Buying Tampa Bay
Buying Tampa Bay
S2 E4. Unlocking Home Equity: Maximizing Potential in Real Estate Investments
Unlock the potential of your home's value and discover innovative ways to use home equity for real estate investments. On this episode of the Buying Tampa Bay podcast, we're joined by Connor Kincaid to explore the often-overlooked resource of home equity, which has reached a staggering $35 trillion in the U.S. We guarantee you'll gain insights into effectively leveraging this asset, whether you're funding retirement plans, starting a business, or considering additional property purchases. Through the lens of the home equity line of credit (HELOC), we'll unpack the critical considerations such as credit requirements and loan-to-value ratios, giving you the tools to make informed decisions.
Managing risk is crucial when venturing into using home equity for investment purposes. Connor joins us to navigate the delicate balance between risk and return, emphasizing the importance of maintaining liquidity and ensuring your investments are cash-flow positive. In today's unpredictable economic environment, we underscore the need for strategic financial planning, particularly when interest rates are high. Learn why accessing home equity for speculative real estate ventures might jeopardize your financial future and how to mitigate those risks by focusing on strategic investments that align with your financial goals.
Looking ahead, we also discuss how evolving economic conditions may present new opportunities for those holding home equity. As interest rates fluctuate, rising home values could offer fresh avenues for expanding real estate portfolios. We delve into the role home equity can play in aiding younger generations with home purchases and share personal stories of how leveraging equity has expanded rental property holdings. With Connor's insights and our experienced hosts' guidance, this episode equips you with practical advice to maximize your home equity returns while keeping a keen eye on market trends and economic shifts.
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Hello and welcome to the Buying Tampa Bay podcast. We're your hosts, peter Murphy and Chase Clark. Experts calculate that home equity in the United States is approximately $35 trillion as of early 2024. That means the average American homeowner has just look at this number $315,000 of home equity in their primary residence. This is a vast amount of locked up capital just waiting to fund retirement plans or business ventures or hey, how about an investment in real estate? So today we're exploring the pros and cons of accessing home equity for investment real estate purchases. For some, home equity is the largest reserve of capital they have, and activating it for investments can be an alluring strategy. So let's dig in and see if it's the right strategy, if it's a smart strategy to initiate an investment in real estate for you.
Speaker 2:Hey guys, conor Kincaid here, and thank you guys for having me back again to this podcast. My goal today is to ask some questions that I have about this topic, as well as some questions that any homeowner would be asking or should be asking these same questions. I've had several friends that have used this investing tool effectively, but so many people do not use this to their advantage. So I hope to take some practical advice from you guys today, and I think using your home equity to maximize this potential can be very useful for anyone that owns some property. So let's get into these questions, and I'll start with. Give me an example of something that you've experienced or some story that you've heard from someone else talking about home equity investing.
Speaker 3:Yeah, hey, connor, thanks for that question. Peter and podcasters, Welcome. Today Interesting topic is, as Connor just said, you know, a lot of people are looking at home equity and trying to take advantage of that resource, and doing so in the real estate investment. Realm and home equity is an interesting thing to think about. A lot of people know it's there. How many people do you know that are on Zillow at least once a week looking up to see what the Zestimate on their house is?
Speaker 3:It's that warm fuzzy thing for us in the Tampa Bay market where, if you've owned a house now for 10 or 15 years, your home equity is pretty significant. That average of 315 per primary residence is definitely alive and well here in the Tampa Bay area, and so if you're inclined to invest in real estate, you may ask, okay, what can I do with this home equity? How can it go to work for me? And we've done some things with home equity, or property equity in general, over the past 20 years. That's been advantageous to us and we've used that equity to help fund down payments and even outright cash purchases of other properties, which you can do. And if you're starting out as an investor, maybe you've just got that primary residence that you bought as your first piece of real estate, as your first investment really in the real estate world. And now you're sitting there with that $300,000 of home equity.
Speaker 3:The best way to tap into that is usually with a home equity line of credit, and that's available at most any bank.
Speaker 3:It is subject to credit and income requirements to be able to qualify for that, even though you may have a substantial amount of equity in your home.
