Epic Real Estate Investing - How to Flip Properties Virtually with Real Estate Agents in 2023 | 1250

Episode Date: January 10, 2023

If you're not flipping properties (virtually or in your own backyard) successfully off the Multiple Listing Service (MLS), it's probably because you're missing two specific things: 1. A good working relationship working with a real estate agent, and 2. A good understanding of adjusting your strategy in a different type of housing market we're all experiencing... and will be in for at least the remainder of 2023. Stay tuned and hear some secrets from Matt. Are you ready? Let’s go! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terio Media. Hey Matt here. I live in Las Vegas and I invest virtually in a dozen different markets in United States. And as the real estate market is doing what it's doing, I have to change some things about how I approach new deals. And if you don't want to lose your shirt in 2003, you should start considering some changes in your approach too. Welcome to the all-new, epic real estate investing show. The longest running real estate investing podcast on the interwebs, your source for housing market updates, creative investing strategies, and everything else you need to retire early.

Some audio may be pulled from our weekly videos and may require visual support. To get the full premium experience, check out Epic Real Estate's YouTube channel, EpicR-E-I.TV. If you want to make money in real estate, sit tight and stay tuned. If you want to go far, share this with a friend. If you want to go fast, go to reiase.com. Here's Matt. Here's what I mean. I stumbled upon this property here in New Mexico.

It sold a few months back for $355,000. I then found a similar property right down the street, same neighborhood, priced for $230,000. That's like a $120,000 difference. This time last year, this would have been a no-brainer to buy. Now, it still could be. But you got to walk a little more softly into deals now, something that 15, years of experience has taught me. With that said, though, nothing happens until an offer is made. So I called up my real estate agent in the area. It's a newer relationship that I've recently

created, and I submitted an offer, sight unseen. I've never been to New Mexico either. I know nothing about the market. But through this new privy software that I've been using the last six months, I can learn a lot about a market really quickly. Specifically, I can see how many flippers are working in the area, which areas they like best, and what type of prices that they're paying. And what, for their pre-flipped properties. And that's really all I need to know if I'm going to flip or wholesale properties virtually in that market. Oh, and Privy helped me find an investor-friendly agent too. And you can give it a test spin at Epicprivy.com if you'd like, but that's not what I want to share with you today. This is about working with real estate agents and the changes that

you'll need to make in evaluating properties if you want to flip and or wholesale in in 2020, virtually or in your own backyard. So this property, I got a counteroffer back at $195,000. That's 35 grand below asking price. So this deal, it's looking even better, isn't it? Maybe. I replied to my agent with a video explaining to him my response to this counter. And I'm going to play it for you in a second,

occasionally pausing to point out what's happening so that you too can create good working relationships with agents. And more importantly, so that you don't overpay for your flips and wholesales in 2003. My agent's name is Matt also, by the way. So don't let that confuse you. Hey, Matt. So I'm looking at your counteroffer and I want to give you an explanation as to why I am where I am. And also sharing this with Jeremy. Jeremy is my real estate agent in Dallas. And I'm working with someone in Houston and I'm working with someone in St. Louis. And I'm working with you here in New Mexico. All right. So thank you for the counteroffer.

And counteroffer purchase price is $195. And the reason I'm sharing this with everybody, So I just have to record it once. I want to, the purpose of this is for one, to show you my approach to this in my philosophy and let you know that I'm not just pulling low ball numbers out of my ass. And this aren't, these aren't random arbitrary numbers. There's definitely a method to where I'm going through here. And second thing is to let you know that I, too, was a real estate agent for four or five years.

And I had an investor clients. And I am empathetic to what it is like as a real estate agent to work with a lot of real estate investors. Most of them are fake investors and then never buy anything. But the real ones, they were a really good business for me, but I had to write a lot of offer to do those deals. And it turned into a very big part of my business and it actually ended up resulting in me becoming real estate investor also because I saw the difference between commissions and profit and equity. And I wanted more profit and equity. So that's why I made this transfer. But I used to be a real estate agent, so I understand what it's like to be on your side. And I want to share this

with you this explanation so that you know where I'm coming from and you get to make a decision clearly whether you want to proceed and continue working together. There's going to be a lot of knows in between the yeses, but it will represent a significant number of deals for you in a year's period. You know, if you're doing 10 a year, now you're going to be doing 20 a year because you're working with me. If you're doing 30 a year, then it's going to be 10 more and you'll be have a 30% increase on your production.

