pull it out easily or you can pull out part of it easily and reinstall.

[00:09:53] Cathy Curtis: Okay. And you wouldn’t do this in a residence, you would do this in a… Rental in a rental.

[00:09:58] Ruth Krumbhaar: Yeah. Or I do it in a residence that I wasn’t planning on living on in a long for a long time. Some people, you probably advise some of your clients who are interested in this and keeping something for two years and then selling it and you get the tax deduction.

[00:10:16] Ruth Krumbhaar: For selling the primary residence. I know people who move every two or three years. To upgrade each time because in that case, you would do it. But in a residence that you are going to live in a long time, I would do a different kind of flooring.

[00:10:32] Cathy Curtis: Okay.

[00:10:34] Ruth Krumbhaar: Trying to think what else. I generally I love a colorful front door.

[00:10:41] Ruth Krumbhaar: So I think that’s a place to add some fun and some whimsy and it doesn’t cost a lot. It could be repainted, but it’s great. It’s fun for a primary residence. It’s fun for a little, even a cheap little rental property. I just rented out a place that has a bright blue, turquoisey blue door on it. It’s a white house.

[00:11:01] Ruth Krumbhaar: And the gal who rented it said, I wanted to rent it because I like the front door.

[00:11:05] Cathy Curtis: Yeah. Interesting. We just got our house painted all over outside, and we hired a colorist to help us because I don’t feel confident picking colors and she recommended it’s not red. It’s like a, it’s like a deep burgundy door and the rest of the house is variations in tan.

[00:11:26] Cathy Curtis: It looks fantastic.

[00:11:27] Ruth Krumbhaar: Oh, that’s, and that’s such a great investment that you did because painting the outside of the house is such a, it’s a big deal.

[00:11:36] Cathy Curtis: Oh, it’s a huge deal. And she had an eye, she looked at what we had in landscaping, we have a plum tree, and we have some other plants that are purple in them, and it just tied it all together.

[00:11:48] Ruth Krumbhaar: Oh, that must be gorgeous. I definitely think investing in people like color consultants when you’re when you’ve got a nice property like I’m sure yours is or a primary residence that you want to invest in. That’s a great thing to do.

[00:12:08] Cathy Curtis: I’ll put the name of the woman in the show notes because she’s fantastic and she, I think she’s pretty well known, at least in the East Bay for doing this kind of consulting.

[00:12:19] Ruth Krumbhaar: That’s great. Yeah. Happy with how it turned out?

[00:12:21] Cathy Curtis: Super happy. And you don’t want to make a mistake in our house, we have a big house, lots of square footage to be covered.

[00:12:30] Cathy Curtis: What if we didn’t like it? Then you’re driving up to a house that you don’t like the color. So I didn’t want to chance it. I thought that was a good investment.

[00:12:40] Ruth Krumbhaar: Yeah, other things I love are Grohe fixtures. They’re German and of good quality. They don’t break easily and they’re nice.

[00:12:54] Ruth Krumbhaar: They’re not the nicest, but they feel good in your hands. They feel like good quality and they’re not that expensive. You can buy them sometimes at Costco. They have a lot of deals.

[00:13:06] Cathy Curtis: Okay, which fixtures?

[00:13:07] Ruth Krumbhaar: Faucets for the bathroom or kitchen. And again, they don’t do super trendy or real showstopper pieces. But for a regular house that’s going to have some wear and tear like a rental property or even a primary residence, if you like the design, they’re all right.

[00:13:28] Cathy Curtis: But especially it’s a way to save a few dollars. If you’re not looking to have bold designs in these fixtures. Okay, good to know.

[00:13:38] Ruth Krumbhaar: Yeah, exactly. And I think the other thing that I have a really good friend and we talk about design a lot, is you don’t want to gild the lily.

[00:13:45] Ruth Krumbhaar: You don’t want to have a showstopper here and then a showstopper there. If your kitchen is very simple and beautiful and you want one sort of fancy thing, having that fancy faucet in the kitchen might be a great idea. It can be the showstopper. Everything else can be more quiet.

[00:14:06] Why every room doesn’t necessarily need a showstopper when it comes to home decorating.

[00:14:06] Cathy Curtis: So, do you think every room needs a showstopper?

[00:14:09] Ruth Krumbhaar: Not necessarily. Can it also leave space for fun cushions and rugs and things like that? Not necessarily. And I think I’m trying to think of other formulaic things. I see a lot of houses; the kind of houses that excite me are those like ugly modern houses. They’re modern but they have traditional fixtures in them and they’re beaten up maybe from the ’50s or the ’60s. Those kinds of houses, I love the idea of doing a modern makeover, bringing them back to what they really should be.

[00:14:52] Ruth Krumbhaar: And so a lot of like iron railing, modern iron railings, or even glass railings. A lot of really simple, beautiful sort of planes, lots of texture, but keeping everything very simple and quiet. I love thinking about those kinds of houses.

[00:15:10] Cathy Curtis: Where would you source those things, like the railings, and where do you generally go?

[00:15:15] Ruth Krumbhaar: Usually I’ll go to an iron worker. Have them manufacture something. You can find pictures on Pinterest or online and you can just go to them and make them. There are also, I know I bought some premanufactured ones through a contractor and I forget the, who made them, but they’re beautiful. And they were there at my property on Telegraph Hill.

[00:15:40] Ruth Krumbhaar: They were actually made for marine around marinas. So they’re very durable, they don’t rust, and I’ve had great luck with those. I can get the name.

[00:15:50] Cathy Curtis: Okay, that’d be great. And just a broader question about this, when you decide that you’re going to have something made versus buying something manufactured, and I know some of it is budget.

[00:16:04] Cathy Curtis: But are there certain things that you think are worth having made for you specifically?

[00:16:12] Ruth Krumbhaar: I think railings can be, but you have to be, you have to make sure that they understand really how to do it, that they’ve had experience doing it. Cause I’ve had experience where people get it the first time and it’s perfect.

[00:16:25] Ruth Krumbhaar: And I have experienced people tried three or four times and they keep getting it wrong. So you have to be sure that you’ve, you’re working with someone who really knows what they’re doing. But it can be a really great way to actually save money to do iron railings in a more modern sort of aesthetic. But again, making sure that you have the contractor who knows, really knows how to handle the situation.

[00:16:49] Ruth Krumbhaar: How stairs turn, how they, that they have experience with that.

[00:16:54] Cathy Curtis: Okay. And so do you take out whatever railings there are already and just change it to iron railings?

[00:17:04] Ruth Krumbhaar: I, in almost, not every house, but most of the houses I’ve worked on, I have taken the railings out because I have a thing against those sort of traditional. I love beautiful old railings, stair railings, if it’s in a really old house.

[00:17:20] Ruth Krumbhaar: Newer ones with a nod to the old, the sort of faux colonial ones. I have a thing about those. I can’t stand them. Yeah, they go out.

[00:17:31] Cathy Curtis: So that is part of your formula. I bet that gives an instant boost to the space.

[00:17:36] Ruth Krumbhaar: Really does. Yeah. And even for a space that’s not totally modern having one modern touch like a cool iron railing or cool glass railing can really Add a bit of that modern feel, even if you don’t want to go all the way, maybe a little drama to a space.

[00:17:53] Cathy Curtis: Yeah.

[00:17:55] Ruth Krumbhaar: So it’s just a nice way to take things up a notch. And so I’m thinking about other formulaic things that I do. Or pet peeves that I have. I know that one of the things that I find really important for rental homes, Airbnbs, primary residences, and you spoke to this earlier with your house, having that beautiful front door, a beautiful entrance, a beautiful lid.

[00:18:26] Ruth Krumbhaar: Numbers visible, maintained area when you come up to a home, it makes such a difference.

[00:18:32] Cathy Curtis: Yeah, I agree. It’s like a welcome mat, a nice welcome mat.

[00:18:38] Ruth Krumbhaar: Yeah, yeah. And so having good lighting, having that front door, beautiful color. Having simple and easy to maintain landscaping so that unless you’re a gardener, you can have a ball, but most of us don’t really have a lot of time to upkeep our garden, so keep it a nice, simple, classic design.

[00:19:00] Cathy Curtis: Nice numbers, you can get some cool house numbers that add an instant boost.

[00:19:06] Ruth Krumbhaar: Yeah, yeah, and allow people to find your house more easily. It just. There’s something, and I also think like having a little bit of a wider path up, if possible. Not, it’s not always possible, but having a little bit of a wider path up to your home and an ample space to stand in front of the door if there’s not a big porch.

[00:19:26] Ruth Krumbhaar: Extending that as much as you can, not having it feel crowded and cramped.

[00:19:32] Cathy Curtis: So I think those are great tips. Thank you. Thank you. I want to talk to you about, because I know you think about decorating differently when it comes, of course, when it comes to the space you’re going to live in yourself versus you have rental properties in Indiana.

[00:19:50] Cathy Curtis: And in San Francisco and one, one other. Oh, and Maine. Yeah. And I, and you use some, you use yourself and then you rent part of the time. Others are full time rentals. Generally, though, when you’re thinking about decorating a space, you’re going to, let’s say a full rental. Let’s just break it down.

[00:20:09] How Ruth determines her decorating budget and where she shops to find cost-effective, quality items.

[00:20:09] Cathy Curtis: Residential. We’ll talk about residential first because that’s fun. You get a rental. And of course, the first thing you’re going to think about is, I don’t want to spend a ton of money on this and it’s probably going to get some wear and tear. And so how do you budget for it and where do you go to find good items?

[00:20:28] Ruth Krumbhaar: I recently did that with an Indiana house and really it was, I took a look at the floors, and they just weren’t that great. They were all scratched up. There was a little hole in one area. And I spoke with the contractor and got a good price on installing just the cheap vinyl flooring.

[00:20:46] Cathy Curtis: And when you say cheap, but you’re saying cheap, but you still think it looks good, right?

[00:20:53] Ruth Krumbhaar: It does. Yeah. It looks cute. I don’t think I would want it necessarily for my home, but for a rental house for, say, a young person, the woman who is renting it is getting her PhD, she’s a soccer coach, she’s got a dog, she just wants something that’s easy to maintain and manage, that her dog won’t scratch the floors, and she’s young, so she likes that trendy feel.

[00:21:18] Ruth Krumbhaar: A lot of like light fixtures that were fairly inexpensive that I got at either Ikea or Home Depot that had that farmhouse look. So I tried to make the house fun and appealing and consistent. But not expensive light fixtures for 30 a pop.

[00:21:40] Cathy Curtis: Okay, great. And the, and how, and the flooring, what does it cost?

[00:21:47] Ruth Krumbhaar: The vinyl? I can’t remember, but it was like on super special. I. A friend of mine was also redoing her rental and she picked the tan and I picked the gray. My place rented first, so I was like, we were arguing over should you do tan or gray. I said gray is trendier. Those young kids, they like the gray.

[00:22:06] Ruth Krumbhaar: That’s the, this is their aesthetic.

[00:22:09] Cathy Curtis: How do you keep up with the trends?

[00:22:09] Ruth Krumbhaar: Sometimes I’ll watch HGTV, or I try and look at what, like for this one I was thinking, what do young people like? And so I would, I looked at some of the pictures of HGTV that I thought were more appealing to younger folks And maybe I wasn’t right, but mine did rent first.

[00:22:31] Ruth Krumbhaar: And that’s really about knowing your audience. We’re really looking at what is your goal? My goal was to get in a good, solid renter who was going to stay for a number of years, who’s going to care for the place. So I wanted it to be nice enough that it didn’t feel like a flop house for a bunch of students to mess up.

[00:22:50] Ruth Krumbhaar: I made it as pretty as I could and appealing to this sort of younger demographic.

[00:22:55] Cathy Curtis: Okay. What about windows? Do you ever change out the windows if they’re…

[00:23:04] Ruth Krumbhaar: Yeah, and again, that’s a big budget item. So, my partner is working on a house in Redwood City, which is more high end. It’s a 1960s house that had old windows, and one of the first things we decided to do was replace all the windows.

[00:23:23] Ruth Krumbhaar: Because in that house, it’s going to be a flip. We want to make sure that the windows are really high quality and good enough for that area.

[00:23:31] Cathy Curtis: So, it really depends on a lot of things. For example, the Indiana place, I think you said it’s near a university. So, students are your renters professors or students?  

[00:23:44] Ruth Krumbhaar: Yeah, professors.

[00:23:45] Cathy Curtis: Okay. So, let’s say they’re old sliding windows, but it would cost several thousand dollars to replace them. You don’t necessarily go ahead and replace those in that case.

[00:23:55] Ruth Krumbhaar: No. And the windows that are there are like the cheap vinyl, but they’re new. So, they keep in a place like Indiana where there are big storms and it does get cold, they have to be really good functioning windows, but they don’t have to be fancy or expensive.

[00:24:11] Ruth Krumbhaar: And the ones there were just fine. They worked just fine.

[00:24:14] Cathy Curtis: How do you, because I think it would be easy, especially as a new real estate investor, to rent, to buy a place to rent and then think you’ve got to make it look pristine. Yeah, perfect. Yeah. I could see where you could put a lot of money in that will really hurt it as an investment.

[00:24:32] Cathy Curtis: Do you agree? Have you ever experienced that?

[00:24:34] Ruth Krumbhaar: Yes. Yes. And it also depends on how long you want to hold onto it. So, another friend who just recently did two rental properties and he’s… he just couldn’t help himself. He overinvested. They’re beautiful, they’re so nice. They’re much nicer than any other house in the neighborhood by far.

[00:24:54] Ruth Krumbhaar: But his thinking, his rationale is, “I’m going to have these for a long time.” So for him, it made sense. I, for me, I’m a little more cautious about spending money. And that’s why I say the farmhouse, the cool farmhouse style light fixtures that are $30, are just fine. Cute. And people like them.

[00:25:17] Ruth Krumbhaar: There’s no need to spend more money there.

[00:25:19] Cathy Curtis: Okay. In the case of your friend, do you think he is able to get any more rent because the decor or the surfaces or the windows are nicer? Than in another apartment in the same building, let’s say, that doesn’t have those upgrades?

[00:25:38] Ruth Krumbhaar: I think sometimes that is true. What I think he accomplished is he rented it very quickly. So, it was appealing. Somebody had to have it. And so, then he could just start getting his income going sooner.

[00:25:56] Cathy Curtis: And maybe you keep tenants longer. Yeah, who knows? I know that’s all hypothetical, but it seems like that would make sense.

[00:26:06] Ruth Krumbhaar: And I have to respect that he’s got his formula and I’ve got mine. Mine is more cautionary.

[00:26:12] Cathy Curtis: Plus, don’t you have to crunch the numbers? Like when you go to buy a place, you look at it and you go, “How much money can I afford to put in this place to still get the ROI I want or reach whatever financial goal I want?”

[00:26:28] Ruth Krumbhaar: And I wanted 10%. So I only invested up to that number. I went a little bit over; I went like maybe $5,000 over, but I knew that’s where I had to, I just had to stop things like on that Indiana property. I wanted to make a certain amount of money, and I wanted to spend a certain amount of money, so there are a few things I didn’t do to the house.

[00:26:54] Cathy Curtis: Like for example, what didn’t you do?

[00:26:55] Ruth Krumbhaar: There are some electrical lines that hang a little lower than I would like in the backyard. So, I was going to have an electrician put them up on a pole on the roof to raise them up. Yeah, I didn’t do it. I would have liked to have had a garden crew come in and really do a good job on getting the yard and the garden squared away.

[00:27:18] Ruth Krumbhaar: Didn’t do that either.

[00:27:18] Cathy Curtis: That makes sense. So, sometimes it’s better not to go see the property and just, if it’s a rental and your goal is to create passive income, the numbers have to be right. Like you said, you haven’t been to see the property in Indiana, is that correct?

[00:27:41] Ruth Krumbhaar: That’s correct. I have a video and photos, and a great contractor. And I’m more concerned there with just having a fridge that works, a washer and dryer that work. It just needs to function.

[00:27:51] Tips and tricks for decorating an Airbnb for functionality and style.

[00:27:51] Cathy Curtis: Yes. That really does make sense. Okay, so I’d love to talk about Airbnbs a little bit because they’re so popular. I just went to Europe and we rented three Airbnbs. I’m fascinated with how people decorate them or pay attention to detail, things like that, and not everybody does. Or I have a suspicion that either they don’t pay attention, or they’ve never… I think people should stay in their Airbnb and experience what it’s like.

[00:28:25] Ruth Krumbhaar: Absolutely.

[00:28:27] Cathy Curtis: To know what people really want when they rent an Airbnb because there’s… you don’t have to be perfect, but there are certain things that are going to make people pretty darn happy. Just as an example, we stayed in an Airbnb where the shower had no place to put soap. It’s like, where do you put it?

[00:28:49] Cathy Curtis: Besides, don’t get me started on French showers, but you turn it on and… Anyway, that’s a French thing, but there was no shelf in the shower to put shampoo or soap or anything. Who designed this? Or no towel racks or not enough hooks. But there are so many things about an Airbnb that could make an experience better.

[00:29:16] Ruth Krumbhaar: Yeah, and really there are two things. It’s like form and function, and you’ve got to have both of them. It’s got to be functional in order for people to be comfortable. They’re coming in from a trip, they’re traveling, they want to just land and have everything work and be easy and approachable. They want a little place in the shower to put their shampoo.

[00:29:37] Cathy Curtis: Yeah, I actually have an Airbnb, a Tahoe cabin that is listed on Airbnb and other platforms. One thing that we did is we totally tricked out the kitchen as far as kitchen utensils and gadgets go. It’s like better than a lot of people’s own kitchen. Every comment we get is, “Oh my gosh, the kitchen is so well equipped.” People love that. And now, it is in Tahoe and people barbecue, which is appropriate for that area because people are going to be cooking. It has to be appropriate for where you are, but I’m surprised how many comments we get about that.

[00:30:20] Ruth Krumbhaar: That’s great. That goes back to knowing your audience. People are going to be doing some cooking, so it’s so important to think about that. A little teeny studio apartment in a great old building in Paris. You’re not going to necessarily be wanting to cook all the time. You’re going to be wanting to go out.

[00:30:40] What you really want is a good coffee maker. And if they provide capsules, bonus points. You don’t have to go out to the grocery store your first day. And speak another language and try and find the coffee capsules.

[00:30:55] Ruth Krumbhaar: Yes. Yes. Agreed. That’s so funny.

[00:30:56] Cathy Curtis: Yeah. Have you Airbnb’d any of your places?