Speaker 3:But typically banks will loan you up to 80% loan to value of your current appraised home value, and so whatever your home appraises for, take 80% of that, then subtract what you owe on your first mortgage and that's approximately what a bank would be willing to lend you in terms of a home equity line of credit, and that equity then becomes available to you to either fund an outright cash purchase of another property as a second home or as an investment, or it can fund a down payment if you can then qualify for an additional purchase loan on that property.
Speaker 3:And so there's a couple of ways there to take advantage of that equity that's pent up in your home. And if you consider your home an investment property your very first investment you need to consider using your equity, because while it's sitting there, it's really not doing a whole lot for you other than making you feel warm and fuzzy when you check the Zestimate once a week warm and fuzzy when you check the Zestimate once a week. So consider how you can deploy that equity in terms of capital and put it to work in the market for you.
Speaker 2:Yeah, so say that someone has used their home equity to invest in another property or to use in other areas. What does that look like practically? How does that affect their everyday life? How does it affect their financial health, both positively and negatively?
Speaker 1:Yeah, okay, so I'll give a stab at this. Home equity is going to come at a higher cost than other types of financing that a buyer can take advantage of or an investor can take advantage of. Purchase money financing, for example, will routinely come at a rate in the mid to high sixes right now. But if you're tapping into home equity and you're getting that from most lenders these days, you're paying upwards of 9% on that money, so your home equity will come at a definite higher cost. I guess that's because lenders are viewing that as higher risk lending. It's still securitized by your home, so you've got the confidence, if you're a lender, that you could foreclose on that primary asset and be someplace within line to receive a payback on your money if the homeowner defaults. But a home equity line of credit is definitely secondary to that primary mortgage in the hierarchy of liens, so they might view that as higher risk and then the cost of that money is higher. So that's going to hurt, right? If you're trying to buy an investment property and your home equity line of credit is your only source of capital and that interest rate is nine or so percent, well, that's considerably higher than it would be if it was purchased money, and so that will affect your cashflow on your real estate somewhat substantially.
Speaker 1:You know there's also the reality right now that you know Chase talked about it a little bit earlier but you have that warm and fuzzy, you know, feeling that you have made a, that you have equity in your home and when you tap into that now that equity is gone and it's accounted for and so your equity-based liquidity is going to become just less, you have less potential, less room for rainy day emergencies that arise if you've taken that equity out of your home and invested it in a fixed asset, and the challenge with fixed assets is that they're hard to liquidate. If you've got to go sell this investment property you've purchased and it takes some time and there's market risk in selling that well, you can't access that capital quickly. And if you have a home equity line of credit just sitting there waiting for your rainy day reality, whatever it might be, that's accessible very fast, unless you spent it on a hard to turn over piece of real estate. So a couple of things to think about there.
Speaker 2:Yeah, so let's talk about some strategic considerations as you're trying to access the home equity. Are there any guidelines or criteria you guys look at when you're looking to perform this task?
Speaker 3:Yeah. So when you're looking at the cost of capital Peter alluded to this earlier home equity lines of credit are a little bit more expensive than purchase money when you're getting them from banks, and so you've got to consider that right now. Let's say the rate on a home equity line of credit is around 9%. Maybe you can get it down as low as 8%, but you're going to be in that 8% to 9% range. Be in that 8% to 9% range.
Speaker 3:Does your investment cash flow with that kind of cost of capital deployed is really the question you've got to ask with any investment property, but especially because home equity is sitting there at a cost of capital that's just below hard money in some cases, and so that rate on a home equity line of credit is going to fluctuate with the market. Now we are probably at the high end of the market right now as far as interest rates go, and it's likely that we're going to see them drop somewhat, maybe slowly, over the next six to 12 months. So if you can underwrite your investment now using the 9% cost of capital and it cash flows, it's possibly going to get better over the next six to 12 months from a cash flow perspective, and so that's definitely one of the big strategic considerations you want to look at when you're thinking about using that home equity.
Speaker 2:Yeah, when using home equity, there's definitely a potential just like with any investment for there to be high returns. But if there are high returns, that also means there's a high risk. So how would you balance the two?
Speaker 1:Yeah, I think it's a liquidity risk once again that you're facing. People who have home equity within 30 days or so could tap into that home equity and access that for whatever emergencies might arise in their life. It doesn't take long to get access to your home equity, and so it's a very smart financial plan for people who might be at significant junctures in their life where capital is going to be required. Maybe that's for health care or caring for a dependent or college expenses or some other just rainy day reserve that you need Accessing and putting an access mechanism in place for that equity is smart business. But if you've tied that up and we've already alluded to this to some extent if you tie that up in real estate and now that option is no longer available to you, that puts your household in a really tough place and I think many people would not be comfortable with that.