So I shared a few things with my agent here intentionally. First thing is, I want to do. I want him to know that I'm not just pulling numbers out of my ass and making lowball offers arbitrarily. And I'm about to walk him through the actual process of how I come up with my numbers, but it's important to let an agent that you want to create a long-term relationship with, that you know what you're doing. Let them know that you know what you're doing, that you're not just, you know, throwing spaghetti against the wall to see what sticks.

Second, I pointed out that I, too, was an agent once, and I know what it's like to work with people that call themselves real estate investors. In the event, he has worked with real estate investors, he probably knows already what a waste of time it can be. And so I want him to know that that's not me. Third, I want him to know that we're going to get a lot of knows in between the S's and that it's going to be a lot of paperwork. I want him to know what to expect because I don't want to fully invest in this relationship to only have him quit in a few weeks, thereby me having to start over and create a new agent relationship. And the fourth thing is, I want him to know the potential of a good working relationship like this,

because in between the nose, there will be a significant number of yeses that will result in a significant number of commissions for him. See, at the end of the day, agents are people too. And like all people, they want to be compensated for their time. And after years of being an agent myself, and after working with them even longer, that's what they care about most.

Commissions, frequent commissions, consistent commissions, long-term commissions, double commissions, big commissions, easy commissions. If you can keep that at front of mind for the agent, what's in it for them, and then deliver, that's going to be a great working relationship for you. Now, I'm about to walk him through my number crunching process, how I know whether I have found a deal or not. And very much how I buy property directly from a seller, how I normally do it,

here too, I'm going to make the market the bad guy because the market controls the value of real estate. It's not the agent, not the seller, not the bank, not the appraiser, not the lender, not Zillow, not even me. The market controls the value, meaning what properties are selling for and what properties are not selling for. That's what matters. Here, watch. I started working with my guy in St. Louis probably about three months ago or three months before we met.

And we've probably written 30, 35 offers and we closed four deals. So that's kind of what the numbers would look like typically. Might be a little bit more. It might be a little bit less. Who knows? All right. So anyway, let's look at this deal. $195 is the counteroffer.

And if you actually look what it's listed at for $2.30, hey, that seems like a good deal. right. Hey, you got $35,000 off and that seems like a really good deal per what's going on. But let's look at what the market is doing because that's all the information I have to go by is the market. I'm here in Vegas. I've never been to your market to New Mexico. I've never been to Dallas or looking for real estate specifically. I have spent a little time at St. Louis. I haven't been to Houston either. But I have a very specific way of doing this and I'm not trying to make the maximum profit on every single deal, not by any means. I just, and even if I just break even and then I'm not terribly upset.

I just want to make sure that I don't lose. That's what I'm really protecting myself against. So if I go ahead and I look at this property here, and I'm just going to look, all I can do is look at the data that the market gives me. At the end of the day, the market determines the value, right? So I have all these solds, but we know in the last few months, last four, five, six months, their interest rates have really had an impact on affordability, thereby impacting what people can spend and what properties are selling for.

So I know whatever the houses are selling for this month is probably going to be a little less than it was last month, a little bit less than the month before and a little bit less than the month before. The market, I don't think it's crashing, but it's certainly slowing down and it is trending downward, even though I think it's going slowly and I don't think it's actually going to crash, but I think we might be in this trend for a little bit longer. That's just what my crystal ball says. So first thing I do is I take these solds. I want to know what the market actually validated the houses for, right? what they actually went all the way through the escrow process and closed. And the most recent one I have sold here is in November 1st. And here we are halfway through December, right?

And that's sold for 195. And that's exactly what the counteroffer is, right? 195. So to me, I'm paying market value. Right. I mean, that's my general consensus in the month before that or just a couple days before that. So for one one sold for 164. Then we have to go back to the beginning of October to get to two,

So there's a big jump here between those two months. And that's because there's a big jump in the rates. And the further back we go, the higher the prices get, naturally, as you would expect, it's perfectly in correlation with the interest rates. Right. So that'd be my first thing. Like, okay, $195, 164 are the two most recent. And then we got to go back, you know, another 60 days.

And now I know if it's sold for 250, 60 days ago, it entered escrow 90 days ago. So I'm really not looking at those numbers as a markations of value. So the next thing I got to do, which I haven't done. a long time because the market has been trending upward, but now I've got to look at the active because I'm going to take over this property. I'm going to fix it up. That's going to take me a couple months. And then I'm going to put it on the market retail right back with you.

So you're going to get the commission on that as well. Right. So I have to come over here to see what houses are actually selling for. What's my competition going to be when I go back on the market? So I go to the actives. And I can see this one most recently. They're going for 319. And that's only been in the market a week.