[00:31:00] Ruth Krumbhaar: I have. I have. An Airbnb gives us a chance to be a little more whimsical because, yes, the pictures do have to sell the experience, and it is an experience staying in someone’s Airbnb. Maybe the experience is a classic Tahoe home, but maybe the experience is a groovy San Francisco pad with a little neon on the wall where you can take a selfie. It’s a chance and an opportunity to be a little whimsical in whatever way is calling you. And I definitely love to encourage people to be a little fanciful in those.

[00:31:43] Cathy Curtis: I agree with you. It’s more fun for the person renting.

[00:31:48] Ruth Krumbhaar: Yeah, and the pictures will sell it too, more easily. The other thing that I’ve noticed about Airbnb is they get a lot of traffic.

[00:31:57] Cathy Curtis: Yeah. I don’t know if you agree with me, but I think you need to go a little bit higher quality in the decor. Not necessarily the gadgets, but the decor, because it gets used so much—rugs and towels and… Either that or you replace them all the time. I don’t know what the best way to outfit an Airbnb is.

[00:32:18] Ruth Krumbhaar: I think either way is important. You also want it to feel fresh. And I’m definitely environmentally minded, so getting cheaper things and throwing them away isn’t what I would necessarily recommend. But sometimes, maybe with a rug or with little throw pillows or whatever, you do want to be keeping it feeling fresh by doing that. And then have more substantial furniture or something to balance that out so that it does feel fresh and has some pop.

[00:32:55] Cathy Curtis: Yeah, are there any places where you shop that you think are particularly good for that kind of home decor, like pillows or things like that?

[00:33:08] Ruth Krumbhaar: I actually think Home Goods is still pretty good. You don’t want to make sure it doesn’t look like a Home Goods setup, but if you’re careful, they always have fresh-looking, well-priced pillows and little knickknacks and things.

[00:33:27] Ruth Krumbhaar: But again, I wouldn’t do all of that. I would mix that in with some flea market finds or some more character items so that it doesn’t look like you just went to Home Goods.

[00:33:38] Cathy Curtis: Yeah, I love the flea market idea. Or thrift stores, where people give away nice things that you can’t believe they’re giving away, but they work perfectly.

[00:33:49] Cathy Curtis: We do that a lot in our Tahoe place.

[00:33:51] Ruth Krumbhaar: Yeah, in my main house, I have a very low window between two twin beds, and I’ve been looking and looking for the right bedside table to put between the beds. And finally, my friend, who’s a designer, said, “Get two galvanized buckets, turn them upside down and put a plank on top, and you’re done.”

[00:34:12] Ruth Krumbhaar: And I was like, “Yes, of course. That’s perfect. It’ll look cute. It’s a guest room with two single beds. So it’s probably where kids are going to stay, and I think it’ll be a little fun.”

[00:34:24] Cathy Curtis: That’s a great idea. Now, this is the Maine property. Yes, it’s on an island, and you use it sometimes for yourself, and then you rent it word of mouth. Okay. And I bet that was fun to decorate.

[00:34:41] Ruth Krumbhaar: Yeah. So much fun. So much fun. And it’s very eclectic. A lot of old pieces mixed in with new, a lot of paint, painting old furniture and old chairs. We just had a lot of fun with that one and it’s come together.

[00:34:56] Cathy Curtis: What do you think about theme decorating? Is that too cheesy? Like beach house decor or?

[00:35:03] Ruth Krumbhaar: Yeah. In some places, it can be nice. This house is in Maine. I’ve got a sort of a Maine feeling, but it’s also a little bit of being near the water. So it’s got paintings of sailboats and I actually have sailboats on my plates. So there’s a little of that going on. My partner makes sure I don’t go too far in that direction.

[00:35:23] Cathy Curtis: When we bought the Tahoe place, it was a rental, it was a second home for the person that we bought it from. Oh man, she had it outfitted with so many bear motif things. It was… And my husband likes bear motif a lot more than me, but so just systematically over the last couple of years, I removed one bear at a time and replaced it with something else.

[00:35:53] Cathy Curtis: But we still have bears in there. It is Tahoe. It was, it can get overdone.

[00:36:00] Ruth Krumbhaar: It can. It can. And that’s where having some fun is good. But it’s like jewelry. I remember a friend who’s very chic. She said, “Oh, when you go get dressed to go out, put on all the jewelry that you want and then take off one thing.”

[00:36:14] Cathy Curtis: Yeah. I’ve heard that. That’s great advice.

[00:36:18] Ruth Krumbhaar: It’s the same for homes. And also, for your wardrobe, you want a bunch of really tailored, beautiful pieces, and then some sort of cheaper, fun things to toss on with them. And that’s how you can approach your home as well.

[00:36:32] Cathy Curtis: Exactly, that is a good money-saving technique because you invest in quality pieces. And then, if you want to be on trend, which is fun to do, you don’t have to spend as much money. Because those things don’t last as long, like the toss pillow that you decide to go all bright pink. In a year or two, you get sick of that, or whatever.

[00:36:52] Cathy Curtis: Keeping in mind the environmental aspect, I agree with you, I’m not into throwing things away or into fast fashion. But that is a good way to think about decor so that you can make it economical.

[00:37:06] Ruth Krumbhaar: And Facebook Marketplace, Craigslist, you can go to those websites if you’re open to using furniture or furnishings that people have used before. It’s a great way to get some good deals and things that you wouldn’t naturally find in a store.

[00:37:23] Cathy Curtis: Interesting. I’ve never once used Facebook marketplace. Is it good?

[00:37:26] Ruth Krumbhaar: Oh, it’s so good.

[00:37:28] Cathy Curtis: Okay, that’s a good tip. And are you using a local Facebook marketplace or is that… Because I know on Craigslist, you could look in your local area to see if you could pick up something.

[00:37:41] Ruth Krumbhaar: You can do it locally. I think you can do it like Craigslist within a certain amount of miles. Actually, no, Craigslist is more region-specific. Facebook is more about how many miles away.

[00:37:52] Cathy Curtis: Okay. That’s good. So instead of going out on Sunday to garage sales, you could do it from your computer.

[00:38:00] Ruth Krumbhaar: Yeah. I’ve gotten some beautiful things on Facebook.

[00:38:03] Cathy Curtis: Ah, okay. Okay.

[00:38:05] Ruth Krumbhaar: Beautiful old lamps and rugs and various things. Plants.

[00:38:12] Why flipping a property requires a slightly different design approach than decorating a rental property.

[00:38:12] Cathy Curtis: Yeah, because people move, and they don’t want to move their plants. Okay, great. What about, and I don’t know if you’ve done a flip. I think you have, or your partner has.

[00:38:22] Ruth Krumbhaar: My partner does a lot and I help him with the design.

[00:38:26] Cathy Curtis: Okay. So that’s a whole different ballgame.

[00:38:28] Ruth Krumbhaar: Completely different. And it really depends who your audience is. Again, know your audience.

[00:38:35] Cathy Curtis: Okay, how do you approach that?

[00:38:37] Ruth Krumbhaar: We’re doing one right now in Redwood City, which is a very nice suburb here in the Bay Area on the peninsula.

[00:38:45] Ruth Krumbhaar: And the property is gorgeous. It’s an old, actually, the property is beautiful with old trees. The house is basically a square box that no one has done anything with for many years. So there’s an opportunity there. That’s a beautiful swimming pool. We have simplified the landscape by having the trees pruned, some of them taken down because it was a little too oppressive.

[00:39:13] Ruth Krumbhaar: To lighten it up and make it a little more airy. We’re just keeping…

[00:39:17] Cathy Curtis: Which is an expense, right? You had to factor that in.

[00:39:20] Ruth Krumbhaar: We did, but we know that we can sell this for much more than we’ve put in. So we know there’s a profit margin, so it’s worth it. And I think the buyers will feel that difference.

[00:39:33] Ruth Krumbhaar: But we left, we actually ground up a bunch of the trees and we created mulch from the ground-up trees and we spread that all in this whole area under the trees. We didn’t have to buy mulch. We didn’t have to landscape it. It just feels more rugged and rural and, but still nice and polished.

[00:39:55] Ruth Krumbhaar: All of that at the same time. And then it was a very narrow path walking up to the house all alongside the house. You have to turn to get to the front door. So it felt awkward. We think about people wanting a nice wide path that you feel invited in. And we’re going to do a fountain across from the door and do a sort of cutout.

[00:40:19] Cathy Curtis: Okay. So this goes back to your kind of formula: make the entryway really nice and inviting.

[00:40:28] Ruth Krumbhaar: Yes. And in this case, because there are all these trees and the wood chips, I wanted to have water, the sound of water too. So we’ll have a little fountain. We were just talking about that before I came on this call.

[00:40:42] Ruth Krumbhaar: Yeah, we have different ideas about what the fountain should look like, but something modern will be right across from the door. So also when you’re exiting, you see this beautiful fountain, and then the landscape just fades and becomes nature. And so that felt like a really good way to add a feeling of luxury and a feeling of welcome and also something for them to remember when they leave.

[00:41:10] Cathy Curtis: Yeah. Okay. So the fountain, where will you go to source that?

[00:41:15] Ruth Krumbhaar: I just went on Amazon and there are enough decent fountains. This is not a high-end fountain. This is just to sell the house. We’re looking at about 300 for a modern, good-enough fountain. And then creating a little nook for it. And then what we did was we really focused on windows and doors and floors.

[00:41:39] Ruth Krumbhaar: So all the main surfaces of this house.

[00:41:44] Cathy Curtis: Which is totally different when you’re looking at a rental for Airbnb, right? Because you’re looking to make a profit on this place and sell it quickly. And that, people look at those kinds of things.

[00:41:59] Ruth Krumbhaar: Yeah. Because the house is so simple and lacks architectural interest, we felt that we needed to add a little more substance to it. The doors are really cool, modern ones with some cutout windows that will also let light in. We made the same design choice on the garage doors as well.

[00:42:17] Ruth Krumbhaar: So there are some sort of fun design elements that we can bring in through the doors.

[00:42:23] Cathy Curtis: Okay. Where did you find the doors?

[00:42:26] Ruth Krumbhaar: I will let you know, because I did not order them. However, my partner has a great local source for doors, and he has lots of opinions on windows too. So, we really focused on those pieces, the entry, and the landscaping.

[00:42:46] Ruth Krumbhaar: We ensured that we chose good, really good windows and fun, yet substantial doors. A door handle that feels really good and solid in your hand is a wonderful detail that you don’t skimp on.

[00:42:59] Cathy Curtis: Yeah, that makes sense. After all, it’s the entry to the home. It’s the first impression sort of thing, like a handshake.

[00:43:08] Ruth Krumbhaar: Yes, exactly. And then we’re going to paint everything Cotton Balls. Of course, we’re selling this house. We want it to be simple, but warm and inviting.

[00:43:21] Cathy Curtis: Did you use that company, Grohe, for the fixtures?

[00:43:24] Ruth Krumbhaar: We haven’t gotten there yet, but we probably will.

[00:43:26] Cathy Curtis: Okay. Did you spell that as G R O H E?

[00:43:33] Ruth Krumbhaar: Yes, that’s right.

[00:43:49] Ruth Krumbhaar: We’ve noticed some trends, for example, ridged wood surfaces. So, we got two vanities for the two bathrooms with that kind of surface. They weren’t that expensive, but they feel designer. We’re trying to create a theme there. In one part of the house, due to the open floor plan, we’re actually going to mimic that with some floor to ceiling thin pieces of wood.

[00:44:28] Cathy Curtis: Interesting. May I ask where did you source those vanities from?

[00:44:34] Ruth Krumbhaar: We had to hunt and peck for them, and I will again send you where we found them. I think we may have even found them on Houzz or Amazon.

[00:44:45] Cathy Curtis: Okay. Can you buy things on Houzz?

[00:44:49] Ruth Krumbhaar: Yes, you can.

[00:44:53] Cathy Curtis: And a lot of people go to Houzz for ideas, right? It’s like Pinterest but for home decor. Do you rely on it a lot?

[00:45:02] Ruth Krumbhaar: I use Houzz, and I use Pinterest. I also read magazines – everything from watching HGTV to my favorite magazine, which is World of Interiors, a more European and ethereal style.

[00:45:19] Cathy Curtis: I didn’t know about that. Okay, World of Interiors. That’s great.

[00:45:43] Ruth Krumbhaar: In terms of color and choices around tile and counters in this house, we’re doing everything in tans, whites, and a little touch of gray, accented with black. So, all the door handles will be black. It’s almost like the little black touches are like the eyeliner and everything else is more natural.

[00:45:54] Cathy Curtis: Are you using elevated materials for the flooring and things like that?

[00:45:58] Ruth Krumbhaar: Yes, for the floors. When looking at countertops, because we don’t have to live with it, we can just look and see what fits our design, budget, and what’s in stock.

[00:46:18] Ruth Krumbhaar: You get what you get and you don’t get upset is our motto when we’re doing projects like this.

[00:46:27] Cathy Curtis: Where do you go to find countertops and things like that?

[00:46:31] Ruth Krumbhaar: Part of our sourcing happens in South San Francisco. There are also a bunch of places in the Bay Shore area of San Francisco. We basically give ourselves two days, cruise through all of them, and make a decision within that timeframe.

[00:46:49] Cathy Curtis: See, that stresses me out. Some people are better at that than others. Have you heard of Granite Expo? It’s in the East Bay. I have a friend that tells everyone in the East Bay who is doing remodel jobs and needs tiles and things to go to Art and Tile on Broadway. It’s a bit high-end but they do great stuff. However, my friend suggests going to Granite Expo for cheaper prices.

[00:47:22] Ruth Krumbhaar: There is a place in the East Bay that we’ve gone to, I’ll think of all our sources. It’s great to go to the expensive places to get ideas.

[00:47:36] Ruth Krumbhaar: Yeah, really great customer service. If you have the budget and you want to make it easy on yourself, by all means, that’s a good choice. They often have good contractors to recommend. It’s a bit more of a white glove experience. If you want to be a bit scrappier or if you have a great contractor that you know, these other places are where you can find beautiful materials.

[00:48:03] Ruth Krumbhaar: It’s just that you have to look a little harder.

[00:48:05] Cathy Curtis: And do you think you end up spending less when you do it? So, you really can save money by doing some of it yourself and foregoing the total white glove thing?

[00:48:20] Ruth Krumbhaar: For example, in Maine, we ended up getting beautiful marble countertops. I won’t bore you with the story, but we had three places that we were going to go to. We knew that we had to get them within a certain time frame, and our backup was to do wood, like butcher block counters, which are expensive, but still attractive.

[00:48:43] Ruth Krumbhaar: It’s a suitable choice for a summer house or for one part of your kitchen. It saves money.

[00:48:49] Cathy Curtis: That’s interesting. That’s a great idea. A backup, yeah. Yeah, excellent.

[00:48:53] Ruth Krumbhaar: And this place in Redwood City, the owner wanted to fill in the pool because he didn’t want to deal with it. I said he can’t. So, we’re doing some very inexpensive concrete around it. We’re actually creating some patterns within the concrete so that we can have moss growing in between.

[00:49:09] Ruth Krumbhaar: It’ll be a high-end feeling but not super expensive.

[00:49:23] Cathy Curtis: And concrete can be very attractive. It doesn’t have to be the ugly old asphalt or whatever.

[00:49:31] Ruth Krumbhaar: There are techniques where you can put salt on the surface to make it pucker a little bit, and there are different finishes and stains you can use on concrete.

[00:49:42] Cathy Curtis: Interesting. So, what’s the timeline for putting it on the market?

[00:49:49] Ruth Krumbhaar: Hopefully, September.

[00:49:50] Cathy Curtis: Okay. Is that because all this is going to take that much time due to the contractor’s schedule?

[00:49:58] Ruth Krumbhaar: It is, and it’s also because that’s a good time to start selling. That’s when people are ready to focus back on that kind of thing.

[00:50:08] Ruth Krumbhaar: During summer, people are more distracted.

[00:50:11] Cathy Curtis: So, you’re going to put it on sale at peak time to get the best price.

[00:50:17] Ruth Krumbhaar: Hopefully. It’s not a great market right now.

[00:50:20] Ruth’s advice for handling home renovation projects, such as updating a bathroom or kitchen, and why a good contractor can make a world of difference.

[00:50:20] Cathy Curtis: Yeah. I heard prices are dropping a little. Sounds like a fun project. Let’s switch over to residences. I am going to start this because I have a project and I want to hear what you say about how to handle this project.

[00:50:35] Cathy Curtis: I think a lot of people are in the same boat. My master bath has not been redone for years. It really needs to be gutted. It’s a fairly large room. So, I had a contractor come over and look at it and measure. He gave a quote for the gutting. Now, I’ve been advised to find everything, pre-order it all, and have it ready for when they come. Do you agree with that?

[00:51:08] Ruth Krumbhaar: If that’s what your contractor wants, then that’s the way to do it. Some contractors will say, “Give me the list of what you want and I’ll order it,” because they don’t want it sitting around at the job site.

[00:51:22] Ruth Krumbhaar: The con, if you have a good contractor whom you really trust and like, is that they have their process, so working with them in their process is a good thing to do. The other reason why they’re probably saying that is because you’re a homeowner; you’re gonna have an attachment to certain things, like a particular tile or whatever.

[00:51:44] Ruth Krumbhaar: And if he’s halfway through and you’re like, “Oh, but the tile that I wanted isn’t available anymore. I don’t know what to do,” he doesn’t want to have to stop halfway through and wait for you to figure that out.

[00:51:56] Cathy Curtis: Yeah, and in the meantime, your bathroom’s all torn up.

[00:51:59] Ruth Krumbhaar: Yeah, yeah. So he probably has some experience with this and feels like it’s better to have it all there, sitting there and not have to worry about things not coming in on time.

[00:52:09] Cathy Curtis: Okay, that makes sense. And then me, who I love home design and I feel like I’m a creative person. I don’t know what it is, but the thought of redesigning a big bathroom just… and I procrastinate so much. I just cannot get started. So, what is your advice to somebody that is faced with this? That really wants their bathroom to look great. What are the steps you would suggest to come up with ideas and come up with a design?

[00:52:38] Ruth Krumbhaar: I think it all depends on your contractor, actually. Is your contractor someone that you trust their judgment and their sort of direction? Because some contractors, because they’ve done this so many times, they really understand how the bathroom functions.

[00:52:58] Ruth Krumbhaar: And they have actually really good ideas about how you might want to set it up. They’re not going to pick your tile for you and things like that. But they’ll have an idea of if you do the countertops here, you’re going to save a lot of money because you’ve already got your plumbing here and if you do, if you want to walk in, shower, you could do it here and you could actually fit a freestanding bath over here.