Speaker 1:Many people not only want to have a little bit of equity they can access, but they're actually looking at that as a big part of their eventual retirement money. And let's say they do put that into an investment and that investment doesn't profit or appreciate the way that they thought it would. Well, then there goes their nest egg. That $315,000 that we've talked about at home equity represents last time I researched this roughly 80% of the average homeowner's total nest egg for retirement. So there's not a lot left there if all of that money now is accounted for investment, and that investment is a little upside down. So there's two very considerable risks to watch out for. If you're thinking about using your hard-earned home equity I mean hard-earned right the asset earned it for you but still it's yours and because you have been in the market you had access to that. But if you use that and you put that at risk in some other kind of investment, then your retirement could be somewhat at risk and that's not an attractive proposition for many.
Speaker 2:Yeah, so kind of going along that. Can you quickly just give a few examples of red flags that you can see as you're trying to mitigate risk in this situation?
Speaker 3:Yeah, I think you know.
Speaker 3:Just like with any real estate investment, you want to make sure that it's going to cash flow.
Speaker 3:I would not recommend to anyone taking out home equity on your primary residence to speculate on what the market might do from an appreciation standpoint with a property. You got to remember every time you borrow money there's going to be a monthly cash outlay, whether it's interest only or whether that loan is amortizing. And you may be in a position where you can afford to put out $500,000, $1,500 a month no big deal and do that on a speculative investment in the real estate market. But most people can't, and, as Peter alluded to, home equity is a precious resource that is really funding a lot of people's retirement or is the backbone of their nest egg, and so putting that money at risk on an investment that would not cash flow or at least cover the cost of your capital, is very risky, and so I would always caution any investor out there. Be weary of investing based solely on market appreciation. You need to consider cash flow, it needs to be the number one consideration, and you need to only buy cash flowing properties.
Speaker 2:So, as Peter mentioned in the intro, there's a lot of people, even in the Temple Terrace area here, that have had these homes. They bought them for somewhere like $200,000. Now they have all this equity in their home and, with interest rates the way that they are right now, so high, it may look like a really good idea to use home equity. But is that really a good idea in this market, given the high interest rates?
Speaker 1:So I think that's an important question and in this market, is really the salient qualifier. There have been markets where using home equity is, I think, a really solid idea. I'm thinking about high appreciation markets and the challenge of course are you in a high appreciation market or not? Well, you know that five years later when you can look back and say, wow, those prior five years were high appreciation. It's very hard to see that you're in a high appreciation market when you're in one. But let's assume that you have that ability to be circumspect and see that, yes, you're in one right. But let's assume that you have that ability to be circumspect and see that, yes, you're in a market where appreciation rates on your home are going to be in excess of what the median appreciation rates have been over time, so more than four or 5%. Then accessing your home equity can be a very safe thing because that home equity pot is going to grow for you and maybe you've accessed a portion or close to all of that home equity. But in three or four years there's more home equity for you and you have your nest egg still there. You have some more leverage that you can tap into if you need to. And so high appreciation markets. Home equity is a good idea. Low appreciation markets or no appreciation markets I think that's very risky, because what you're going to find is, not only is your home not appreciating, but it's actually depreciating right. You've got costs and you've got maintenance and expenses related to maintaining your home, and I promise you that tax rates are not going to go down and insurance costs are not going to increase, so your cost of ownership of that asset is going to go up and your equity is not, and that's going to put you in a more and more vulnerable spot. You don't want to tap into your home equity if you feel reasonably certain that you're in a low appreciation market.
Speaker 1:I also think that interest rates has a lot to do with this here. If you're tapping into your home equity and your interest rate environment is high like it is today, you've got to ask yourself well, why am I doing that? If it's to buy another primary residence, well, you could buy purchase money financing at far lower rate than you can buy home equity financing, so that certainly wouldn't be smart. And if you're buying at a 7% to 9% interest rate, well, you've got to really consider carefully whether your investment can cash flow at those kinds of interest rates? In our evaluation they do not. And so, unless you have astronomical rent rates for one reason or another, a 7% to 9% interest rate on your home equity line of credit which you use to buy an investment property, that's going to be a loss leader for sure. So I think caution in using home equity lines of credit in this current market is the right idea. Yeah.