Who knows if it's worth that or not. not. Initially, I'm just looking at this raw data. I'm not even looking at picture or anything. That one sold at 274, 270, 279. Excuse me, this is what they're being, they're listed for. So they're not selling for that. Right. And 299, this has been on, so we know that's not worth 300 grand, because this has been on the market 84 days. And then this one, 249, that's been on the market for who knows how long. But here's what I'm looking at right now is I'm not looking at all of these comparables and just putting them all together. I'm looking for the fix and flips.

I'm looking for what those sold for. What's the true after repair value? Right? So these here, would you see with these bold numbers? These are fix and flippers. They're fix and flip. They're trying to sell it for 319,

trying to sell it for $2.99. So that would essentially be my two points of competition. So when I come back on the market, I want to make sure I'm priced lower than these two, even if it's by a dollar. If I can be priced by a dollar lower than them and still hit my margin, then I'm okay with that. But I know it's not worth those two,

because this one been on the market for 90 days of fix and flips. Look, see how pretty it is. Actually, I haven't even looked at it. But let's go see. There's the before pictures. Then here are the after pictures. All right, it looks like they might have not completed there all the way. We're seeing that a lot, a lot of half done fix and flips right now.

See you later. All right. So there's that. And let's look at what this one is because this would be my competition. It's brand new on the market. And here we go. And then here's what this one looks like. Okay.

So now you can see this one's. really nice. So this will be my competition. This is like something that my house will look like once I'm done doing the work. So I want to know what these sold for. I'm not worried about the next door neighbor who had been in their house for 20 years and just kind of cleaned up before they tried to say it's it's out. All right. So we know it's not worth 319 and 299 because those are the fix and flips in the market that aren't selling. And then here's the non-fix and flips price 25, 20, 30 grand less. And those aren't selling either. But let's go back and look at the fix and flips that did sell So this one sold for 300.

This one sold for 355. Now sold for 310. I think that's it. So out of the last year, those are the only fix and flips that sold. And you can tell that these were fix and flips. Let's see what it looks like inside. See it very nice.

So this would be my minimum standards to try and hit that value. And you can see there. So what I'm going to do is I'm just going to take the after repair value of the fix and flips. And these are essentially the highest cups. So I'm starting it the most. most generous number. So if I take 300 plus 355 plus 310, so that gives me an average of 321, 321.

Now, again, that was back in June, June, and, okay, so all those picks and flips sold in June. So we know the market is trending downward. So two or three months from now, what is this value going to be? Well, here's one for 270 way back in April. I'll just leave it out. It doesn't matter. So all I'm doing is taking 10% off of that. I'm anticipating it'll sell for 10% lower.

So I just multiply it by 90%. So now my value is 289. And that actually makes a lot of sense right now, doesn't it? Well, if we go back to the actives, not selling 319, not 299. So likely a house fixed up to those standards might sell in right now at 290. So it'd probably be the nicest house on the market. But that's where I'm going to start. Now the next part is, so I just walk.

him through the process of how I came up with the actual value of this property. We looked at what has sold and what is not selling. And then I let him know how I wanted to be positioned from a price standpoint once I've completed my rehab and then we go back to market. Also what's happening here is I'm indirectly educating my agent. I'm almost 100% certain that he's never been shown this type of analysis from anyone in his office. And by him now seeing it, he will indirectly share this information with sellers and listing agents of the properties we're making offers on. I mean, even if it's just a little bit, he's going to start making the market the bad guy too. Like Mrs. Seller or Mr. Agent, here are the after repair sold and here are the after repair

actives. This is what's not selling. And they're all being affected by the interest rates and the affordability index. These are all the things that are inarguable and will have an impact on us getting our offers accepted. So now that I have my ARV starting point, I'm going to discount my offer based on what other fix and flippers in the area are paying for their pre-flip properties. And this is really important, especially for virtual investing and flipping. Now that the market is cooling off quite a bit, we're going to be returning to the old adage of real estate. It's all about location, location, location. You see, that traditional wholesale formula of ARV times 70% minus repairs minus profit,

that doesn't work the same in every market. It can be a good starting point, but each market has its nuances that affect that formula. For instance, That formula most of the time is going to have you land somewhere between 50 to 60% of the ARV. And if that's what you're offering, say, in St. Louis, you're still going to be too high. You're going to be paying too much because most flippers are paying 40 to 50% of ARV. And then here in Vegas, you'll be too low, and you're going to be losing out to other investor offers because they're paying 65% to 75%. Now, I don't know what that number in New Mexico is, but Privy will tell me. Here, watch how I use it to find what flippers in this market are paying for.

their flips today. I want to know what these people purchase their property for in order to be confident they would make a profit because I have to leverage the existing fix and flippers in the market because I don't live there. I don't know the market. So if I look at this, this house, we can see he paid 115 for it or she and sold her for 300. They paid 175, 355. They paid 161 and sold for 310. But those numbers are going to adjust based on what they sold it for. So I'm looking for it is the percentage off-of-market value that they purchased it. So this one, they purchased this at 38% of the ARV, which is a huge discount. And this is normally what I do when I purchase properties off-market direct-to-seller.