[00:53:19] Ruth Krumbhaar: They’ll possibly have some really good ideas. So I think that’s a great place to start. Start that conversation with your contractor, bring them in for a meeting in the space.

[00:53:32] Cathy Curtis: Yeah, and say, “I want a beautiful design that doesn’t cost ridiculous amounts. So I want to use what I can with the space,” like you’re saying, the plumbing.

[00:53:44] Cathy Curtis: Yeah, it makes sense.

[00:53:46] Ruth Krumbhaar: Or where window placements are, doors and things like that. The other thing is that if you have to get a permit, you may need to submit drawings, and so you would need somebody who can do that for you. If that’s the direction you’re going. Some people submit permits, some people don’t.

[00:54:07] Ruth Krumbhaar: It’s generally a good idea to do it.

[00:54:09] Cathy Curtis: Yeah. I know I have that. I debate that with people all the time.

[00:54:12] Ruth Krumbhaar: Yeah. And then the other, in terms of design and function, is what do you want? What is important to use? For some people, it’s important to have the toilet have their own little room. For other people, it’s they must have that double vanity with lots of space.

[00:54:30] Ruth Krumbhaar: For other people, it’s a walk-in shower and a freestanding tub. Thinking about how you want to use that space.

[00:54:36] Cathy Curtis: Okay. What’s important to you. Okay, that makes sense. And then the daunting thing to me is picking out the tiles and things and the countertops, because you’re not, you can’t envision it until it’s done.

[00:54:56] Cathy Curtis: So how do you go about doing that?

[00:54:59] Ruth Krumbhaar: I always, when I’m confused and unsure, I just go classic. You can never do too badly when you choose classic things. Like a sort of a marble, a grey and white marble. It may look, ho-hum, regular, uninspired, but hopefully you’re doing it in such a way that you’re adding in some fun details where you can.

[00:55:27] Ruth Krumbhaar: But classic always looks good. And so I would go on.

[00:55:31] Cathy Curtis: There’s some colors that I know this is true. In the 50s, it was all olive green and pink. I know there’s always trends. And I guess that’s not so important if you’re not planning to sell your house, but are there trends right now in bathroom colors?

[00:55:50] Ruth Krumbhaar: The ones that I see and respond to most are neutrals – just all neutrals. However, I’ve been working with a friend who’s obsessed with Moroccan tiles, which are trendy now. She wants to have the green square Moroccan tiles in her shower. I said, “If you do that, you have to have an arch doorway. Go for it!”

[00:56:18] Ruth Krumbhaar: That approach will get you a Moroccan light fixture. It can be fairly flush to the ceiling. Go for it. Because of that conversation, I’m seeing a lot of green. There are a lot of earth tones, interesting, almost clay-like, kind of pinky-brown clay-colored tiles, and a lot of beautiful tans.

[00:56:42] Cathy Curtis: What about wood-looking tiles? I’ve started to do a little exploring on Houzz and Pinterest, and I love that kind of earthy, outdoorsy feel that you get with wood. But of course, you don’t want wood in the bathroom.

[00:56:57] Ruth Krumbhaar: I think going that way is great. If you want to go earthy, I would take it a step further. Maybe do the pebble floor in the shower, just to bring natural elements or that kind of feel into the whole bathroom.

[00:57:13] Cathy Curtis: Yeah, okay. So maybe start with a theme. I like the natural elements look. It’s like you can make this an outdoor bathroom or something.

[00:57:24] Ruth Krumbhaar: Yes, then go for it. Go from there. And that’s where having a primary residence that you’re going to stay in for a while is important. You want to follow trends and be smart to a certain extent, but it’s also a chance to do something very personal for you. You’re going to create something that you’re going to enjoy for years to come.

[00:57:49] Cathy Curtis: Yeah, okay. From a budget perspective, do you think it’s a good idea to hire a bathroom consultant?

[00:58:07] Ruth Krumbhaar: Yes, I do. It’s like having a color consultant. A bathroom is a big deal and it’s a big expense, so you want to feel confident going in and like you have a plan. You don’t want a lot of changes happening as you’re doing it because your contractor will become more and more expensive.

[00:58:32] Cathy Curtis: So you don’t need an architect when it comes to redesigning?

[00:58:37] Ruth Krumbhaar: It really just depends, but I think getting a bathroom consultant is a good idea. I would speak with your contractor. If you have the budget, get a bathroom consultant who might be able to draw up the plan and make sure that you’re not overspending on your bathrooms. Generally, the projects that I’ve been privy to, and my mother is a landscape designer, she tells me every single project goes one third over budget. My partner is a contractor and it’s the same thing – every single project is one third over budget. So if you can keep in mind, only budget for two thirds of what you can afford. Leave a third extra of your budget for all the things that you’re going to discover along the way.

[00:59:34] Cathy Curtis: Yes, I know. I see it all the time. The clients did a lot of remodeling during COVID because people were at home. Home became a huge priority. I don’t even know if a third covered the overruns. It just got very expensive for people. They’re all very happy with it though. People love remodeling their homes and getting their spaces to reflect who they are. Like you said, if it’s going to be your residence for a long time, and most of my clients are planning to be in their residences, why not? The cost amortizes over time. If you do it well, maybe you won’t have to do it again for another 10, 20 years.

[01:00:17] Ruth Krumbhaar: Yes, exactly. And that’s where getting good fixtures, especially faucets and shower fixtures, comes in. You don’t have to go all the way to the super expensive ones, but you should get a good quality one.

[01:00:32] Cathy Curtis: Right, and knowing what the good quality things are. I guess that’s where you’re going to share some of your resources. You just have to do your research and talk to people. I’m sure bathroom consultants know where to go for good quality.

[01:00:48] Ruth Krumbhaar: Yes, and contractors will know as well. Some contractors are really up on that too.

[01:00:54] Cathy Curtis: Yes, it sounds like a key person is your contractor.

[01:00:59] Ruth Krumbhaar: Yes. So, I would almost speak with them before the bathroom consultant, because they’ll have that kind of understanding of the space, and you can brainstorm. For example, if I wanted to move the vanity over here, how much more would that cost?

[01:01:14] Ruth Krumbhaar: Get a sense for the kinds of choices that you feel prepared to make and pay for.

[01:01:19] Cathy Curtis: Okay. And then just generally speaking about res, so you’ve done a lot of decorating. Do you do decorating with friends too, besides your own? Yeah.

[01:01:27] Ruth Krumbhaar: Yeah. Yeah.

[01:01:32] Tips for updating a space where you’ve grown tired of the décor, and why hiring a style consultant can be a worthwhile investment.

[01:01:32] Cathy Curtis: So any, you’ve talked about your philosophy, general philosophy, but any other tips that you can give when you’re thinking about, let’s say, you’re completely tired of your living room decor? Like my living room decor has been the same, gosh, for 15 years.

[01:01:50] Cathy Curtis: We did it we got some really high-quality core pieces of furniture, but like I have a sisal rug. I’d love to get a real rug. How would you, what do you think about that? Updating like a room, refreshing let’s say.

[01:02:03] Ruth Krumbhaar: Oh, I think it’s great to do. I think it’s great to do. And maybe that sisal rug can find a home somewhere else in your house too.

[01:02:12] Ruth Krumbhaar: Yeah. It doesn’t necessarily have to go on the curb. One of the things that I’ve had a lot of fun with is working with friends doing updating, say, a living room, and they’ll say, maybe they’ll come to my house and be like, “Oh, I love your living room. I really want mine to look like yours.” And then we’ll go to their house.

[01:02:32] Ruth Krumbhaar: And I’ll realize their style is totally different than mine. It’s never going to work. And so it’s fun to help them really home in on your style. What is your style? You want a clubby, cozy, rich feeling. You don’t want an airy, ethereal, bohemian. Or you love that English countryside look. Go for it.

[01:02:56] Ruth Krumbhaar: And it’s so fun for me to explore other people’s tastes. My mother, for example, we’re finding fabric, she’s got a, in her kitchen she’s got this big banquette, like seating area, and a big table, and these big armchairs, and it’s all pink and green. Which, I can’t stand pink and green. Personally, it has been so much fun getting into her head and into her style.

[01:03:22] Ruth Krumbhaar: I have found the best pink and green fabrics for her. It’s been so much fun. I really think it’s important for us to connect to ourselves and connect to what we love and what makes us happy. And if you have a friend who’s good at design to get the design juices going or hire somebody to come in for a consultation.

[01:03:46] Cathy Curtis: Yeah, I know, I have friends that use designers, would never think about, I have a friend doing a refresh right now, has used a designer from the start, but she herself, my friend has really strong ideas of what she wants, and she finds it looking through Houzz and magazines and all that.

[01:04:06] Cathy Curtis: I think she uses a designer mainly for the sourcing. Yeah, and that’s finding these pieces that she really wants because she doesn’t want to have to do that leg work.

[01:04:16] Ruth Krumbhaar: Yeah, and designers are really good for that because they get a discount and so they can either make their money in time or in reselling you the pieces at regular prices and they or both.

[01:04:29] Cathy Curtis: Yeah, which high-end designers do both.

[01:04:32] Cathy Curtis: I know that hourly and getting a cut on whatever pieces are sold.

[01:04:38] Ruth Krumbhaar: Yeah. And that’s where also working with designers, a lot of designers are wonderful, but some of them are going to try and push you to get more expensive things so they can make more money. So really making sure that you stick to your budget and stick to your guns around.

[01:04:53] Cathy Curtis: I had that experience when we first decorated this house. We hired a designer who showed me a dining table that was like a third of our budget for the whole top floor of our house, and I’m like “Were you not listening to anything I said about our budget?” We really had a budget. Yeah. Do you know what she said?

[01:05:14] Cathy Curtis: She said, “Oh, I’m sorry. Most of my clients don’t have a budget.”

[01:05:18] Ruth Krumbhaar: Ooh, that doesn’t sound like the right…

[01:05:22] Cathy Curtis: My husband said, “Let’s not use her.” And I was so deep into the project already. I thought I just couldn’t, but he was right. He was right. That kind of comment clearly indicated she wasn’t the right designer for us.

[01:05:37] Ruth Krumbhaar: Yeah, especially for your profession. You’re helping people manage money.

[01:05:41] Cathy Curtis: Yes. So, you have to find the right person. And then, I decorated our master bedroom at another time, found the perfect person who went out of her way to stay within the budget and found some wonderful things for even lower prices.

[01:06:02] Cathy Curtis: And I… I would have never thought that because she was so focused on that. So, there are all different kinds.

[01:06:10] Ruth Krumbhaar: And it’s just like your contractor. Making sure you have a good contractor. Making sure that if you hire a decorator or designer of any kind, you see eye to eye and they’re creative.

[01:06:22] Ruth Krumbhaar: Some designers are very resourceful. Like the one you mentioned, they go on websites like Cherish, which is a wonderful website. Another tip. There are so many cool websites that have wonderful finds that are unique or antique. And they know how to find these unique things. That make your home really feel…

[01:06:48] Ruth Krumbhaar: Like an extension, an expression…

[01:06:50] Cathy Curtis: Of yourself. Exactly. And what I loved about her, she was more excited than me when she found a great deal. It was fun working with her instead of anxiety provoking like it was with the original people that we worked with. It was extremely anxiety provoking. Oh my gosh.

[01:07:10] Cathy Curtis: Beautiful things. Who doesn’t want a beautiful oak $15,000… But yeah, so I learned my lesson in that one. So speaking of, we’re going to go back to the personal finance aspect of this. There is investing in pieces, and then there’s knowing that you’re buying something that you love, but probably won’t last long.

[01:07:35] What Ruth believes are the most important items to invest in when decorating your home.

[01:07:35] Cathy Curtis: What do you think are the most important things to invest in when you’re decorating your home?

[01:07:41] Ruth Krumbhaar: I was just talking with a designer friend and she said it’s the rugs and the window treatments for her. And for me, I was like, really? I think it’s the sofa.

[01:07:53] Cathy Curtis: I think the sofa is really important too.

[01:07:56] Ruth Krumbhaar: I think… I happen to, I’m looking in my living room right now, I have an expensive sofa that I probably paid way too much for, but I love it, and it is the showpiece of my living room. I’ve got a very inexpensive rug that’s maybe $250, really inexpensive. But it looks good. So sometimes we can find these cheap things that look okay.

[01:08:23] Cathy Curtis: I know. It’s really true. Is it a big rug?

[01:08:28] Ruth Krumbhaar: It’s huge. And I can’t even believe how inexpensive it was. I bought it online on something like rugs.com for another room. And when it arrived, it was so nice. It’s not, if you touch it, it’s not going to feel like a really high-end rug, but it, and then my expensive sofa works very well with it.

 [01:08:50] Cathy Curtis: See, it elevates the whole room. That, I like that.

[01:08:53] Ruth Krumbhaar: So, I think it’s… People have their philosophies about what to invest in. I do think window treatments, good window treatments are… You can really feel the difference between custom curtains and off-the-shelf curtains.

[01:09:09] Cathy Curtis: And other… Not to say that you couldn’t find a good off-the-shelf curtain. Your rug is a great example. It’s just not as easy.

[01:09:18] Ruth Krumbhaar: Exactly. And there’s some… I think Pottery Barn has some like lined linen curtains. This is my go-to for people when they can’t figure out what they want, but they want it to look soft or summery or… It’s just a good standard. This is a good placeholder and you might have it for the next 10 years and it might just be fine.

[01:09:39] Cathy Curtis: Yeah. That’s not expensive. You know what my favorite, one of my favorite pieces in my home that came from working with the original designers is these reed shades in our living room. Oh my gosh, I love… I still love them. I’ve had them for 15 years and I look at them and they make me happy. And they were expensive.

[01:09:58] Cathy Curtis: Yeah. And I just… That was such a good investment.

[01:10:02] Ruth Krumbhaar: Yeah. I have some curtains that I bought years ago for an old house that I lived in a long time ago. And they’ve traveled with me. I make sure that they work in every house that I’m in because the fabric is so beautiful and the… quality of how they were put together is so beautiful. They elevate every room they’re in.

[01:10:21] Cathy Curtis: In fact, I’m going to put the name of the designer of my shades in the show notes because they still… You would probably know the name. I forget it, but… So beautiful. But you know what? Then again, I know that there’s a lot of quality copycats now that you can get a lot cheaper. It just depends on your budget and how much time you have to search out things.

[01:10:45] Ruth Krumbhaar: Yeah, but I do think if you want your house to feel elevated, every room should have something that feels really substantial. Whether it’s a headboard, or in my guest room, I have a beautiful headboard and some beautiful fabric on the bed. Then I have a cheap desk that I might have gotten at Ikea. It’s just a guest room, so it doesn’t need to be super elevated. But I wanted the bed to feel really sumptuous and it has beautiful cushions.

[01:11:15] Cathy Curtis: I agree with you. We’re talking about residential right now, but even Airbnb’s need this. One of the Airbnb’s we stayed in on our trip was a really nice space.

[01:11:25] Cathy Curtis: It was big. It had a kitchen, but it was decorated completely in HomeGoods standard. There was no elevating element to it at all. It was adequate, it was comfortable. It was fine. But, I couldn’t help thinking, “God, I wish they had just spent a little bit more money.” And it was even from the things hanging on the wall, everything.

[01:11:53] Cathy Curtis: I thought, just maybe a few hundred more dollars. I couldn’t help thinking that, to your point, even if they had just picked one nicer element, it would have elevated the whole space.

[01:12:08] Ruth Krumbhaar: Yeah, it makes a difference. People feel it, even if they don’t know what they’re feeling. Like in that Airbnb that you were in.

[01:12:17] Cathy Curtis: Exactly. I think about that with our Tahoe space. I’ll give a good example. We were in Tahoe recently and I went to a shop that had original art. The art wasn’t that expensive. I found a piece and I thought, “Oh my God, that would look so good in one of our bedrooms.”

[01:12:38] Cathy Curtis: And I thought, “Yep, I’m getting it.” We didn’t have the right piece. But, when I put that on the wall, just the fact that it’s an original art piece, even though it’s not that expensive, elevated the whole room.

[01:12:52] Ruth Krumbhaar: That’s an important aspect of decorating. Going back to my little house in Maine, I have the upside-down buckets with a piece of board on it, but on the wall, I have a series of antique floral framed pictures in old frames that are beautiful and have that elevated quality.

[01:13:24] Cathy Curtis: That works because you’ve got both elements. Another thing we noticed in a lot of Airbnb’s, which seems to work, is using baskets for decor like hanging a series of them on a wall. It works if there are other elements that aren’t baskets.

[01:13:51] Ruth Krumbhaar: In fact, I have here something I’ve traveled with. It’s a big rattan kind of basket-like thing.

[01:14:00] Cathy Curtis: Could you bring it a little bit closer? There you go.

[01:14:02] Cathy Curtis: Wait, a little bit back. We could see it at some point, but I see what you did.

[01:14:09] Ruth Krumbhaar: Anyway, it’s something that can go on a coffee table, or it can go on a wall. It was like, I don’t know, $40. Because it’s earthy, it doesn’t feel cheap. It’s like the baskets.

[01:14:24] Cathy Curtis: Exactly. And because it’s earthy, I don’t think people should move away from basketry. It really is a nice design element. Maybe you don’t like that look in your home, but if you have an Airbnb or VRBO, I wouldn’t hesitate to use it as a design element.

[01:14:45] Ruth Krumbhaar: It’s a really inexpensive way to bring a little more design in.

[01:14:50] Cathy Curtis: Juxtapose that with a piece that’s maybe a little bit nicer.

[01:14:54] Ruth Krumbhaar: Yeah, I do have a lot of baskets in my house in Maine, actually.

[01:15:00] Cathy Curtis: Do you? Okay, what’s your resource for that? HomeGoods? I’ve asked you that 20 times already.

[01:15:08] Ruth Krumbhaar: I have to admit, that’s a great place.

[01:15:11] Cathy Curtis: HomeGoods? Yeah, HomeGoods. Okay, that would be a good place for baskets. Remember Cost Plus used to be such a great place.

[01:15:26] Ruth Krumbhaar: I don’t know, I haven’t been there. There was one near here, or are you thinking of Pier 1?

[01:15:32] Cathy Curtis: Oh, Pier 1. I think they’ve shut down too. Those used to be my go-to’s, but you’re giving a lot more ideas for where to look, which I’m excited to see.