Speaker 2:All right. So have you learned anything from watching others as they use their home equity to invest? What are some common mistakes that you've seen?
Speaker 3:Well, you know. Again I want to go back to this idea that you know investments should be evaluated on a case by case basis. It's hard to say in this market every investment is this way or that way, or every strategy is going to be good or bad. When it comes down to the use of home equity or any other source of financing, again it all goes back to the cost of capital. So in this environment, if the cost of capital on a home equity line is 8% or 9% and the cost of purchase money for an investor is probably somewhere closer to the low sevens, you've got to evaluate that for every different investment property to determine can you make sense of that investment, achieve the kind of ROI that you want, to achieve the kind of cash flow you're looking for with those costs of capital? And so that's really what the crux is, I think, of this whole conversation is just know, hey, number one, home equity is available to you and you can use it. And one of the best ways to do that because home equity functions like cash, which is critical for investors, because cash investors are usually the investors that get the best deals. So going down to your bank and seeing how much of a home equity line of credit you can qualify for is a great idea, because a line of credit doesn't require you to borrow a single dollar at all, and usually the banks will do them for little to no money in terms of costs to no money in terms of costs. So if you can secure, if you have $300,000 in equity and you can secure a $200,000 or $225,000 line of credit on your home that just sits there and waits for you to identify a great investment to hopefully be able to take down with that cash, that's a great thing for you. But understanding that once you deploy that capital, once you draw on that line, that's when the till starts right. So the 9% interest kicks in right away, and now you've got to make sure the investment will cash flow at that cost of capital.
Speaker 3:Now a couple of good things, I think, in our favor.
Speaker 3:Like I mentioned before, I think we're at the height of the interest rate market right now, at least for a little while, and rates will slowly tick down over the next six to 12 months.
Speaker 3:The 30-year fixed rate, hopefully, will do that, so will the rate on the home equity lines of credit, and so one strategy that a lot of people often employ is go ahead and buy the home run investment or the really good cash flowing investment now with your cash from your home equity line and then in six to 12 months, evaluate your cost of capital again and determine okay, now that I've got this property, it's cash flowing, maybe I've got some equity in it. Should I refinance that property with a traditional 30-year fixed loan at that point at a lower cost of capital and let it ride for the 30 years? And that's definitely an option to reduce your cost of capital from whatever the HELOC line is the home equity line of credit, also called HELOC back to a traditional conforming investor fixed rate mortgage. So that's definitely an opportunity there for investors of any type to have this equity sitting in their home.
Speaker 2:All right, to this point, we've kind of talked about the current market conditions and some past experiences. But let's look into the future. How do you see this form of investing and funding investing? How do you see that changing or evolving?
Speaker 1:I love future prediction questions because you don't know how wrong you are until 10 years from now. So maybe this is completely off the wall, but I love the idea of the fact that we are in somewhat of a flat and a languishing real estate market right now, and many people have lots of home equity in their homes, and we're looking at probably a 1% to 2% real estate appreciation rate over the last 12 months. So it's not great. And so, looking forward, what will that look like? Will it be 1% to 2% again for a while? Will it tick up a little bit as the economy improves? As interest rates come down? Will the value of homes increase because now cash is more accessible?
Speaker 1:And I assume that it probably will, and so what you're going to find for a time, I think, is that people's equity will start increasing again at a reasonably good rate, but we're not going to have a ton of great investment opportunities. People are not going to be forecl of great investment opportunities. People are not going to be foreclosing out of their mortgages and, as much as I hear the doomsayers prognosticate, we're not going to see a deluge of storm, damaged homes come on the market in our area, and that means the opportunities to buy good investment properties aren't going to be there for a while. So let's say it takes three or four or five more years for there to be good options to invest in. Well, your home equity if your values of the home has been increasing at four or so percent is going to be substantially higher in five years from now.
Speaker 1:And well, in some cases, for many people they've got a huge number of options available to them at that point, when that $315,000 becomes $500,000 of home equity. Now you can tap that reasonably, you can tap a portion of that and you can make your good investment and you don't have to put your family or your retirement at financial risk. My sense is hold off and let that equity build up, and then we're going to see just one of those awesome periods of time where huge amounts of money are going to be able to enter the market, both for investments and second homes, vacation homes, and much of that will take the place in home equity investing. That's my prognostication Chase. What about yours?