Just how you guys get listing. You go for a listing presentation, I go to make an offer. And we can see they purchased on the public records back in at the end of 2020. And then they sold it for 300,000 on 623. But 38%. That's the number I'm looking at. So I don't think I have to buy it that cheap to make the money. But at least I know what they bought it at.

And this one, they purchased it for what percentage off? So they're 49% off ARV. Okay? They're 49%. And they purchased theirs at 52%. So I think those are more of the real numbers. 49%, 52%. So now, what I take is my 289,

the after repair value minus 10%. Now it got to multiply it by 50%, because that's what they purchased theirs at. So now I'm at 144. So now Matt, you can see where I came up with that actual number was 144. I just didn't pull out of the air and said I wanted a deep discount. And so I think I could probably, just my gut would say, once I inspected the property,

then I probably pull this off at 60%. So 289 times point six, as long as I didn't find anything like totally crazy inside the house, that'd be a 173. So Matt, based on this counter offer of 195, so they came up 50 grand, came way down, but they really just came down to what the last house just sold for. And so I know I'm not to put a lot more money into that to reach that after repair value. So really, 173 would be my max that I would go. And that would be contingent on a pretty decent inspection. So you noticed, I pushed my numbers up a bit, right? Because I still think that I'm going to need to buy this property at 50% to make some money here.

But I can't make any money unless I'm in contract. So I'm willing to nudge up my offer a bit to get into contract. And then after I inspect the property, I'll know what to do next. I mean, if the property just needs cosmetic fixes, then cool. I can probably make some money here at 60%. I got a good deal and I can move forward. If I find something substantial, though, then again, I can make the market the bad guy and ask for a price reduction.

I can make the inspector the bad guy, whatever it is. It'd be like, Mr. Seller, you know, we entered this contract under a certain understanding of the condition of the property. And after the inspection, we now have a new understanding. You know, the roof needs replacing ASAP, or the electrical is outdated and totally shot, or did you know you had mold in 60% of the house?

How much of this newly found liability, Mr. Seller, are you willing to share with me? And you just put the ball in the seller's court to respond, and either they'll reduce the price enough for you to move forward, or they won't. and then you'll have a decision to make from there. And here's how I wrapped up that recording. So I just want to share that process with you.

And rather than going through this whole thing twice, I wanted to do that right now or just for both of you because this is what I'm thinking about all of my markets. Jeremy, I will go ahead and reply it to your counter here specifically. But I just want to kill two birds with one stone and give you guys the opportunity to decide whether you want to keep working together in this fashion or if not. Because if you don't want to, I totally respect that. And I don't want you to be able to be able to.

like, oh, here's that damn mat with his low ball offers again. No, it's all math. It's just math. And when I get it, the property accepted under contract, now we go and fine, tune the math. And sometimes we came up with a smoking deal. And sometimes we find out, like, oops, this is going to eat a little more repair than we fucked. And then we can make adjustments then and do that way. But if we work together, you're going to get, you'll get the commission certainly on this one. And then when I fix it all up, you'll get the commission on I resell it.

Okay. So that's how it works. So as you saw, I set their expectations. of how future negotiations might go. And then I reminded them of all the money that they're going to make working with me. And here's what I got for my agent about an hour after I sent this video to him.

I love it. That's awesome. I'm game for sure. I just emailed this to you as well, but got goosebumps on that video. I love it. This will be a good relationship and we're going to make a bunch of money together in 2023. And that wraps up the epic show.

If you found this episode valuable, who else do you know that might too? There's a really good chance you know someone else who would. And when their name comes to mind, please share it with them. And ask them to click the subscribe button when they get here and I'll take great care of them. God loves you and so do I. Health, peace, blessings and success to you. I'm Matt Terrio.

Living the dream. Yeah, yeah, we got the cash flow. You didn't know home for us. We got the cash flow. This podcast is a part of the C-Suite Radio Network. For more top business podcasts, visit c-sweetradio.com. Thank you.