[01:15:46] Ruth Krumbhaar: And Etsy is another wonderful place. I just ordered a tablecloth from Etsy, which is beautiful. You can find so many different things of varying quality on Etsy.

[01:15:59] Why practical designs can actually boost your return on investment with an Airbnb property.

[01:15:59] Cathy Curtis: You’ve given some great notes too. I want to make sure we covered some of your main points. Oh, I know, about rental and Airbnb, the practicality. We haven’t really discussed practical designs very much. Designs that are easy to clean, easy to maintain.

[01:16:20] Ruth Krumbhaar: So you don’t want to do something like I did in Maine, unless you’ve sealed it a bunch. Having marble countertops in a rental is probably not a great idea because red wine could spill on it and stain it.

[01:16:35] Cathy Curtis: Oh, okay.

[01:16:37] Ruth Krumbhaar: Want to have surfaces. And oh, I had candles that dripped. You want to have dripless candles. Things like that. You need to consider, imagine messy people being in the space and how the housekeeper is going to clean it easily.

[01:16:58] Ruth Krumbhaar: And how are you going to maintain it easily? So, making choices, whether they’re cheaper things like the board on the galvanized buckets or smooth surfaces that can’t be destroyed, is key. Some of my furniture in Maine, for example, is painted, but it’s also a little bit of that. It can be chipped and a little worn because that’s the sort of feeling of a Maine summer house.

[01:17:24] Ruth Krumbhaar: So, I don’t care. But if it was a different kind of feeling, maybe the painted furniture wouldn’t go so well.

[01:17:31] Cathy Curtis: One of my pet peeves is bathroom surfaces that are dark. I don’t know if it’s slate or what, but it shows all the toothpaste stains. You cannot keep it clean no matter what. It’s a mistake to have in any kind of place that is an occasional rental.

[01:17:51] Cathy Curtis: Yeah, yeah. You really have to think through that kind of thing.

[01:17:54] Ruth Krumbhaar: You really do. And think through what also of yours can you tolerate having other people touch or use.

[01:18:04] Cathy Curtis: Yes. And the cleaning person thing you brought up. So critical to help your cleaning person be able to clean quickly and efficiently, especially if you’ve got a popular place with constant turnover where they’ve got to come in and maybe have someone come in that same evening when someone leaves. Thinking through that, maybe not so many knickknacks or the surfaces you choose for your floors in the kitchen and bathrooms, all those kinds of things are so important.

[01:18:35] Ruth Krumbhaar: It’s so true. That’s so true. Having enough sets of sheets so that if some are in the dryer, the cleaning person can get the other beds ready.

[01:18:44] Cathy Curtis: It’s a real art and a science to run a place. And to run it well.

[01:18:48] Ruth Krumbhaar: Yeah. And that’s why with the Airbnb’s that I’ve had, all the sheets are the same color.

[01:18:55] Ruth Krumbhaar: So if you have a pillowcase here, even if they’re slightly different, you could, everything’s white or everything’s blue or everything is in the same theme so it can be mixed and matched.

[01:19:07] Cathy Curtis: Yeah. I agree. Keeping it as simple as possible is, especially if you have multiple bedrooms, it just makes so much sense. And all the beds being the same size is helpful too. Yeah, if you can do it. But all these things save time, and they save money. They do. You make your cleaner’s job easier, she or he is going to spend less time in the place cleaning it, you’re going to have a lower cleaning fee, things like that.

[01:19:36] Ruth Krumbhaar: And so, I think with those kinds of properties, keeping it again, simple, keeping the design simple, keeping the garden simple as easy to maintain as possible. One of the things at my place in Maine. The front step. It’s an island where there are granite quarries. So it’s got these massive granite slabs as steps, but they were off-kilter and the whole house felt kind of funky. I had a guy just correct it and oh straight and pushed it back into place, which was not an easy thing to do because they’re humongous. The whole house feels different.

[01:20:17] Ruth Krumbhaar: It feels so good. And also, it’s safer. Because if somebody trips on those stairs, if they were a little bit off, maybe they could sue me. So you have to also think about that.  

[01:20:30] The importance of understanding local real estate laws when investing in a rental property.

[01:20:30] Cathy Curtis: Okay, that’s another great topic. So, this is for rentals. You have to know the local laws about keeping the property safe.

[01:20:42] Cathy Curtis: Yes. If you have a tenant especially. Can you talk to that a little bit?

[01:20:46] Ruth Krumbhaar: Yeah, it’s really important. When I owned rental properties in San Francisco as a landlord, I don’t have a lot of rights. I have fewer rights than I would like so that’s something really important to consider. In Indiana, I certainly don’t want to do anything to upset my renter.

[01:21:06] Ruth Krumbhaar: I love my renter, but I have more rights in Indiana than I do here in San Francisco. And that is appealing…

[01:21:13] Cathy Curtis: About that on the first podcast, that you could do a lot more things than you can do in San Francisco. And just how much easier would that be? It’s just so much easier.  

[01:21:24] Ruth Krumbhaar: Yeah. This is less, there’s so many elements that come into this.

[01:21:29] Ruth Krumbhaar: Because you have to make sure your insurance is good for it being a rental and…

[01:21:34] Cathy Curtis: Can you give an example of something you can do in Indiana that you would never be able to do in San Francisco?

[01:21:40] Ruth Krumbhaar: I think I can kick my renter out more easily. And again, not that I would want to, because I love my renter.

[01:21:48] Cathy Curtis: But no, I know, but that’s a real issue for landlords.

[01:21:51] Ruth Krumbhaar: Yes, in San Francisco, I was considering selling my property and approached the renters and it was going to cost a hundred grand to move them out.

[01:22:02] Cathy Curtis: Yeah, that’s happened to friends of mine. It’s horrible.

[01:22:06] Ruth Krumbhaar: Yeah, so it’s important to think about that. And as I go to re-rent my property in San Francisco, I have to consider the renter, if I want to sell it in say three years.

[01:22:19] Ruth Krumbhaar: I either need somebody who I think will leave in three years, or I have to be prepared to buy them out.

[01:22:25] Cathy Curtis: Are there any other, you mentioned knowing other local laws or ordinances and wherever you do buy and rent.

[01:22:35] Ruth Krumbhaar: Yeah. I’ll use Indiana. The mayor of the town where my house is. He’s real estate friendly.

[01:22:43] Ruth Krumbhaar: He’s actually just trying to help the town get back up on its feet. And so he wants people to come in and fix up houses. He wants great rental housing because three new factories are moving in. So he’s trying to make it easy for everybody, the workers and the people who need housing, but also the people who are supplying the housing.

[01:23:05] Ruth Krumbhaar: And I love his attitude. I don’t, I can’t recite all the nuts and bolts, but in listening to him and reading some of the articles about him and the initiatives that he’s got going. He’s really favoring developers, he’ll sit down and meet with you and talk to you about what you want to do in terms of development and try and make it happen.

[01:23:26] Cathy Curtis: Did you know this when you, after you bought or before you bought?

[01:23:31] Ruth Krumbhaar: Before, before. A friend of mine…

[01:23:32] Cathy Curtis: That would be, that’s a really interesting element to know about when you’re going to buy a rental in a city.

[01:23:38] Ruth Krumbhaar: Yes. And so you want to go on any sort of board, even Reddit is a place where you can get some information.

[01:23:47] Ruth Krumbhaar: You don’t want to rely on that solely. You should read the local newspapers. That’s a really good way to learn, talk to some banks about lending practices and what’s going on, and do a drive around the area, talk to your realtor. Look at, I think we talked about a lot of this in our first podcast, look at places like Muncie where my house is, three new factories are coming in.

[01:24:14] Ruth Krumbhaar: Actually, I think it’s really promising for our future. I think that it’s important to do your research around what’s happening locally. You don’t want any surprises.

[01:24:26] Cathy Curtis: Yeah. We want as few as you can manage because there’s always going to be something. Yeah. It’s always going to be something.

[01:24:35] Ruth Krumbhaar: Yeah, you can make a property as pretty as you want and you can have it as buttoned up, but there are always things.

[01:24:43] Ruth Krumbhaar: One thing that I think my partner is running into in Redwood City is when you do a transaction there buying or selling a property, you have to upgrade the sewer lateral, which is a huge expense that a lot of people aren’t aware of. So I think that’s common.

[01:24:55] Cathy Curtis: I hear about that a lot and it’s expensive.

[01:25:03] Ruth Krumbhaar: It is. So just making sure that you do your research.

[01:25:07] Cathy Curtis: Yeah. You need to be like a forensic scientist when you’re digging into all the details. That makes a lot of sense. Great. I have enjoyed this conversation so much. Is there anything else you’d like to add that you think our listeners would enjoy hearing about? When it comes to decor, and I know, just so everyone knows, we’ll share a whole bunch of resources on the podcast page once this is published.

[01:25:37] Ruth Krumbhaar: I think just connecting to what makes you happy, what brings you joy. If you are a maximalist, go for it, at least in your own home. If you are a minimalist, go for it. And then also, I think, just follow your heart, be you. Yeah. Or make your home represent you, make it be an extension of your personality and expression.

[01:26:04] Ruth Krumbhaar: That’s in your own house. And if you have rental properties or you’re interested in doing Airbnbs, see if you can establish a formula because it’ll make it a lot easier. Have one paint color that you always go to, that feels like the safe bet. So you don’t have to scurry around and wonder what color you painted that rental property or that rental property.

[01:26:27] Ruth Krumbhaar: And just have fun with it. Design is fun, and it’s inspiring, and it says a lot. And it’s a great way for us to express ourselves, but it’s also a great way to welcome people and allow other people to feel good. So that, and then in terms of finances, that sort of two thirds, one third is possibly a rule to stick with.

[01:26:52] Ruth Krumbhaar: If you have your budget is, say, $100,000, see if you can whittle it down to somewhere like $75,000 or $70,000. You can work within there knowing that you have a little bit of extra wiggle room if you need it.

[01:27:06] Cathy Curtis: That’s great advice. And then you won’t be so surprised. And hopefully, you’ll have the money to be able to do it.

[01:27:15] Ruth Krumbhaar: Exactly. And then, of course, as we talked about, having every room have that something elevated.

[01:27:22] Cathy Curtis: I think that is really good advice. Yeah. I love it. You can’t go wrong if you do that.

[01:27:31] Ruth Krumbhaar: All right, this has been so much fun. It’s wonderful fun. And I love talking about design and real estate and finances with you.

[01:27:40] Cathy Curtis: I do too. Thank you so much. And we’ll be publishing this very soon. And I’d love to say we’ll do a third one. So maybe we’ll come up with another topic for the future. Yes. Okay, Ruth. Thanks so much. Take care. Bye. Bye.

For more information and resources related to this episode, please visit the show notes.

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S5E4 Transcript: Mastering the Art of Real Estate Staging & Interior Design with Ruth Krumbhaar Read More »

Single Women and Longevity Risk Part 2: The Importance of Investing

Single Women and Investing

Saving and investing are both crucial for financial health. Yet investing is particularly important when it comes to mitigating longevity risk.  In Part 2 of this three-part series about single women and longevity risk, we’ll delve into the significance of investing and explore how understanding risk and reward can empower women to become better investors.

Differentiating Saving and Investing

When it comes to personal finance, many conflate saving and investing. While both are crucial for financial stability, they serve different purposes.

Saving entails setting aside a portion of your income for near-term expenses or potential emergencies. In other words, your savings should be a safety net that’s liquid and risk-free.

Investing, however, implies allocating money to stocks, bonds, and other assets in anticipation of a potential return in the future. Despite the inherent risks, investing is an essential strategy for single women to increase wealth over time, so you don’t outlive your financial resources.  

Understanding the Risk-Reward Relationship

While investing offers the potential for a higher return on your money, it’s also inherently riskier than saving. That’s why many women hold too much cash relative to their financial goals.

If you tend to be risk averse, you’re not alone. In fact, one Northwestern Mutual study found that in general, U.S. adults prefer to play it safe with their money than take risks.

However, understanding the risk-reward relationship is crucial for overcoming the confidence gap that many women experience as investors. Each investment carries a different level of risk, and effectively managing these risks is essential to achieve your financial goals.

Typically, investments with the potential for higher returns carry a higher degree of risk (although high risk doesn’t guarantee high returns). For example, higher-risk investments like individual stocks and equity funds generally offer the potential for higher returns over time. Conversely, lower-risk assets like savings accounts and short-term Treasury bonds tend to yield more modest returns.

Navigating the Risk vs. Reward Dilemma

Many women face the dilemma of whether to keep their money safe in a bank account or invest it for potential growth. Indeed, research suggests that men are generally more willing to take risks with their finances than women.

However, studies also indicate that as women gain confidence through education and experience, they become better investors. Moreover, women investors are more likely to exhibit traits such as reduced trading, increased patience, openness to advice, more diversified portfolios, and a healthy skepticism towards “hot” investments.

Ultimately, your financial goals determine the level of returns you need from your investments. Saving for a house down payment in the next few years, for example, might require safer investments with less risk. In contrast, saving for retirement that’s several decades away allows for higher-risk investments with the potential for more significant returns.

But you also need to weigh your return objectives against your comfort level with taking on risk. In this case, risk generally refers to the possibility of losing your money. Taking on more risk than you can tolerate can lead you to make rash investment decisions that impede your progress toward your financial goals.

Single Women and Investing: Mitigating Longevity Risk

To mitigate the risk of running out of money prematurely, women must embrace some investment risk. By profiling four different investors, we can illustrate the outcomes along the risk spectrum.

Assume the following savers/investors invest $50,000 for ten years and reinvest all interest and dividends.

  • Investor #1 places her $50,000 in a savings account earning an average annual return of 1.5%. Her account grows to $57.815 in 10 years.
  • Investor #2 places her $50,000 into a certificate of deposit (CD) with an annual yield of 3%. Her account grows to $67,196 in 10 years.
  • Investor #3 places her $50,000 into a diversified portfolio* of 60% stocks and 40% bonds earning a 6% average annualized return. As a result, her account grows to $89,542 in 10 years.
  • Investor #4 places her $50,000 into a diversified portfolio* of 100% stocks, and it earns a 9% average annualized return. As a result, her account grows to $129,687 in 10 years.

A Note on Volatility

While the 100% stock portfolio generates the highest outcome, it also experiences substantial fluctuations over the 10-year period. Meanwhile, the 60% stock/40% bond portfolio exhibits less volatility due to the lower risk associated with bonds. 

Consider the following hypothetical annual return patterns for these two portfolios:

The graphs above illustrate how Investor #4 experiences larger swings in performance over the 10-year period by investing exclusively in stocks than Investor #3. In other words, the price of higher returns is generally increased volatility.

Thus, investors who are unable to weather the ups and downs of the stock market may need to sacrifice return potential to stay the course over time.  

*Diversified portfolio returns were generated using Vanguard Total Market Funds, both U.S. and international.

Striking the Right Balance to Reach Your Financial Goals

The challenge for many independent women investors is understanding their risk tolerance in relation to their need for return.

For example, if Investor #1 doesn’t invest in stocks, will she reach her financial goals and manage longevity risk, or will she run out of money before the end of her life? On the other hand, does Investor #4 need to take quite so much risk, or can she beat longevity risk by investing in a less volatile portfolio?

These are the answers I seek when working with my female clients. Ultimately, my aim is to keep my clients invested for the long term to experience the magic of compounding returns and reach their financial goals.

In the third and final article in this blog series, we’ll look at the other side of the equation: minimizing longevity risk by managing your expenses in retirement.

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Single Women and Longevity Risk Part 1: Why Independent Women Are Most at Risk

Single Women and Longevity Risk Part 1

This is the first blog post in a three-part series about single women and longevity risk. In this article, we’ll explore why independent women are most at risk of outliving their financial resources.

One of the reasons long-term financial planning is important is to minimize longevity risk, or the risk of outliving your financial resources. Longevity risk is generally brought up in connection with retirement, since the risk of depleting your savings increases once you stop working.

With advances in healthcare and increasing life expectancies, longevity risk is becoming an increasingly relevant concern for many retirees. Unfortunately, single women are among those most at risk of outliving their resources due to a variety of factors.

#1: Women Live Longer Than Men

First, women tend to live longer than men on average, which means they may need to support themselves financially for a longer period during retirement. According to a 2021 CDC study, the average life expectancy for women in the United States is 79.1, while for men, it’s 73.2.

However, using an average statistic to determine life expectancy and longevity risk can be problematic as each person’s family, health history, and lifestyle differ. Fortunately, the Social Security Administration (SSA) has a life expectancy calculator that can help you better understand your likelihood of living past a certain age.

For example, a 45-year-old woman’s life expectancy today is 85.4 years. But if she lives until age 70, her life expectancy increases to 88.9.

#2: Single Women Face Unique Financial Challenges

Second, single women often face unique financial challenges, such as lower average incomes. According to the U.S. Department of Labor, women working full-time and year-round make 83.7% of what men earn in similar jobs.

In addition, women are more likely than men to experience a gap in employment due to caregiving responsibilities, which can interrupt their earning and saving potential. The Covid-19 pandemic exacerbated this disparity, as women’s participation in the workforce tumbled disproportionately in part due to increased childcare responsibilities as schools and daycares closed.

Given these challenges, women tend to save less than men on average, further contributing to longevity risk. In fact, a recent T. Rowe Price report found that women tend to contribute less annually to workplace retirement accounts than men and have meaningfully lower account balances.

#3: Women Tend to Invest Less Often and More Conservatively Than Men

According to data from Morningstar, women tend to invest less and hold a larger percentage of cash than their male counterparts.

Studies show that this is largely due to a lack of confidence. For example, Fidelity’s 2021 Women and Investing Study revealed that only 19% of women feel confident in their ability to choose investments that align with their financial goals.

Unfortunately, this lack of confidence often translates to smaller nest eggs in retirement, increasing longevity risk. Consider the following example.

Suppose you invested $1,000 in the U.S. stock market 30 years ago, at the beginning of 1993. Over the next 30 years, the S&P 500 generated an annualized return of 9.7% before accounting for inflation.

That means at the end of 2022, you would have had $16,074 if you reinvested all dividends. Had you kept this money in a savings account that yielded an average of 1% over the last 30 years, you’d have about $1,347 at the end of the same period.

Thus, investing is necessary for single women to minimize longevity risk and outpace inflation, so your dollars don’t lose value in retirement.

