The Science of Flipping - Navigating a Shifting Market| Buyers Are Still Buying

Episode Date: October 25, 2022

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Yo, yo, what is up, everybody? What is up? Welcome back to the Science Flipping Podcast. I am your host, Justin Colby. And as always, our main number one sponsor, MinutePages.com is our sponsor for professional real estate investor websites. If you are in real estate, aspiring to be in real estate, and you want credibility, influence, and authority right away, make sure you go to MinutePages.com for your $97 a month website. It is for us real estate investors by us real estate investors. This episode is going to talk on a couple points, but one is the upcoming Fed has another meeting coming up and what that really means. And then two, some of my philosophies on how we need to start to navigate as real estate investors. Many of you who are active right now have felt some level of change, fluidness in the market.

Obviously, we went from almost, well, a record low listings to more substantial listings on the market. In large part, this is gonna be because the interest rates are hiking, and that's why I bring up this pending November meeting again. They also have one on the books for December. Now, whether the meetings for sure hold on those dates, that remains to be seen, which is fine. However, I can tell you

from all the research that I've been doing, it looks like it is almost guaranteed that they are going to raise rates again by 0.75 basis points. So for all of you that have been paying attention to what's going on, on my social media, I've been questioning all this recession talk because I am seeing people in high-end restaurants. I am seeing people in the malls. I am seeing people wearing very expensive bags, clothing, watches, etc. And it feels like nothing really has changed regarding the consumer. But in real estate, we do feel some change. I myself, in my business, have been feeling some change. Now, lucky for me, I have gone through these things before.

I have gone through and made it through the great recession of 08, and so I have prepared myself. I have de-risked my business. I do not have a lot of flips going on. And I'm really focusing on finding the right buyers, which is really, really what I want to jump into on this episode. So here's the reality is, yes, interest rates are going on, but there are trillions of dollars sitting on the sidelines right now that are ready to plug and play as they see this dip happening. Now, most of that money will be to buy and hold. They're not reliant on interest rates per se. So as they see a dip, they are going to be more opportunistic in buying rental properties. Now,

the key here is how do you align yourself with those buyers? It's not just one company that has trillions. There are a lot of buyers on the sidelines. Some have hundreds of thousands. Some have millions, tens of millions, hundreds of millions to play with. The key and one of the biggest pivots I've been doing is making sure I'm in alignment with my buyers. Even as recently as last week, we got a deal in Cleveland, Ohio.

And what I immediately was talking to my team about in that market is let's first reach out to the buyers that we have worked with in that market and just see where they're at. What are they doing? What's changing? How are they buying? Because I like the buy number we have in recent past, I do believe, and it still may sell. However, I'm aware that people are buying

differently. They're buying a little bit deeper. Maybe they're not buying as much. I want to know what their buying criteria is. I've done a lot of deals in the state of Ohio as a whole, Akron, Cleveland, Cincinnati, you name it. And so I'm really trying to hone in on what is changing in those markets. Cleveland is pretty special because there's not a lot of appreciation that happens in that market. However, rental rates stay really consistent and are really good. So while we contracted the property at a really good buy price relative to the rents, we want to make sure the buyers see the same thing. Well, again, going back to point number one, as interest rates increase, even myself as a buy and hold buyer, it makes it harder to pencil the 1% rent ratio as well as make sure I'm buying at 75 or at least all in at 75% of ARV

so I can refi out. That model is getting pinched a little bit right now, meaning I need to buy deeper. And so we contracted it at a pretty deep discount, like 30% of what they wanted, right? So much deeper than what the seller wanted, but that's irrelevant because I need to know what my buyers want. And that is the big pivot I wanna share with you guys today. What are your buyers doing? How are you changing your business

to make sure you're in alignment and congruent with your buyers above the deal? For years and years and years, it's always about find deals, find deals, find deals. I get it because the economy has been crazy. There's been no properties on the MLS and I don't mean literally no, but incredibly low amount. You know, sellers knew that it was a seller's market.

They wanted incredibly high prices. So it's been overwhelmingly difficult to find the deal. And even that was still not that difficult. But as we change into a buyer's market, we got to reverse engineer how we're thinking about the business. We need to go reverse the business. As my good friend and brother Kent Clother has termed it, reverse wholesaling, making sure you're focusing on the buyers first to go get the deals. Now, what I will tell you is I'm not telling you to stop and go get the deals.

I'm telling you to put more emphasis and focus on what your buyers are actually doing. Now, if you're a student of mine, you know I'm more than happy to help you sell the deals because I have 4.4 million buyers on my buyers list nationwide that are cash, real investors that are proven. So as students, I have 4.4 million buyers on my buyers list nationwide that are cash, real investors that are proven. So as students, I do that.

I help them sell their deals so that they can leverage my team in my buyers list. If you're not a student and interested in that, then reach out to me. Go to my social media, TheJustinColby, or even watch this on YouTube, JustinColby.tv, and make sure you're subscribing to YouTube and throw a comment right this on YouTube, justincolby.tv, and make sure you're subscribing to YouTube and throw a comment right there on YouTube. If you're listening to this on iTunes or Spotify or any of the listening platforms, reach out to me on Instagram.

It's probably easiest, thejustincolby. Let me know you'd be interested in coaching. This is the time for coaching, by the way. This episode is not selling coaching, but I can tell you right now, many people who are in the time for coaching, by the way. This episode is not selling coaching, but I can tell you right now, many people who are in the game right now, they're looking for mentorship and coaching because they know the market is shifting and they may have only been in the business two, three, four, five years.

Well, what's happened in the real estate economy for two, three, four, five years? Just awesomeness. That's it. Just the best, craziest, wildest, most profitable real estate market we have ever seen. So now things are changing and the business is getting pinched a little bit. So there are a lot of people out there looking for a mentorship. So if you are, I'm happy to be that for you. Go to the Justin Colby, shoot me a DM. I'll personally reply to you. We'll take it from there. But the real point I really

want to make is I believe the Fed is going to increase interest rates again, I think twice before the year is over. They have a meeting in November. They have a meeting in December. So whether it's 0.75% or not both times, I believe both meetings will have an outcome of increased interest rates. That means buyers are going to be pivoting. The market is going to be shifting and we need to adjust for that. As an investor, that affects me as a buy and hold investor because that means my interest rate is going to be higher, which means I effectively have to buy much, much deeper to be able to afford those or just buying cash, right? To be able to afford the rent rate versus my mortgage. Um, as a wholesaler,

it means I need to be in tune with, uh, the buyer, where are they buying? How are they pivoting? What are they doing? What's changing for them? So that's the big takeaway I would tell you right now is real time. The market shifting. We need to be shifting with it. And one of the biggest pieces of advice I can give you is make sure you're in tuned with how people are buying, how entities are buying, and align yourself with those entities to make sure you're congruent

and you're able to get them the deals that they're looking for. With that said, guys, make sure you go over to justincolby.tv. Subscribe right there on my YouTube channel as well as give us a five-star review on iTunes as I'm trying to knock this out for you each and every day.

Five episodes a week on the science of flipping. I will see you guys on the next episode. Peace. Outro Music