Speaker 3:Yeah, who knows what rates are going to do and how fast or how slow they're going to move? We've got a lot of positive momentum right now. People's crystal balls are lighting up in a very positive way with the election, the results there, president-elect Trump's at the stock exchange today lighting a fire under everyone and talking about all the positive, good things coming down the pipe. So there's a lot of reason to have optimism about what's going to happen. Yet then you look at what economists are saying about the next 12 months and the predictions for the market in 2025 are flat to negative five. So you know we're not quite sure where things are actually going to go over the next. You know 12, 13 months or even beyond that, but fundamentals never change. And so, again, you know, in real estate investing, you make your money when you buy it and don't overpay. Don't think I've got all this home equity sitting here and I've got to do something with it, like money burning a hole in your pocket, right? You've got to count the costs. You've got to consider the 9% rate, the 8% rate, whatever it is now, is what's important, not what you think it's going to go to in the future, because it may not get there, so don't just buy something to buy it right.
Speaker 3:One thing interesting to me is that you know, you hear people talking about Florida becoming the new California and we're already bumping up against the ceiling of affordability here in the state. For what wages are. You've also got people that you know now a little bit older than us, not too much older, have got kids, you know, in college, graduating college, who won't be able to afford to buy a home. And what has happened in California over the last 20 years is that parents with tons of equity in their homes have used that equity to provide down payments on homes for their children and that was the only way that they could afford to buy a payments on homes for their children, and that was the only way that they could afford to buy a home and live in that state. Not sure that we're headed there quite yet, but I already see signs of that possibly being a great use of your home equity down the road. Now, is that a great investment? Opportunity for you Depends on how you look at your bottom lines. Opportunity for you depends on how you look at your bottom lines If you like your kids to stay in the area, if you want to help provide them with a jumpstart to their future. Some people look at that as a wonderful investment opportunity. So, you know, I think there's a lot of different considerations being made by people with home equity right now, depending on age, depending on, you know, what else they've got in their nest egg and where they individually see the market going in the future, and so all those things play into what their behavior might be with this wonderful resource of home equity that is sitting there, maybe doing nothing right now.
Speaker 3:One thing I will say, because Peter and I talk about this all the time we have a rental real estate portfolio now with a lot of equity in it. And so, going back to your question your previous question about what have you seen people do or what have you done with equity in some of your investments? A couple of things. When the market's right and you can identify good investments, equity is the best place to go find money right. It's the fruits of your labor in terms of what you get for taking the risk and entering the market and riding the market up from an appreciation standpoint. We've used equity to buy more properties that now have more equity, and it's been a huge blessing in that over the past 20 years equity, and it's been a huge blessing in that over the past 20 years.
Speaker 3:The one thing you've got to consider, though, when doing that, is that money is expensive, and money can be very expensive when you're tapping into equity.
Speaker 3:Banks are profitable because they charge a lot of money for loans the closing costs, the origination fees, the yada yada right Thousands of dollars to take out a loan to be able to tap into your equity.
Speaker 3:So not only is it the interest rate, but also be prepared to count the cost of the friction of getting your hands on those funds from banks. Find the cheapest possible way that you can get your hands on that money, and that will just help you achieve a higher ROI down the road. And when you do get your hands on the money, I would say if you're going to experience the cost of borrowing, borrow as much as you possibly can. That still makes sense in achieving your desired investment outcome. Don't shortchange the amount of money you're going to borrow at one time, because right then you don't need it if it's not going to cost you anything to get a little bit more and be able to deploy it in an advantageous way. So I think we've made that mistake once or twice before, not borrowing enough when we've been charged like we should have borrowed more, and so the cost of that money becomes even higher for the smaller loan amounts. Just something to be aware of and look into as you explore how to tap into your home equity.
Speaker 2:Yeah, so let's just finish up talking about maybe some advice you'd give to somebody that wants to use this strategy. Maybe each of you could give one or two of your top pieces of advice and summarize that for us.