How Single Women Can Address Longevity Risk

To address longevity risk, engaging in proactive financial planning is essential. This includes:

  • Saving and investing. It’s crucial to start saving early and regularly contribute to retirement accounts, such as 401(k)s or IRAs, to accumulate a sufficient nest egg for retirement. Within investment accounts, include stocks for their above-average growth potential and diversify your investments to mitigate market volatility risks.
  • Estimating retirement expenses. Assess your expected expenses during retirement, including healthcare costs, housing, and daily living expenses. This evaluation can help determine how much you need to save to ensure a comfortable retirement and reduce longevity risk.
  • Social Security planning. Understand how the Social Security system works and develop a strategy to maximize your benefits. Consider when to start claiming benefits and spousal or survivor benefits if applicable.
  • Long-term care insurance. Evaluate the potential need for long-term care insurance to protect against the high costs associated with extended care services. Research different policies and assess your options based on your health, family history, and financial situation.
  • Health and wellness. Prioritize maintaining good health and adopting a healthy lifestyle. Being healthy can contribute to a longer and more active retirement, reducing potential healthcare expenses and increasing overall financial security.

By being proactive and mindful of longevity risk, single women can take steps to secure their ongoing financial well-being.

Part 2: The Importance of Investing for Single Women to Offset Longevity Risk

Although single women face a variety of unique challenges and risks when it comes to financial planning, there are steps you can take to manage these risks and achieve your financial goals. In Part 2 of this blog series, we’ll dive deeper into why it’s so important for single women to invest when it comes to minimizing longevity risk.

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S5E3: Real Estate Investing 101 with Property Powerhouse Ruth Krumbhaar

Real Estate Investing 101 with Ruth Krumbhaar

Real Estate Investing 101 for Single Women

This episode is Real Estate Investing 101 for single women who are curious about investing in real estate but may not know where to start.

Today’s guest is Ruth Krumbhaar, a successful therapist, coach, and part-time real estate investor who has built a reliable source of passive income through her investments.

Ruth’s journey began when she bought her first condo in an up-and-coming area of Berkeley, California and nearly tripled her investment in just a few years. Fueled by her initial success, she began learning everything she could about investing in real estate and has since expanded her portfolio to include multiple properties. Her experience has made her an expert in finding the right properties, building a successful real estate team, and managing a diverse portfolio of real estate investments.

In today’s episode, we’ll cover:

  • How Ruth made the transition from homeowner to real estate investor.
  • Some of the mistakes she made as she learned the business.
  • Why it’s important to manage your emotions as a real estate investor.
  • The types of properties Ruth has invested in and what she believes makes a great investment property.
  • How to build a great real estate team in any part of the country.
  • The financial planning aspects of investing in real estate as a single woman.

Ruth and I both believe that real estate investing can be a great source of passive income for single women, and I’m excited to share Ruth’s unique insights with you in today’s episode. So, sit back, relax, and join us for a fascinating conversation, as we explore the wide world of real estate investing in Real Estate Investing 101 with Property Powerhouse Ruth Krumbhaar.

Ruth's Post-Episode Advice

Ruth also offered these words of wisdom after her Real Estate Investing 101 episode:

“It’s also helpful to subscribe to local newspapers in the areas you want to invest in, so you’re up to date on what’s happening in local government, business, and culture. I recommend any person investing in rental properties also carefully study the planning and building websites for the jurisdiction, as well as the county site, for any incentives or information related to property ownership.”

Episode Highlights

  • [10:45] Ruth Krumbhaar shares some of the biggest mistakes she’s made as a real estate investor.

  • [15:06] What Ruth believes is her greatest success so far as a real estate investor.

  • [22:09] Ruth explains her process for identifying new investment properties.

  • [31:17] Ruth explains why it’s so important to research the local area and make sure you can find good help nearby before purchasing an investment property.

  • [34:40] How Ruth finds sources of help near her investment properties and researches potential growth factors in new locations.

  • [39:43] Cathy and Ruth discuss how financing works when investing in real estate.

  • [45:11] Why it’s so important for real estate investors to find an inspector they trust.

  • [52:30] Why real estate investing can be a great way to build wealth, even if you’re starting small.

  • [55:11] How rising interest rates have affected Ruth’s approach to real estate investing.

  • [58:08] Ruth Krumbhaar’s advice for single women who are interested in getting started in real estate investing.

Links Relevant to this Episode

FEMA National Risk Index Map

The BRRRR Method for Investing in Real Estate

Avail.co for Marketing and Managing Rental Properties (Free Landlord Software)

Beacon™ for Investment Property Research

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S5E3: Real Estate Investing 101 with Property Powerhouse Ruth Krumbhaar Read More »

S5E3 Transcript: Real Estate Investing 101 with Property Powerhouse Ruth Krumbhaar

Cathy Curtis, CFP®: Hi, welcome to Financial Finesse, where we bring you insights and experiences from interesting and successful women. Today we have a special guest, Ruth Krumbhaar, who has built a source of passive income through investing in real estate.

Cathy Curtis, CFP®: Many women are curious about investing in real estate but don’t know where to begin. Ruth, I know that your real life and personal experiences and insights will be invaluable. Thank you for sharing your expertise and joining us on the show today. Can you tell us how you got started in real estate investing?

Ruth Krumbhaar: Well, it was a long time ago and I was looking for an apartment to rent in San Francisco. And I answered an ad and went to a beautiful apartment on Dolores Park. I remember it so well. And the woman there had just bought it and she said, you can rent half of this apartment, but I own it and I’m going to be working on it while you live here.

Ruth Krumbhaar: So just wanted to let you know. And I walked away thinking, wait, if she can do it, I can do it. I think I want to buy my own place. What’s going to, what’s stopping me? So I looked at real estate prices, which were very high. Real estate prices were already high in San Francisco.

Ruth Krumbhaar: I looked at my bank account, it was low. So, my stepmother generously, I talked to her and she said, I’ll give you money for a down payment, and it was $20,000. So that’s basically how much I had as a down payment.

Cathy Curtis, CFP®: Was that enough back then?

Ruth Krumbhaar: Well, I looked all over San Francisco, and I couldn’t find anything except in really, really scary places.

Ruth Krumbhaar: So I ended up expanding my search over to Berkeley because I figured that was a community that I believed in, that I knew was solid and I felt like also had little pockets that would appreciate. And I bought my first condo. Which my friends and I called the cheapest condo in the Bay Area in a little pocket of Berkeley that was sort of up and coming.

Cathy Curtis, CFP®: So cool. What was the pocket?

Ruth Krumbhaar: Well, it was, it’s called now the Gourmet Ghetto, but it was south, the southern part of it. And so it was a, it was a conversion from a T I C into a condo building. It was an old, an old building with six units, and it was the perfect opportunity for me. So together with the other owners, we got the building painted, we landscaped it, we all improved our units and I ended up doubling or almost tripling my investment within two and a half years.

Cathy Curtis, CFP®: You bought this to live, right?

Ruth Krumbhaar: I did. I lived in it, but I, I kind of worked on it, like the woman who I had gone to see the rental apartment, I was sort of following her model. And it was great. So that gave me, when I sold it, after a couple years, I had enough money now to move back into San Francisco, which is where I wanted to be.

Ruth Krumbhaar: And then I bought a place in the mission, and another one that I, I lived in, and you could just sort of see the neighborhood slowly changing.

Cathy Curtis, CFP®: What year was that? I’m just trying to get the timeline of when you invested.

Ruth Krumbhaar: Yeah, that was the early two. That was around 2000.

Cathy Curtis, CFP®: Okay, so that was in the dot-com boom.

Cathy Curtis, CFP®: Yeah, and real estate was probably, priced pretty high in the mission, or maybe not yet. Maybe not yet. Okay.

Ruth Krumbhaar: No, no. So again, one of those areas that I had a good sense, it was more of a gut sense than a, than a, than a, a research sense that this was an area where sort of people were wanting to live. It was kind of artsy.

Ruth Krumbhaar: It was eclectic, there’s beautiful architecture, great little cafes and restaurants were sort of popping up and, and so that told me it was a place I wanted to live. And because it was a place I wanted to live, I figured other people would be, would be coming soon.

Cathy Curtis, CFP®: So you’ve got the gut instinct for real estate, it sounds like, from these, just these two examples, which I think is a real thing.

Cathy Curtis, CFP®: I, you know, successful real estate investors go with their gut and yeah, maybe they do some research, but a lot of it is instinct. I want to talk to you a little bit more about that as we keep going. So you’ve now bought another place to live in the mission and what happens from there?

Ruth Krumbhaar: I got married, I had a kid, I moved out, but I kept it as a rental property and that’s when I switched over from having real estate to live in as my sort of home into something that was an investment and something that I generated income from. And, and that’s when everything sort of switched for me.

Ruth Krumbhaar: And then when I sold that, I sold that at the top of the market and was able to put that money aside for a while until the market tanked in 2008. And that’s when I was able to buy a property on Telegraph Hill, which is a two-unit property. And that’s when this seed money, this $20,000 that I got, that’s when it really started to take shape and turn into something bigger.

Ruth Krumbhaar: And I, I think real estate investment, I mean, you can make money right away by having a rental income, but it can also be a sort of longer-term thing. And it could, or it can be a sort of hybrid path. And that’s how I, that’s how I was looking at it.

Cathy Curtis, CFP®: Okay. This is interesting because I have a, a similar experience myself, investing in real estate as a single woman.

Cathy Curtis, CFP®: When, when I realized I could afford to do it, I, like you wanted to start out in San Francisco, quickly realized it was too expensive. So I started looking in Oakland, Berkeley. Even then, it was too high for me. And so I went all the way out to the deep burbs into Dublin.

Cathy Curtis, CFP®: So it happens I had a job in Pleasanton, but I was a, I’m such a city girl, San Francisco, born and raised. It was really hard for me to imagine actually moving there. But I was able to find a condo that was affordable. I bought it. And, but then I turned that I like you, I made a profit on that eventually.

Cathy Curtis, CFP®: Because real estate markets go up and down. I mean, and it, you recognize that, like, it sounds like you waited a long time before you bought your next property in the city because the markets really change over time. When I bought the place in Dublin, it was cheap. The markets crashed, then BART went out there and the prices went way up.

Cathy Curtis, CFP®: And I sold it, moved that money into another home. So, you know, some of it’s lucky timing, you can’t panic, so many things about it. It’s sort of like investing in the stock market in that way that you gotta have a really cool head about you and make smart decisions.

[10:45] Ruth Krumbhaar shares some of the biggest mistakes she’s made as a real estate investor. 

Ruth Krumbhaar: Absolutely. And I think some of the mistakes that I’ve made in, in real estate investing are panicking or a, a sense of scarcity or moving too quickly and not paying enough attention.

Cathy Curtis, CFP®: Can you give an example? People love to hear people’s mistakes. But we also all learn from people’s mistakes. So if you wouldn’t mind sharing one of those.

Ruth Krumbhaar: I think one, one is that I paid too much, I think for a property.

Ruth Krumbhaar: I, I have a, a rental property in Indiana. And, you know, I was so excited to get into this new market and I really knew the area that I wanted. I’d sort of done my research. I knew the, the, the kinds of people that were renting there. I found a property that met my criteria and it was very inexpensive.

Ruth Krumbhaar: So this was not a big, big mistake in terms of dollars, but. It was listed, get this at $95,000. I offered 85 and then we negotiated up to 90. I, I’m kicking myself a little bit because I still think I could have gotten it for 85. Between 80 and 85. Yeah, I really do, which would’ve paid for the improvements that I put into it.

Ruth Krumbhaar: So now, once I got it at 90, I put some improvements into it and, you know, it’s at, it, it’s fine. I, I’m getting income consistently.

Cathy Curtis, CFP®: Oh, you still, so you still own this one?

Ruth Krumbhaar: Yes. Yes.

Cathy Curtis, CFP®: Okay. But okay. So that’s, you think you paid 5,000 or so too much for it. Okay. So you’re, because it’s not cash flowing the way you want it to or the, the return on investment isn’t as big as you want.

Ruth Krumbhaar: It’s more that I think I could have gotten a better deal based on the other transactions that I’m seeing in that area.

Cathy Curtis, CFP®: Okay. Okay. That’s interesting. Yeah. All right.

Ruth Krumbhaar: I think I overpaid. Well, which we do, we make these mistakes when we get excited, you know, and sometimes aren’t thinking clearly or we’re not slowing the process down.

Cathy Curtis, CFP®: Well, I’m going to tell you about over excitement and, and so I’m going to share another story. So I, my husband and I wanted to get into investment real estate. So we right before the credit crisis, you know, in 2006, 2008, of course, we get all excited like everybody else, and we find a place in Utah, Salt Lake City area.

Cathy Curtis, CFP®: We found a rental house. We figured big families there, blah, blah, blah. But the timing was wrong. It was, you know, it, the bubble was about to pop. And so we invested and we ended up selling it. We didn’t make any money. We had a little bit of a loss, so there’s another mistake. And it was because we got caught up in the hype.

Cathy Curtis, CFP®: Like a ton of other people did. We’re very lucky it wasn’t our home. A lot of people, you know, foreclosed during that time, but you have to, so we didn’t have the instinct like it seems like you did for that.

Ruth Krumbhaar: And sometimes we make those mistakes. I made another one recently. I was trying to buy a property and I just didn’t bid high enough.

Ruth Krumbhaar: I knew it was competitive and I knew I also had a financing contingency on this particular one, and I knew. I knew it was a hot location and a great price for this particular house, and it had some architectural integrity, but, you know, it was really cute. It was a little craftsman bungalow.

Cathy Curtis, CFP®: Where was that?

Ruth Krumbhaar: In Richmond, Virginia. In this area called Churchill, which is, which is really happening right now. And so, and the price point was low, so I, it was lower than most properties in that area.

Cathy Curtis, CFP®: The one that got away, it sounds like. That must be disappointing.

Ruth Krumbhaar: Yeah. Yeah.

Ruth Krumbhaar: But we all have those, and, and you know, we have to learn from those.

[15:06] What Ruth Krumbhaar believes is her greatest success so far as a real estate investor.

Cathy Curtis, CFP®: Right, right. So tell us, I asked you about a mistake. What has been your greatest success so far in real estate investing?

Ruth Krumbhaar: Well, I think all my Bay Area properties have been, have been great. The one on Telegraph Hill particularly, because I bought it at the right time when things were really in a slump, and the sellers were really motivated.

Ruth Krumbhaar: They had some family issues and they, they wanted to just break even. And so I got it at a great price. There were no other buyers, the sellers needed to sell. It was helping them, and it was a property that also had some potential to improve. And so it went from a sort of mediocre, you know, ho hum property to something that I developed, into something that’s, it’s really quite beautiful.

Ruth Krumbhaar: And we’ve had people like rent out the patio area for parties and it’s, it’s pretty neat.

Cathy Curtis, CFP®: And so that sounds amazing. What led you to find that property?

Ruth Krumbhaar: Well, I was single again. I’d gotten divorced and I had, my son was five, and we were living in an apartment and we wanted a house. We wanted something with no one above us or below us.

Ruth Krumbhaar: And so this property has a little cottage in the back of the property, and then a courtyard, sort of terrace area in the middle. And then in the front it has a garage with a studio apartment above it. And it felt like the perfect property for us because I was figuring when he was a teenager, he would live in the studio.

Ruth Krumbhaar: He would have his own little zone and be away from his mother. But while he was a little kid, I could rent it out and so we ended up living in the cottage and then Airbnb-ed the studio. Which then I also used as a guest quarter for, you know, friends and family when they came to visit. So I would kind of time, I would block out the Airbnb portal for the weeks that I had people visiting.

Cathy Curtis, CFP®: Okay. And you used the profit from selling the mission property to buy this one? Yes. So, so far each purchase was first meant to live in, and then because of circumstances you rented, like you got married and then you rented the mission, and then this one you bought for rental purpose from the beginning.

Ruth Krumbhaar: Yes. But we, we actually left it because we wanted a bigger home and my son got into surfing, so we had to move out to the beach. So we live in the outer sunset now, but we now rent out both units. It changed from being a residence with an Airbnb to having two full-time renters.

Cathy Curtis, CFP®: And do you own your place in the sunset now, or no?

Ruth Krumbhaar: No. I, and again, another regret is I probably could have gotten into that market right when we were thinking about it, because it was about to take off, another area before Covid. Pre Covid. And some of the signs for that are just the popularity of a lot of the cafes and restaurants and the farmer’s market.

Ruth Krumbhaar: You could kind of tell that this is an area that people were really beginning to invest in. And there’s a whole wonderful culture there of young, kind of artsy people and great yoga studio and, you know, wonderful places to go in the evening.

Cathy Curtis, CFP®: I agree. I grew up on 14th and Rivera, and I’ve lived in the East Bay for a long time now, but I recently drove around that area and I’m amazed at how it’s changed.

Cathy Curtis, CFP®: So if you got into that area at the right time, you would’ve done really well. But, so this is something I want to ask you about in particular about San Francisco or any, any expensive metro area like that. Because, I often have clients ask me about rental, real estate investing. And I’ll say, well, where are you thinking?

Cathy Curtis, CFP®: Well, I’d love to buy something in San Francisco. And I, I always think, gosh, San Francisco, how are you going to be able to buy a rental property in San Francisco and make any money at all? And it always seems like San Francisco is going to be like that, but you were not afraid to dip your toes in, in two different places.

Cathy Curtis, CFP®: And I’m sure they weren’t cheap, I mean, relatively right. They were probably still a stretch, I’m imagining. So you had, you got over the fear or your instincts are really strong, or can you talk about that a little bit?

Ruth Krumbhaar: Yeah, I’m very pragmatic about things and so, you know, when I, one of the things that you may have found when you bought your place in Dublin.

Ruth Krumbhaar: Being a city girl, that I found in Berkeley was that my friends said, why are you living out here? Don’t you want to be in the city? Absolutely. And I have another whole thing going on. Don’t worry about it. And now they’re wishing they had done that.

Cathy Curtis, CFP®: I had a, I was single at the time and I used to go to San Francisco for my social life. When I lived out in Dublin. I had a guy tell me that I’d be a lot more attractive if I lived in San Francisco and not way out in the boonies.

Ruth Krumbhaar: Well, good thing you passed on him.

Cathy Curtis, CFP®: Yeah, and my current husband didn’t care.

Cathy Curtis, CFP®: I was living out there. Then when I first dated him, he drove out there, picked me up, brought me a dozen pink roses, and took me, drove all the way back to Berkeley to have dinner. Tell you what, guess who I got married to.

Ruth Krumbhaar: Oh, that’s great. Yeah, so anyway, the place in the mission, my criteria was I want two bedrooms and at least one and a half bathrooms because I wanted the option of having a roommate. So, and I wanted it so that if one of us was in the shower, the other one could, you know, use the bathroom. So that’s what I found.

Ruth Krumbhaar: And I got a roommate who only lived there part-time.

[22:09] Ruth explains her process for identifying new investment properties.

Cathy Curtis, CFP®: Oh, good. So do you literally, when you’re getting set to buy, right, first you identify, this is a good time, this is a good area for these reasons. And then do you make a like a handwritten list of your criteria and check it off? What, what’s your procedure?

Ruth Krumbhaar: Well, it really depends on the property. So, I think you and I had communicated about three properties that I’m currently working on. And so Muncie Indiana, outside of Indianapolis, is a, is a sort of small city that is on the uptick. Really cheap housing stock, three new factories moving in.

Ruth Krumbhaar: Ball State University is there. It was a, it’s a city where the mayor used to work in real estate, so he’s super real estate friendly. There aren’t many regulations around Airbnb or development. And the local government are really accessible and make development really easy. And what I mean by development, like adding a unit or splitting a lot or things like that where you can actually really maximize your investment.

Cathy Curtis, CFP®: Sounds perfect. I’m going to stop you right there. How did you find Muncie, Indiana, of all the cities in the United States and pinpoint it as a good place to invest?

Ruth Krumbhaar: You know, it’s funny. A friend of mine was who loves real estate was visiting her great-aunt there because she, her family originated from there and she took a look around and realized it was a good investment.

Ruth Krumbhaar: So she sort of set things up for me. I really, the path was well greased. She had a realtor.

Cathy Curtis, CFP®: You’re paying attention because you’re thinking investment. You want to do this, right. You’re all, you’re an investor, you’re a real estate investor. So you’re picking up on cues from everywhere probably.

Ruth Krumbhaar: Exactly. And that’s what we have to do. So Muncie was right for me because I had a good, you know, I knew there was a good contractor available. I knew there was, I had intros to a realtor, a really good realtor and an inspector.

Cathy Curtis, CFP®: And how did you know this contractor? Through your friend.

Cathy Curtis, CFP®: Okay. So personal connection is super important.

Ruth Krumbhaar: Super important, yeah. Especially for someone like a contractor. And he, oh, he’s been wonderful. And he’s also my rental agent, so he shows all my properties, and we’ve formed a really, really good working relationship. I also pay my bills immediately because that relationship is so precious to me.

Ruth Krumbhaar: I want him, I want to be his top client.

Cathy Curtis, CFP®: Okay. That’s, that’s really good advice. So you coddle these relationships and make sure there’s a trust established and all those things.

Ruth Krumbhaar: Yeah, so for Muncie, it was that, and it was also wanting to be in a particular area where I knew there was a good rental base.

Ruth Krumbhaar: So I’m right near Ball State University. And have you been there?

Cathy Curtis, CFP®: You know, I have never been there. This is fascinating. You really don’t have to visit the places you invest in, do you?

Ruth Krumbhaar: You don’t. You don’t. It’s good to, and I want to, but, but you don’t have to.

Cathy Curtis, CFP®: That adds cost too. It, it’s time.

Cathy Curtis, CFP®: It’s the flight.

Ruth Krumbhaar: It’s the flight, getting there. Rental cars, all of it. Yeah. Another, but there’s different criteria that I look at. I bought a vacation rental in Maine that was very different. You know, that was more like, it’s gotta be near a river, a mountain, a lake, or the ocean.

Cathy Curtis, CFP®: And what, where did this idea come from?

Cathy Curtis, CFP®: What, what inspired you to look in Maine?

Ruth Krumbhaar: Well, Maine is a place where I have family and I wanted a vacation, you know, a home for myself close to family living on the West Coast. I wanted something on the East Coast. And so Maine holds a particular place in my heart. And I also knew that my family all over the East Coast would come there to visit.

Ruth Krumbhaar: But I also knew it was an area where real estate was really beginning to take off. Portland has become a pretty trendy, an affordable option for a lot of young people. So there’s a lot of great restaurants. There’s a whole sort of creative community. It’s very artsy. And so I wanted to buy a property that was sort of a spinoff from that hub.

Ruth Krumbhaar: Where people would live who were connected to that kind of energy. And also where people would want to stay on their vacations. And so I layered and layered and layered criteria and ended up buying a home on an island, which has its own sort of community. It ended up sort of not following the model exactly because it was far enough away from Portland that it was really more of a Vacationland kind of.

Cathy Curtis, CFP®: Okay. But this happens, right? You, you have a plan, but it depends on what comes up.

Ruth Krumbhaar: Yeah. Yeah. So what was wonderful is that I had my criteria at my, my price point, and I called my cousin and she had actually just bought a property on the same island that I was looking.

Cathy Curtis, CFP®: Oh my gosh. So, a little serendipity there.

Ruth Krumbhaar: Yeah. So I got a little house in the town because I couldn’t afford something bigger. But the town holds its own sort of allure and it’s a great place for people who want to come for a weekend or a week to rent because they have access to all the amenities in the town and can feel really connected to it.

Cathy Curtis, CFP®: And for you too, it’s a vacation for home for other people, but then you reserve it when you want it.

Ruth Krumbhaar: Exactly. Sort of like what it sounds like you were doing with the Utah property.

Cathy Curtis, CFP®: No, that’s what’s interesting. We bought that strictly for investment. It was in a residential community and yeah.

Cathy Curtis, CFP®: Talking about the different purposes, our purpose was to make a stream of income and then sell it for a profit. I have, we have a place in Tahoe that we are doing what you do. With the Maine property. But no, it, that wasn’t the purpose.

Ruth Krumbhaar: Well, and the Maine property is, you know, just cheap and cheerful.

Cathy Curtis, CFP®: Okay. Did you use Airbnb to rent it or how do you rent it?

Ruth Krumbhaar: Right now I’m just using word of mouth because there’s enough, there’s enough people who would want to rent on that island that word of mouth is sufficient. And also I didn’t, because we had to sort of renovate it and we’ve slowly been, you know, pulling up carpeting and sanding floors or painting them.

Ruth Krumbhaar: While it’s beautiful, it’s not quite to the standard that I think that an Airbnb should be.

Cathy Curtis, CFP®: Okay. And are you doing this work yourself? So this is a place you go to regularly and you’re putting some love into it.

Ruth Krumbhaar: I’m putting a little, a little love into it. And the reason I’m doing that is there aren’t that many, and this is something important to consider, there aren’t that many people there to do that kind of work because it’s a lobster fishing community.

Ruth Krumbhaar: The year-round people are making so much money as lobster fishermen that they don’t want to do building. So while I have people who can do housekeeping, the, the bigger stuff, the, the more construction related stuff is, I don’t, I don’t have help for that. So it’s so important. When you buy a property, if it needs to be improved or it’s going to need some maintenance, let’s say it has decks or pools or things that may over time need to be repaired or taken care of, that it’s within a community where you know you can get help.

[31:17] Ruth explains why it’s so important to research the local area and make sure you can find good help nearby before purchasing an investment property.

Cathy Curtis, CFP®: Yeah. So that’s where sort of the research or having a contact in the local area becomes very important.

Ruth Krumbhaar: It does. And I think that having a really good realtor who understands your goals is one of the most important things that you can do in the very beginning.

Cathy Curtis, CFP®: Okay. Let’s riff on this idea for a little bit.

Cathy Curtis, CFP®: So, a person decides that they want to invest in a town in Tennessee. They discovered through a friend or family that this little town is starting to boom. Our community’s growing and so they don’t want to travel there. It’s not in their budget. And so they start trying to find a team.

Cathy Curtis, CFP®: Like a local first one would be a local realtor, it sounds like. And you can Google and find out who are the best. That’s probably not that difficult.

Ruth Krumbhaar: That’s, that’s fairly easy. And you want to interview them and make sure that you have a rapport with them. And you can, and that they’re responding to your questions in a way that makes you feel comfortable.

Ruth Krumbhaar: And that they are asking you the right questions as well. So, and you’ll know this, this is a sort of a gut thing.

Cathy Curtis, CFP®: Okay. And I’m assuming that local realtors, at least the ones I know here, they are so connected with contractors and, you know, people, decorators, and so many, there’s so many contacts. If they’re a good realtor, they develop their contact list to help their clients.

Cathy Curtis, CFP®: So that could be the first source of many other sources of help in building your team?

Ruth Krumbhaar: Absolutely. And so that’s one of the most critical pieces and they, they will send you leads. They will sometimes send you off market listings. And you should also be doing your own research in addition to that because you may find something that may be outside of your criteria, but that looks interesting enough that you ask them about it. I recently did this in Muncie with my realtor.

Cathy Curtis, CFP®: And so, so you would go on Zillow or some of those sites and just put in your criteria and do your own side search too? And then in finding out things like, like you found out this interesting fact about the mayor in Muncie.

Cathy Curtis, CFP®: That was through a personal contact, but could you also find out what’s going on, like development wise or companies moving to a city, things like that? On a, like a, a local community site?

Ruth Krumbhaar: Yes. I go, so for Muncie, for example. And actually I’m really interested you brought up Tennessee. Chattanooga is an area that I’m interested in.

Cathy Curtis, CFP®: Yeah. I’ve heard that several times. Tennessee has come up in conversations with people.

Ruth Krumbhaar: I think there’s, there’s still a lot of value there, and people are moving there.

[34:40] How Ruth Krumbhaar finds sources of help near her investment properties and researches potential growth factors in new locations.

Cathy Curtis, CFP®: We’re talking about how to find sources of help in the cities you go to, and how do you find out about the growth factors going on in the area?

Cathy Curtis, CFP®: A headquarters moving there, a progressive political scene, what, you know, where they want to build more community spaces, all those things that you can find out.

Ruth Krumbhaar: I think the key word here is to just be obsessive. And just start and just start looking and, and follow, follow the threads, so.

Ruth Krumbhaar: Right after I chose Muncie, I read in Forbes Magazine, there was an article about real estate investing and Muncie happened to be listed in it. I was like, yes, I made a good decision. And then I sort of followed some of the links in that as well, and it led me to understand that while the enrollment in Ball State is actually going down a little bit, which is concerning, these factories are coming in.

Ruth Krumbhaar: I don’t understand yet why Ball State enrollment is going down or what the levers are to improve it. Or, you know, what is exactly going on. I’m curious, so I want to get obsessed about that.

Cathy Curtis, CFP®: Yeah. See, that’s interesting. Is the curiosity, I mean, the fact that you are going to find out about that is fascinating to me.

Cathy Curtis, CFP®: That’s, that’s how deep you have to go to understand an area if you’re going to really do this, right?

Ruth Krumbhaar: Yes. And then you look at what the local government is doing in terms of development and in and investment in the infrastructure of the city. Are there new subway lines going in or bus lines, or is there a new bus terminal or is there an airport being developed?

Ruth Krumbhaar: Which airlines? So in Maine, for example, there’s a teeny tiny airport right near my island. And Cape Air has regular flights between Boston, New York, Nantucket, Cape Cod coming in to where the ferry leaves, an area right near where the ferry leaves to go out to the island. So that is important for me to study those.

Ruth Krumbhaar: You know, the flights, are they adding flights? Are they subtracting flights? What’s happening? How accessible is this area?

Cathy Curtis, CFP®: Also, things like all these natural disasters we’re hearing about now, the flooding and all, I’m sure that must be top of mind wherever you’re looking.

Ruth Krumbhaar: There is a website and I wish I could remember it. Basically, you can put in any address, and it shows you the potential for natural disaster, whether it be fire, severe weather, heat, flooding. I think there are a few other criteria. And they show these maps. Then they assess all the areas I think in the world.

Ruth Krumbhaar: But, I’ve just been looking in the areas. I’ve just been inputting addresses or city names that I’m in. 

Cathy Curtis, CFP®: You know what, we’ll find out what it is, and I’ll put it in the show notes after.

Ruth Krumbhaar: That would be great. And again, this is something if you want to invest in real estate, it’s fun.

Ruth Krumbhaar: If you like this stuff, if you like getting obsessed about these things, it’s really fun.

Cathy Curtis, CFP®: Yeah, I know. It sounds fun if you have the interest. I think that’s key to be successful on this. It can’t be taken lightly. Like, oh, I’m going to find a realtor in a city where I think it’s going to grow and I’m going to rely on them to find me a place. And then I’m just going to buy it and I’m going to make passive income and everything’s going to be fine.

Cathy Curtis, CFP®: It’s, it’s not, it’s not that easy.

Ruth Krumbhaar: No. And that’s, that’s why I think not everyone should do it. Because it is a pain sometimes. I just had a renter give notice, so now I’ve gotta advertise once again and get the place cleaned and check for, you know, it does require work.

Cathy Curtis, CFP®: But yeah, people, well, I know when you’re trying to figure out what the cash flow will be, you always have a vacancy percentage, right?

Cathy Curtis, CFP®: To see if the numbers work. What percent do you assume? 10% or 20%?

Ruth Krumbhaar: yeah, I just assume it’ll be rented 10 months a year.

Cathy Curtis, CFP®: Okay. That’s, that’s good to know.

Ruth Krumbhaar: And then I add in, you know, sort of cleaning, maintenance, landscaping, pest control. For Telegraph Hill, you know, there’s an issue with pests, so you have to have pest control.

Ruth Krumbhaar: Other properties, I don’t have to have that because it’s not an issue.

[39:43] Cathy and Ruth discuss how financing works when investing in real estate. 

Cathy Curtis, CFP®: Yeah. So you need to know all of those things. Let’s switch gears a little bit and talk about financing. Because I think people are going to be really interested in that. Is there a down payment requirement in any, I mean, tell us about your experience in financing these properties.

Ruth Krumbhaar: So it depends how much money you have and what your goals are and what markets you’re looking in. So, for example, in Muncie, I bought my property and I’m in the process of hopefully buying another one with cash. Because it was, it was not an expensive area. It was a good, I felt it was a good place for me to put my cash and just get some monthly income off my cash.

Ruth Krumbhaar: I’m in the process because I called around to some local banks in the Muncie area, and there was, there’s a really good deal going on where I can get a HELOC. So I can pull some money out of my house at just over 5%.

Cathy Curtis, CFP®: Is that variable though? Will that go up?

Ruth Krumbhaar: Yeah, but still it’s a low starting rate. And so that will allow me to free up some money temporarily to say buy the second house. The second house I’m buying from a private seller, and so he isn’t in a rush. So as soon as that HELOC comes through, then I’ll pay for the second house with that.

Cathy Curtis, CFP®: I love it. Okay. And then once there’s equity in the first place for you to pull out whatever cash you need. And is that because of appreciation or was there always the equity?

Ruth Krumbhaar: It’s a little bit of appreciation and there was always the equity because I paid all cash.

Cathy Curtis, CFP®: Yeah. Okay. Okay. All right.

Cathy Curtis, CFP®: So sometimes you have to pay all cash.

Ruth Krumbhaar: Yes. So for example, in Richmond, because it’s kind of a hot market right now with investors. And for people like myself and like probably a lot of your clients, it’s an area where you need to go in with cash. And so that was again, a mistake I made.

Ruth Krumbhaar: I went in too low and I had a financing contingency.  

Cathy Curtis, CFP®: This is what you didn’t get it.  

Ruth Krumbhaar: Yeah. And so you can do all cash by, say, pulling money out of another property if it makes sense. And again, you don’t want to over-leverage yourself. Or you can, if it’s cheap enough and you have enough reserves, you can spend all cash and then finance it later.

Ruth Krumbhaar: Or you can finance it and it’s really good, as you probably know and would tell your clients to have a good mortgage, a good relationship with a mortgage lender.

Cathy Curtis, CFP®: Oh, absolutely. Luckily, my husband was a mortgage broker for years at his own company and I learned a ton about mortgage financing.

Cathy Curtis, CFP®: So I can help my client, I can look over the statements and see if it’s on the up and up and, you know, good rate and all those things. It really pays to have a good mortgage person.

Ruth Krumbhaar: Yeah, it really does. So, and I like to get a local person where I’m buying, because they really know the ins and outs of that market.

Ruth Krumbhaar: And they also have contacts.

Cathy Curtis, CFP®: And you can a lot of times get those referrals from realtors too. They have their favorite mortgage broker because they want the deals to close. That can be a very tight relationship. And I think it’s okay to use the realtor’s reference for mortgage broker.

Cathy Curtis, CFP®: I don’t think that’s a bad thing. I mean, if you can find one yourself, great, through a personal referral. But I don’t think it’s a mistake to use the realtor’s mortgage broker reference. Do you?

Ruth Krumbhaar: I don’t. I think it’s a good idea because they, they’ve kind of gone through the steps together.

Ruth Krumbhaar: And so they kind of know each other’s way of working and communicating. And that way, if there’s any sort of hiccup in the deal, which sometimes there is. Because there may be issues that you discover along the way. They know how to work together to sort of solve the problem with you.

Cathy Curtis, CFP®: Yes. Oh, I want your opinion on this. I have an opinion on getting inspectors. Because you always want to have the property inspected, right? And I think it’s better to find your own independent inspector. A lot of times we all get excited when we’re about to buy a property and the realtor wants the deal to close and they’re very motivated and so they’re, they have all kinds of referrals and, and they could say, oh, I’ve got a great inspector.

[45:11] Why it’s so important for real estate investors to find an inspector they trust.

Cathy Curtis, CFP®: I really think it’s smarter to get your own inspector, not the realtor or seller’s inspector. Get your own. And is that realistic? And what is your experience with that?

Ruth Krumbhaar: I completely agree, and you may or may not have the time to do it, so you always have the realtor’s inspector as a backup.

Ruth Krumbhaar: But if possible I agree because they, you want an independent assessment, especially if you can’t go to the property or if you don’t know a lot about construction issues that might arise.

Cathy Curtis, CFP®: Because I, I know we all want people to be honest and disclose, but the truth is not everything gets disclosed.

Cathy Curtis, CFP®: And you, and an inspector may not do as deep a job as you would want an inspector that’s a referral from a realtor. And I think that’s really something to be careful of. Granted, like you said, a lot of times there’s time pressure. But if you can keep that in mind from the beginning, like when you’re looking in an area, maybe identify an inspector that you might use.

Ruth Krumbhaar: That’s a good idea. You could be ready for it. Yeah, I agree.

Cathy Curtis, CFP®: Okay, so this is, this talk about the financing is really interesting because I have a thought in my head for the listeners of some advice. So let’s say okay, they’ve decided Tennessee, Chattanooga, and so they have to figure out how are they going to finance this property.