Speaker 1:Well, I tell you, I think my top piece of advice is a cautionary note right. So we have had properties that have lots of equity and then something turned in the market and now that equity is gone, I mean it's negative equity, right, and that can happen because equity is on paper, right, it's not in your bank. And what we've, what we've done to really double down on that error, is that if in some of those cases we pulled out, had second mortgages on them or pulled out lines of credit to fund renovations on other properties or variety of other things maybe not even a full, outright purchase we had just taken some out of home equity and used it to improve the look of our investment properties. And then values plummet and now you owe way more between your first mortgage and your home equity line than what that home is worth. And if you have not heard about the concept of short sale because you're younger than 20 years old, you should know that the whole real estate market was absolutely roiled for a good 10 years because of this gigantic problem with the loss of equity.
Speaker 1:And it wasn't just that people took a bunch of second mortgages out and they lost value, it's that even their first mortgages became more than what the equity in their properties were, and so they were left with this terrible dilemma where, like I, owe way more than what my property is worth. So I have no choice but to give it back to the bank and to be foreclosed on, or to short sell it, or to get you know deed in lieu of foreclosure or any other number of adverse actions that a borrower might have to take when they find themselves in that spot. Don't do that to yourself, right? Your home, your home, is already a little bit on a razor, on like a tipping point where the market changes too much than your mortgage might not cover its value. Don't dig yourself even deeper by getting yourself a big line of credit if you're in a market or if you're fearful that a market might turn. So that would be my number one piece of advice.
Speaker 3:Yeah, I'll offer one piece of advice as well. One thing we've done over the years is continually evaluate our portfolio for what kind of return we're achieving on it, and one of the big gaps that's always there is return on equity. That establishes a lot of equity in it, sometimes more than what you paid for the property. Your return on equity is very low compared to your return on investment. So you may only have $100,000 invested in a property that's worth $500,000 now. So you have $400,000 of equity. Your return on the $100,000 looks great. It's 12%, 14%, 15% sometimes but your return on the $400,000 of equity maybe 2% or 3%.
Speaker 3:And so a lot of people in that situation would look and say, well, okay, we got to put the equity to work. You've got two choices in putting the equity to work. You sell the property or you refire, or tap into that equity with a HELOC. That's a math problem. It's not advice on which one's better or which one's worse. Do the math.
Speaker 3:If you've got a better investment alternative somewhere outside of that property, you need to determine whether or not cashing out and disposing of the property to invest in something else is going to be your highest yield, or if taking out a HELOC or refinancing your primary mortgage on that property to a market rate will provide you enough capital at the right cost to be able to achieve the kind of yield you want to achieve on another investment. And so those are really the two considerations when it comes to equity is what are you going to do with the equity? Are you going to dispose of the property, reliquify completely and redeploy capital, or do you want to hang on to that asset and just further leverage it in order to make new investments, and most of the time, outside of extremely high cost of capital? The leveraging route pays off in the long run, but only if you can find a cash flowing investment that meets your yield requirements.
Speaker 2:All right, this has been a great discussion. Thank you all for having me on the show once again and I'll turn it over to Peter.
Speaker 1:Yeah, it has been a great discussion, Connor. Thank you, man. Some great questions there and great to think through some of that strategy. And I love the concept of return on equity, because it's just not one of those things we evaluate very much as investors to know that all of our equity is not working up to its fullest potential. So how do we maximize that? And it's not an easy answer, for sure, but isn't it nice to have equity? That's, I guess, the nicest thing, Whether or not you're getting the return on it. You should be who knows. But, man, it's a good problem to have right But-.
Speaker 3:Make your net worth look really good. What was that Make your net worth look really good?
Speaker 1:I know right. So there you go. That's something to be thankful for, but listen, it was a great conversation. I look forward to getting back with you guys again to talk about something interesting in a couple of weeks. A lot of our questions over this podcast season are coming from people who have asked us just general investment questions. A lot of them how do I get into investments for the first time and really start making a go at it in real estate? So we're excited to share with you some of the things we've learned over the past few years. So I think for until next week it's been a lot of fun and Peter out.
Speaker 3:Yeah, thanks, guys. Connor, appreciate your work today and your help with guiding us through some of these questions and look forward to more questions in the future. If you have questions, please reach out to us. You can get us at chase at home propcom, or Peter at home, propcom. We'd be glad to field your questions and even address some topics that you may want to hear about on this podcast. Hope you all have a great evening and we're bundled up for winter here in Florida.