Cathy Curtis, CFP®: So they first have to get an idea of the cost of properties there. But then they have to look at their cash reserves, do they have any cash reserves. Let’s say they know they can come up with $30,000. Does it make sense to then look, start there. You, you’ve identified a city, you know, you’ve got $30,000.

Cathy Curtis, CFP®: Look for the price range that, that will support a $30,000 down payment and plus, there’ll be other costs, closing costs and things like that, right? Would that be a good way to go into an investment?

Ruth Krumbhaar: I think it’s, well, I think you also need to consider that the property may need some maintenance.

Ruth Krumbhaar: And as you mentioned, all the closing costs, insurance tax, those numbers as well. And so, I would hesitate if say $30,000 was your number, and you want to put generally 20% down in a not super competitive market, then I would go a little lower than that. I would want to save maybe $10,000 for improvements.

Ruth Krumbhaar: The possibility of improvements, though, if a property is a turnkey property. Let’s say it’s a condo or, or a newly built dwelling, then that’s going to be a lot lower. So you can have a wider range of criteria, but just keep in mind that if it’s an older property, you’ll probably, there probably will be things you’ll want to improve.

Cathy Curtis, CFP®: Okay, great. So all the closing costs, which are roughly 2% of this, I mean, ballpark-ish. So make sure you take those into account, down payment and the state of the property. And estimate improvements if it’s not turnkey. Yeah, because that’s, that’s the confusing part with people.

Cathy Curtis, CFP®: I want to buy investment real estate. I always get that, I want to buy investment real estate. Cathy, can you gimme some advice? And it’s such a big question. It’s like, oh my gosh. Well, where are you thinking about buying is the first one. Why? Why do you think that’s a good market?

Cathy Curtis, CFP®: And this other criteria that you’ve talked about it, are you going to use it yourself and rent it? Is it going to be a full rental? Are you going to hire a management company to manage it if it is outta state? Which you will need to. So you have to have those costs in mind. Do you use management companies for your properties so far?

Ruth Krumbhaar: I have not. Because in Muncie I’ve got this amazing contractor whose wife is a house cleaner. And he and his team also mow lawns. He’s my rental agent. His wife is the cleaner, and he’s the maintenance guy as well. And it’s just a wonderful relationship.

Ruth Krumbhaar: So he’s kind of like my property manager in a sense.

Cathy Curtis, CFP®: Okay. That is fantastic. So you’ve got the maintenance and cleaning taken care of, and then you act as the rent collector, like you have them on auto pay? You do the books?

Ruth Krumbhaar: I do all the books.

Cathy Curtis, CFP®: So this is a huge savings because it is, what is the cut for a manager?

Cathy Curtis, CFP®: Is it 15?

Ruth Krumbhaar: Sometimes it’s 20.

Cathy Curtis, CFP®: Yeah. That’s a lot.

Ruth Krumbhaar: It is. So you want to build that in or find your person, like I’ve got. And I’ve got another person in Maine, and I just pay her a monthly fee to stay, to keep on top of my property, to make sure the pipes aren’t burst, to make sure that there’s, to clean it, you know, at the end of the season. And take, put, sort of take it in for the winter.

Ruth Krumbhaar: And make sure that no tree limbs have fallen and, you know, things like that.

Cathy Curtis, CFP®: Okay. So this begs a question. How much time do you spend on your property portfolio?

Ruth Krumbhaar: Good question. I would say I spend about five hours a week. Managing and thinking, you know, and doing things around them. Because sometimes it’s higher.

Ruth Krumbhaar: So when I have to rent a property, it’s a little bit more. And sometimes there are weeks when I spend no time.

Cathy Curtis, CFP®: Okay. And do you think that is a good use of your time as far as cost benefit return on investment?

Ruth Krumbhaar: I do. I think about, I’m, as you know, I’m also a licensed psychotherapist. And I think about how much money I make per hour doing that work versus how much money I make per hour doing the real estate investing.

Ruth Krumbhaar: And if I was just interested in making money, I would only do the real estate investing. Because I make so much more money per hour that I spend on it.

Cathy Curtis, CFP®: Yeah. Well maybe you, you do that in the future. You start spending more time on it or you know, depending on how many more properties you buy.

[52:30] Why real estate investing can be a great way to build wealth, even if you’re starting small.

Ruth Krumbhaar: Well, and the thing with real estate that’s exciting is you can start small and then just leverage that property and then get another one and then leverage that one and get another one. And it can be sort of, you know, it’s so exciting to see young people buying a property, whether they’re going to live in it or rent it out because you can imagine over time how that’s going to expand and grow.

Ruth Krumbhaar: If that’s what they’re interested in.

Cathy Curtis, CFP®: Well, your example is perfect. The Indiana property, where you’re going to take a loan out, a HELOC against it, to buy another property. That’s what you’re talking about leveraging. And I know that’s how many, many successful real estate investors did it. They started really small.

Cathy Curtis, CFP®: The beginning story is always fascinating. And then they learn that leverage is your friend with real estate investing, right? You don’t, you don’t really want to buy properties for cash.

Ruth Krumbhaar: No. The only reason I did that is because I didn’t know what else to do with that money.

Ruth Krumbhaar: So I figured just get me in here and then, but now that I found this good deal from the local bank, I’m pulling the money out and expanding on that.

Cathy Curtis, CFP®: Right, right. That makes so much sense. And I think people learn that as they go along if they don’t understand it from the very beginning.

Cathy Curtis, CFP®: Did you learn everything on your own through experience? Or did you read books, or do you have any recommendations for someone to get a kind of a broader understanding of real estate investing and financing? Because I think you need that as a base.

Ruth Krumbhaar: I think so too. I’ve attended a couple seminars on real estate investing, and they have lots of them. And there’s also, there’s some great people on YouTube and there’s some really good books that are very sort of simple and straightforward and kind of map out a process. There’s one guy that I particularly like, I don’t have his name right now, but I can send it to you.

Ruth Krumbhaar: And then I have friends who are in the mortgage industry or the real estate industry. And so again, you know, this is something I enjoy. So I like obsessing about it.

Cathy Curtis, CFP®: The curiosity is a big deal, so you ask a lot of questions, and you learn a lot. You know, I know we only have a few more minutes and I just wanted to ask something specific to the time that we’re in right now.

[55:11] How rising interest rates have affected Ruth’s approach to real estate investing.

Cathy Curtis, CFP®: So, interest rates have jumped up quite a bit over the last year, an amazing amount. How does that affect your decision making when it comes to investing in more real estate now?

Ruth Krumbhaar: Well, it certainly makes me more cautious. But really what you have to do is just look at the numbers. The numbers still pan out because less people are able to get loans.

Ruth Krumbhaar: They don’t want to pay the higher interest rates, so there’s potentially more renters in certain markets. And so if, if the numbers work out between the loan that you can get with the down payment that you can put down and all the fees associated with it, and then the rental income that you can manage. Or if you believe, say, in that area in Richmond, Virginia that I was talking about, I believed that even if I broke even, which was my goal, that the house itself would double in value probably. I’m just going to say within five years.

Ruth Krumbhaar: So that’s really why I wanted that property.

Cathy Curtis, CFP®: And so different properties will have different, you’ll be thinking about them in different manners, right? Some would strictly be good passive investments for income. Others will be that, plus really high potential for appreciation.

Cathy Curtis, CFP®: So there’s always those two factors at play. And it sounds like you think about those things in advance. This is why I’m identifying this particular area and property.

Ruth Krumbhaar: Yes. So for Richmond it’s more about the appreciation and breaking even, or hopefully getting some return. For Muncie it’s more about just getting a sort of steady stream of passive income.

Cathy Curtis, CFP®: Oh, the one other thing we didn’t talk about was the tax benefits, depreciation expense. And are you considered a professional real estate investor where you could take the passive losses every year? Or do you have to carry them forward?

Ruth Krumbhaar: I am not considered a professional real estate investor.

Ruth Krumbhaar: I am going to probably set up an LLC in Muncie because I want to avoid liability. But also it’s just a better way of doing business there. And there are tax benefits to it as well that I’m not as familiar with, but I was told it was a good idea for me.

Cathy Curtis, CFP®: Yeah. That, that does sound like a good idea.

Cathy Curtis, CFP®: Boy, we could keep talking forever about this, but I think we got in some good gems for the listeners. I really do.

Ruth Krumbhaar: I think so too.

[58:08] Ruth Krumbhaar’s advice for single women who are interested in getting started in real estate investing.

Cathy Curtis, CFP®: I so appreciate you sharing your experience, but I’m going to ask you one last question. If you were going to give three pieces of advice to a single woman who would like to diversify her portfolio into investment real estate, what would they be?

Ruth Krumbhaar: One is to be curious and a little obsessive, so that you find an area and a type of property that would work for you, and really think about how you’re going to use it. The other is to be brave and know that people who are brave can sometimes make mistakes. They can fail, but they can also be successful. And we can’t be successful unless we make some bold choices.

Ruth Krumbhaar: And then I think that the last is to really have fun with it. Try and talk about it a lot with people. Just gather information. Just, just enjoy it. It’s also an area where you can make good relationships and have a good time and do good business.

Cathy Curtis, CFP®: That’s fantastic. What a great last word. I love it. Well, Ruth, thank you again. This has been a fascinating discussion and I know all the listeners loved it too.

Cathy Curtis, CFP®: And I’d love to do it again. We could do part two so we could talk about that. Alright everyone, there will be show notes to talk about some of the things Ruth discussed, books and websites and things like that. So be sure and come back and look for those.

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S2 E2: Sticking To Your Investment Plan In Times Of Uncertainty

Sticking To Your Investment Plan In Times Of Uncertainty

Staying The Course - Even When It Hurts

In my second episode of Financial Finesse Season 2: What Keeps You Up At Night?, I talk about investing in stocks during periods of uncertainty. And I think we can all agree that things look pretty uncertain right now. The good news is, that doesn’t mean your financial plan needs to suffer. 

If investing in stocks feels scary to you, you’re not alone. Many investors can’t stomach the volatility that comes with investing in the stock market, so they either avoid it altogether or end up selling their stocks when they start to lose value. This presents two problems: first, investing in stocks is necessary for most people to achieve their long-term financial goals; and second, trading in and out of stocks at inopportune times can lead to permanent loss of capital. 

In this episode, I go into some of the technical details of why these two problems occur, but more importantly, I explain why having an investment plan and sticking to it over the long run is the best way to avoid them. I hope you find my message reassuring, and as always, don’t hesitate to get in touch if you want to discuss your investment plan in more detail. 

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S2 E2 Transcript: Sticking To Your Investment Plan In Times Of Uncertainty

00:01

Hi, I’m Cathy Curtis, welcome to Season Two, Episode Two of the Financial Finesse podcast. In this season, I’m talking about what keeps you up at night. And as investments in the stock market are right up there when it comes to things that people worry about, I’m going to talk today about sticking with your investment plan during periods of uncertainty. And let’s face it, how much more uncertain can things get than they are right now.

There are two key money concepts that I’d like to get across to you today, that will hopefully give you greater peace of mind when it comes to investing. One is that you must invest a good portion of your savings in stocks, in order for it to grow, and last your lifetime. And second, how important it is to have a long-term view when it comes to investing.

Now I’m just going to take a brief moment and explain something, a couple of concepts that you’ll hear me talking about a lot. When I say stocks throughout this podcast, I don’t necessarily mean that you can go out and buy individual stocks, that that’s what you’re going to do. Investing in stocks includes investing in mutual funds or exchange traded funds as well, both passive index funds and actively managed funds. And when I say the market, I’m using the S&P 500 as a proxy for the market. The S&P 500 is a stock index made up of 500 of the largest US companies. It’s as good a proxy as any for the US economy and for the concepts that I am explaining to you today.

All right. So in order to accept these concepts, that you must invest a good portion of your savings in stocks, and how important it is to have a long-term view when you do, you have to understand and embrace the fact that investing in the stock market is risky with the capital or the way you know stocks are risky is by their volatility. Markets go up and down day by day, week by week, month by month. Sometimes they go down a lot. And for a longer period of time that is uncomfortable. But that’s a characteristic of stocks. And it’s what we must endure to get the higher returns that stocks reward us with over longer periods of time.

So just to visualize this contrast, investing in stocks to investing your money in a CD, a CD’s value doesn’t fluctuate, you buy it knowing you’re going to get a certain amount of interest. But currently, you’ll get less than 1% invested in a CD with no upside potential. So for example, if you invested $10,000 in a CD, today, at 1%, in 10 years, you’d have a little over $11,000 in 20 years, you’d have a little over $12,000. Contrast to investing in the stock market, with the average 8% return in 10 years, you’d have over $21,000, and in 20 years, you’d have over $46,000. This is a perfect example of the power of compounding interest, and why the higher return you can get from the stock market compounds exponentially over time.

The greater return on stocks is particularly important when you take into account inflation. Inflation means that your living expenses go up year after year, and they’ll definitely be higher in retirement. If you are earning 1% on a CD and inflation is 2%. It won’t be long before inflation as eroded the spending power of the money in that CD. In contrast, if you can earn a higher return on stocks, it will outpace inflation, and keep your spending power intact for your retirement years when you are no longer earning an income or a salary.

When you pay too much attention to the volatility of the market, it’s really easy to get scared and want to sell out to feel safe. This is a mistake because it is too hard to know when to get back into the market. While you are trying to decide you will most likely, proven by many, many studies, miss out on the very best days and hurt your long-term returns. Many people, maybe even you, got scared out of the market in 2008 in the depths of the global recession, and you may or may not have gotten back in. Yes, it took longer than past recessions for markets to fully recover. But by 2013 you would have been back to where you were and probably better off if you had rebalanced your portfolio when the markets dropped.

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According to Goldman Sachs, the 10-year annualized return between 2009 and 2019 was 15%–higher than the normal and one of the highest 10-year returns since 1880. The typical 10-year return since 1880 is 9%. But again, it wasn’t always smooth sailing in that 10-year 2009 to 2019 period. If you recall, at the end of 2018, there was a scary market crash of about 20%. But that has recovered quickly as well.

Let’s just look at this year as an example, when COVID was spreading quickly to the US in February, investors panicked, and their widespread selling of stocks caused the S&P 500 to go down 34%. Since March 26, however, the index has completely recovered and more.

If you were one of the people that panicked and sold, then watched the market go up, up, up, since then, you’re probably thinking, well, now it’s overvalued, so I’m going to sit out longer. This isn’t the way to run a sound investment plan.

So how do you stick with your investment plan in times of great uncertainty? Well, the first step is to believe in your plan from the start. So let’s take the steps. To make a long-term plan, it’s important to write down the kind of lifestyle you want for the future, along with what expectations you have for the next 30 years. Because that’s really why you invest your money, to make sure that you have it when you need it after you retire. And you no longer are able to earn a salary income, your portfolio becomes your source of income along with social security or if you’re lucky, a pension. So you’re making a plan to get there. And I have to say that most people I know don’t want to reduce their lifestyle in retirement. And investing is one way to ensure that you don’t have to.

Secondly, you’re going to implement the plan, which a big part of this is determining the amount of risk you need to reach your goals and invest accordingly. For most people, this means a majority of their money should be invested in stocks. But whether it’s 60%, 70%, 80%, 90%, you need to stay with it and rebalance periodically and ignore the short-term volatility.

Lastly, you need to stick with it. No matter what, stay with your plan. Unless something drastically changes with the United States or global economic systems, history should be a comfort to you.

Now I’m going to talk about why sticking with an investment plan is so important for women in particular. Unfortunately, the statistics show that women are more likely to have a savings shortfall than men in retirement. There are many reasons for this, including the fact that women get paid less than men for the same work, and that women are more likely to be in and out of the workplace because of family care needs. Therefore, they can’t save as much as men over their lifetimes. Until these realities change, in order for women to close the savings gap, they need to have a plan, stay with the plan even in times of great uncertainty, save and invest more than you think you need, and get over the fear of investing.

Thank you for listening. Again. If you’d like to hear more from me, follow me on Twitter: @CathyCurtis, or on Facebook. I have a business page called Women and Money.

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Episode 3 Transcript: Women, Wealth And Social Change

00:03

Welcome to the Financial Finesse Podcast, where we’ll be discussing tips on how to handle your money and life with skill and style.

00:14

Your host Cathy Curtis, CFP has been helping make finance accessible and intriguing for women for almost 20 years. You’ll get savvy, actionable ideas, listening to her conversations with some of the coolest and smartest women on the planet.

00:31

And now, here’s your host, Cathy Curtis.

00:36

Hi, welcome to Episode Three of Financial Finesse. I’m Cathy Curtis, host of this podcast and also founder of Curtis Financial Planning, a financial advisory firm focused on the finances of independent women. I am thrilled to welcome my guest Haleh Modasser. Haleh is a senior vice president and

01:00

partner at Stearns Financial in Chapel Hill, North Carolina. The friend that introduced Haleh and me said we’re birds of a feather. And she was right. What we really share is a passion for empowering women around their finances. Haleh has taken this passion a step further and written a wonderful book called Women on Top: Women, Wealth and Social Change. Haleh’s basic message and we’ll get into it is to encourage women to invest their wealth with the mind towards doing good in the world by doing well themselves financially, to do good, but also doing well. In our conversation, you will hear the acronym ESG and the term ESG Investing often.

01:55

ESG is an integration of the E environmental

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s social and the G governance into investment analysis that includes but goes beyond the purely financial sales, profits growth and things like that. For example, environmental factors determine a company’s stewardship of the environment. Are they concerned about climate change, pollution, resource depletion in their operations? It also looks at social factors. How a company treats its employees. Is the workforce diverse, is the environment safe for the employees. And lastly, it looks at governance factors, such as for diversity and executive compensation. Some also call this value-based investing or dual mandate investing. But before I get into it too much further, I want to welcome Haleh. Haleh, thank you so much for joining me on my podcast. It’s a pleasure, Cathy. Thanks for having me. I’m just thrilled that we can have a

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conversation about something that we’re both so passionate about. So I thought we’d start, there’s always a lot of confusion around what values-based investing is both in the financial advisory community and the public, the public in general. So could you just give us a brief explanation about this type of investing? Sure. So the idea here is that you’re investing your assets in accordance with your values. And that has seen multiple iterations over time, historically speaking, people who did that really cared more about the change that they were creating than their financial return. And I think that kind of gave a bad name to this type of investing because they by definition, did have to take lower returns, and often paid higher expense ratios as well. But in the last five years, values-based

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investing has just exploded. There is so much product out there. It’s inexpensive, it’s accessible. And recent studies have shown that ESG investing, which is the most current iteration of values-based investing, actually does as well, if not better than an unconstrained portfolio. Yes, I’ve heard that. I do invest some of my clients in an ESG manner. And I think what moved me towards this is one, the demand by my female clients for this type of investing. Women really want to invest with their values, if they understand it, which I think is one of the issues is women, when they hear that they’re like, oh, yeah, that sounds really good. But they don’t really know what it is. And I’m wondering why you think there’s this education gap.

04:57

And well, let’s first start with the

05:00

common perception out there that 80% of women are interested in ESG investing. That is a statistic that I’ve run across for several years. And in writing this book, I did an original research study, where I actually interviewed 500 Boomer women ages 55 to 75, with investable assets of 500,000 or more, and I was shocked to learn that 80% of these women, and remember, these are the women that have the assets right now. 80% of them didn’t really know what ESG was, a disconnect, it was completely opposite of what I had heard. And I investigated it further, talked to many experts in this and we’ve kind of decided that the millennial women are what’s driving that figure. But unfortunately, the millennial girls don’t yet have the asset

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base to move the needle, the way that Boomer women do who currently control somewhere between 60 and 67% of the nation’s wealth?

06:11

Yeah. And your survey was Boomer women specifically, correct. The women that do have the 500,000 or more in assets? Yeah. Could I ask you, was the study a nationwide or was it a certain geography? It was nationwide, we actually wanted to make sure that it had a 95% confidence interval. So in order to find women meeting this criteria, that is Boomer women with investable assets of over 500,000, we had to go to about 5000 women and finally culled it down to who we think are the women that actually control the majority of the wealth or a sample of the women that control the majority of the wealth. And I think

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it’s a pretty good representation of most Boomer women. That would be our clients. Cathy, right away. ESG investing unless they’re your client or my client. Well, yeah, and but the reason I asked about the geography is that I’m in Northern California where a lot of people know about it and have heard of it and kind of understand it. So that may be an anomaly a little bit. That’s not really like the rest of us. But even so, there still is a myth that the investment returns aren’t as good. I get that question all the time. Can we debunk that myth? Absolutely. There was actually a meta study done. That’s a study of over 2000 studies that showed that at worst, ESG investing returns the same as their typical portfolio at best it slightly outperforms. And I think over time, we would find

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I mean, it makes intuitive sense if you think about it, if a company treats their employees well, if a company has transparent corporate governance, if a company has inclusion of gender and race within their ranks, they’re going to do better over the long term. That’s not disputable. Yeah. It makes complete sense to me that as time goes on, companies that are scoring higher on the ESG spectrum will outperform.

08:33

Well, it makes sense to me. Um, you and I are like preaching to the choir. So this is a challenge and question I have for you. How do we educate more of these Boomer women with the wealth that can, you know, make great change by investing in this manner and supporting companies that have these values? What do you think the answer

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is in getting more people to invest this way?

09:04

Well, I think the first order of responsibility is the women themselves. As you know, I’m sure 95% of women die alone, regardless of marital status, and that’s because women have longer life expectancies. So suddenly they inherit wealth from their parents, from their husbands. They may have earned their own assets, you put it all together, and they’re faced with

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a ton of money and the responsibility of prudently investing it. And so, my message to women is, please don’t put your head in the sand. You know, you have to read, you have to understand, you have to do your homework. But what I find is that most high net worth Boomer women prefer to use an advisor and I’m all about that. What is distressing to me

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is that there are many advisors who don’t really understand or want to promote ESG options, and therefore they don’t really show that or educate their clients on that. And I feel like it’s a real missed opportunity for women. And not to get on my feminist flag here. But, you know, we haven’t had a woman president, less than 6% of Fortune 500 companies have a woman CEO, I mean, women still have a gender pay gap. And women still take time off to take care of kids and they don’t earn as much and they don’t have as much in retirement savings. And so here’s an area where women actually are already in the lead. They’re already on top. They control the majority of the wealth in the nation, and they can really leverage that wealth to leverage their voice. Okay, well, I have an idea. So both of us would like to

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see more of this kind of investing? And what you’re saying is, it’s really in women’s best interest to do so. Right? Because so many of the values and issues within ESG investing match what women want. I know you found that in your studies, right, that it matches what women care about. And then for advisors, women control $22 trillion, is what I’m reading or 61% of the wealth in the country. So it seems like there’d be a motivation on both sides to invest in this manner. I want to step back a minute though and talk about why women may not be what about this, this phenomenon about women who are wealthy but never feel like they’re rich? And they you know, the bag lady syndrome is alive and well. I was surprised when I read that in your book because I see that many of my wealthy women clients, no matter how much they have, they still don’t believe

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they’re wealthy. And that may be a little bit of a deterrent in investing in this manner. If there’s any inkling that maybe it doesn’t have the same returns for you mentioned or that their husbands may still be involved in the investment decisions, and they’re not enlightened about ESG investing. Yeah, I mean, generally speaking, Boomer men are not as interested in ESG investing as Boomer women, for example, or women in general. And if the male advisor is also not as inclined to promote ESG investing, then I would suspect that a boomer woman who’s delegated the investment management either to her husband or to their advisor, probably just has no idea that it’s even an option. Right? What I find is, the higher the net worth, it’s a little bit like Maslow’s hierarchy. You know, once you’re not worried

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about food and shelter, you suddenly want to give back. And so my higher net worth clients are the ones that are coming to me and saying, look, I, I have an amazing life. I have had an amazing life. I have all of this wealth. And before I leave this earth, I want to do something. And to be honest, so many feel disenfranchised in this political environment. You know, and so my study found that less than 30% of women, regardless of political affiliation, feel that either the government or philanthropy can attack the social issues that we face as a country. So they really want to make a difference with their wealth. And I think the conclusion is that the real power brokers of our capitalist society are corporations. And if we can get corporations to view us as stakeholders.

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Not just investors. But if we really as women care about the environment, if we care about how people are being treated during the pandemic, their working conditions, do they have time off? Can they work from home, then which is a social and ESG? Right? caring about the people in the company’s rank, as well as its master? I mean, there’s a social means the primary question I would have for your audience is, is a company required? Or is it incumbent upon a company to do more than just care about the shareholder? I mean, here we are buying their products at Target or Walmart. You know, is it is there a responsibility on that company to sell us something that’s safe? Mm hmm. You know, the food products, is there a responsibility to protect us? You know, are they responsible for treating

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employees well, do we expect good corporate governance and transparency, diversity on boards and diversity in the workforce, things like that. There. In your book, you cite a couple of examples about companies that didn’t do these things and were hurt in their profits. So can you talk about that. Dick’s Sporting Goods comes to mind and a couple other examples that you mentioned. And the ones that I would point out immediately would be Volkswagen, okay. The amount of shareholder value that was lost because of that emission scandal was enormous. And MSCI had actually downgraded Volkswagen due to complaints, at least a year or two before the scandal ever hit. So if you were a Volkswagen shareholder, and you had been focused on ESG factors, you probably wouldn’t have held Volkswagen when that scandal broke.

16:00

That’s true also with Equifax. It’s true with Wells Fargo. I mean, there are a number of examples of that. I think the Dick’s Sporting Goods example that you’re referring to Cathy has to do with the weeks following the Marjory Stoneman gun shooting. You’ll recall that was when a 17-year-old in Florida went into a high school and opened fire on a group of students with a semi-automatic weapon.

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Anyways, the country was outraged. But the difference this time was that people took to social media, and they started questioning, where did that gun come from? How did the 17-year-old get that gun? Mm hmm. And I know in my office, I had several clients calling and saying I want you to dump all gun stocks, anything that has to do with the gun industry. And so we did that. We found what

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we were looking at some of our ETFs and mutual funds that both Walmart and Dick’s Sporting Goods to sell guns, they distributed guns. And within two weeks when these companies were faced with economic risk and reputational risk, they had both changed their rules. One

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raised the age from 18 to 21, to buy a gun and the other stopped selling bump stocks entirely. And that’s when I had my aha moment, which was, wow, it took two weeks to change major policy, whereas the NRA and all the political wrangling over the years about gun control, which by the way happens to be one of the issues that Boomer women really care about, regardless of party affiliation. They did it in two weeks. Yeah. So was that the motivation to write this book? Was that one of them? It really was because I saw that

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power being harnessed of economic harm and reputational risk by the consumer and by the investor toward a company, I started to realize that, you know, you could completely bypass politics, you just like go directly to the company and say, I don’t like that you’re doing that, and they will change. Yes. So this is the three pillars thing you talk about. Women traditionally have done charitable work, volunteer, give money to charities. They’ve gotten politically active and voted for their candidate. But what you’re saying that’s all good and that’s important work, charities do important work, but investing is a way to make an even bigger impact on and make change happen in a really astoundingly quick manner. All right. Well, for one thing, I love our charities, I mean, I love them.

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But very few women have enough money to give away that they can move the needle. However, if you’re not giving money away, you’re investing your own assets, but you’re using your wealth to promote causes that you care about. That’s a lot more money that you can leverage. Well, it’s a lot more people investing in that same manner.

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Yeah, pool women’s resources together. It’s as high as $23 trillion.

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And just to put that in perspective, the entire GDP of Australia this year is about 1 trillion. I mean, this is a lot of wealth, and 7% of the nation’s wealth and so it can really move the needle if women will come together and vote with their pocketbooks, so to speak. Well, another interesting point you made in the book is that this is kind of a unique

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time, there’s all these Baby Boomer women, right? And then there’s this one opportunity now to make some real change before we move on, right and pass on. And then new generations may have different ideas. So the time is really now. I also want to bring up another point about right now, we have the pandemic. And we also have all this social unrest with the George Floyd killing, and Black Lives Matter. And I also have my women clients who want to know, what can I do? Everyone’s wondering what can I do to help and this is a great way to do that is to invest in this manner. And so let’s get into more about the specifics of how you invest in this way. So you said earlier, one way is wealthy Boomer women work with financial advisors, right? So they rely on their financial advisors to help them make investment decisions or they just turn over

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the investment decisions to their advisors. So one thing they can ask their advisors to invest in this way. Okay, so, too, so for the advisors listening, I want to just emphasize that you can do ESG investing and build diversified portfolios. As Haleh said earlier, it’s not just about negative screening or positive screening anymore. There is a way to invest in this way called best in class. And Haleh, do you mind just going on a little bit about best in class in ESG investing. Yeah, I’m interested that you asked because the Vatican just came out the Pope did and said that he wanted all good Catholics to divest of all oil stocks.

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I read that and I thought, let’s, let’s logically play that through. You’re an investor. You own Exxon, you sell your Exxon and it goes to somebody else.

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Who buys it? Does that in any way, shape or form injure Exxon? They don’t even know. You know, more than 6 billion trades are made a day. They don’t know whether you’re rebalancing your portfolio or whether you’re making a statement, they’ve already gotten their money at the IPO, you know, you’re not taking money away from them. So what is the best way to show Exxon that you would like for them to come up with alternate forms of fuel, cleaner energy, and leave a better carbon footprint? What is the best way? I would say that the best way is

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to own some of their shares, and potentially vote by proxy, and pool with other people in writing shareholder resolutions. So that’s one option, that’s active ownership approach, right. The other option is simply to buy a fund

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that has already been created that only incorporates the best in class, as you just mentioned. Mm hmm. Let’s say that you have an oil company that’s doing all the right things. And then you’ve got another oil company that just doesn’t care. That fund is going to wait, the better oil companies hire and have very little of the ones that aren’t doing the right things in the fund. And in that way, it’s more of a passive message to the companies that hey, look, if you want to be in this massive fund, which by the way has huge amount of market share, you better step up your game and start doing what this other company is doing. Ya see? I really, to me, that makes so much sense. Because then you can still build a portfolio that has a piece of every industry there is you don’t cut out oil companies you don’t cut out

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companies that make junk food or you know what I mean, you, you have the diverse array of companies. So you can build a diversified portfolio. But you overweight the companies that are doing good, quote unquote. And I want to get to this doing good thing, because who determines which companies are doing better than others in this area? It’s the rating agencies. Right. And I think that’s also another area where there’s some, it’s a little bit gray, because it’s not truly standardized yet. But it’s getting there. Right. Can you speak to that a little bit? Yeah, it’s a lot better than it used to be. But, you know, some of your listeners may have heard the term greenwashing. Right, in order to curry investor favor, every fund and every company says, guess what? We’re ESG when they’re really not, you know, there’s a lot of deception

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going on, because there’s a lot of self-reporting going on. And we have these rating agencies that are doing a phenomenal job, but because the, it’s not as standard as it could be, you might have one company rating the same company completely differently than another. So it’s really important. I mean, this is one of the areas I would say to, to, you know, any investor, if you’re really interested in ESG, it really is worth it to go to someone who understands the space and try to kind of weed out the greenwashed products and try to actually develop a diversified portfolio across all asset classes, not just stocks, but bonds, alternative investments, real estate, there are many, many companies that are doing good while also doing well. But it’s hard to access if you frankly, I mean, you almost have to be a professional to access them.

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Some of these asset classes, yeah, certainly the private equity and alternatives and things like that. But I would argue that an investor can build an ESG portfolio using some of the fund families out there right now, who have really taken this seriously. And I’m, I’m so thrilled to see that you can build a diversified portfolio with large cap, foreign emerging markets, small cap, and, and it’s diversified and it performs well. And you know, sometimes it outperforms even. So it just depends. Yeah, and if you’re worried about returns, I mean, it’s very easy to look up the track record of these funds. You don’t have to take anybody’s word for it. You just look at how they perform. How did they perform in a bull market? How are they performing during the pandemic? Many ESG funds during this pandemic have outperformed, many are positive.

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Yes, I’ve noticed that in my own portfolios and not just because of who I am. I’m absolutely thrilled to see that. So, you know, are we, is there any downside to this kind of investing that you can even

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imagine?

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I Cathy, I really don’t think so. I think this is the wave of the future. I think we as investors expect more from our companies, it’s not just enough to be focused on the bottom line, we really, we can see that with the social unrest in this country after the George Floyd killing, you know, and the pandemic, the disproportionate numbers of minorities that have not only lost jobs but lost their lives, due to a lack of access to health care and education and, you know, jobs that are more secure and so really through ESG we can promote

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and support companies that are supporting these minorities to kind of level the playing field. So it’s, it’s hard for me to see as progress is made over time and we become hopefully a more and more civil society at least that’s my hope that this just won’t become the standard. This type of investing is not replacing fundamental stock valuation, it’s an add on

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to all the other fundamental criteria, it still has to be a good investment for you to invest in it. Right, an added bonus. And I would say that if a company is performing well in this added criteria, that they’re going to do better over the long term. Right. And, and also, many rating agencies are looking at ESG criteria now too I mean, S&P and Morningstar and all the big ones right? And it’s because

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there is a demand for this kind of investing, maybe starting with the millennial generation. But there is a demand. But I think also we can’t discount the impact of social media. I mean, things are so digital, that if a company does something, quote unquote, bad, everyone’s gonna know it’s instantaneous around the world. So companies really have to protect their brand. Companies that have behaved well during the pandemic. I’m thinking of Ford, you know, converting some of their manufacturing to make face shields. People know that it’s warm and fuzzy. It’s US company. Yeah. And you think of other companies that haven’t done so well. Right. You know, and you don’t forget that when you’re at the grocery store, and maybe you don’t want to buy that product. So

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we can’t lose sight of the fact that reputational risk has

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gone through the roof in terms of its ability to

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go across boundaries, and everyone’s going to know everything instantaneously. Yes. Well, I have to say I think your book is extremely timely. I know, I know, you published it when earlier in the year, it was February and I was thinking to myself, you know, is anyone going to be interested in ESG? Like people are interested in the E part, which is the environment, but who cares about social justice, right, but look at now, I know, I get out there and talk to as many people as you can, because people have their ears open and are listening. Yeah, I actually read recently that the interest in ESG is up 140% since the pandemic, that’s amazing. It is amazing.

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So as an advisor, let’s say you’re an advisor, you haven’t done this kind of investing before, right? And you want

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to

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let’s say you can do it management approves a bit and all that right? And a client walks through the door and you don’t know whether they care about it or not. Would you offer it as an option? Would you educate? Would you do what you normally do? I think this is a question that advisors have. How do I dip my toes in if I’ve never done this before? Um, well, we at Stearns are launching our ESG platform to coincide with the publication of this book. Okay. Basically, we have a fund lineup and some private investments across all asset classes that is ESG focused. And when we have someone coming in off the street when they sit down and we you know, you chat with them, you find out what their goals are. We make that an option. I mean, it’s not something that they have to do. Some people immediately gravitate toward it.

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You know, I mean, it kind of blows my mind that we’re in a capitalist society. And if I asked you, Cathy, for example, what did your portfolio do last year, you’d be able probably to give me the return and the standard deviation and return the whole thing.

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If I asked you, well, what causes did your assets support, you know, you might be met with a blank stare. And so it really is an epiphany for potential clients, or even existing clients when you tell them that, you know, I know you’ve been really bothered about all the stuff that’s going on, you know, if you want to do something about it, there is a way and you know, and they don’t have to, but they need to know that that option is out there. Right. Okay. So your company is offering it as an optional type of portfolio. Yeah. And are you heading up that initiative? That’s fantastic. That’s very, very exciting. I mean, we work as a team and so I’ve got

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my investment department who actually put together and researches the fund lineup, but, you know, I think and it’s probably because I’m a woman advisor and 95% of my clients are women, and I find that women really want to make a difference, they care about the greater good. Yeah, I can’t take credit for the concept because it started with my women clients, asking, you know, what can I do? Well, it’s just another piece of your toolkit. It’s another pillar to do something that supports your values. And I, you know, I agree with your message. I’m really happy that you have taken this on. It’s obviously a real strong passion for me too. And I hope that our listeners will take this as a starting point to dig in deeper, learn more.

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You know, listen to their clients, talk to their clients.

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And, and we can all create change together.

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I love that message, Cathy, thanks for doing what you’re doing. And thanks for having me on. Thank you. Is there anything else you’d like to add? For example, where can people buy your book? And do you have a blog or podcast, anything you’d like to share with us on your public platform? We kind of deferred the official launch of the book because the pandemic hit and it didn’t even occur to me that, you know, my book would become more relevant. I was thinking who’s interested in a book when everybody’s worried about this Coronavirus, but it is out there on Amazon and readily available that way. Okay. We’re having a formal book launch

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upcoming but it hasn’t happened yet. Okay, well, I’m excited for you. Thank you for taking the time to write this book and putting all the research and thought you did into it and I’m looking forward to hearing

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more. Thanks Cathy.

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