The Science of Flipping - Real Estate Market Shift Update | What You Need to Know

Episode Date: November 17, 2022

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Yo, yo, welcome back to the Science of Flipping podcast. I am your host. And if you're not yet watching this on YouTube, make sure to go to justincolby.tv and subscribe to these podcast episodes. With that being said, this episode is brought to you by our main number one sponsor,

which is minutepages.com. If you are an investor and you do not have a website, or if you want a website that can get you 10X the amount of leads, make sure to go to minutepages.com and get your website right now so you can be professional, have credibility, gain influence and authority in your marketplace, and get 10X the amount of leads as any other website out there. Now, the market is shifting real time again. In November, we have another price hike. And why is this another topic or episode about this? That is the question.

Well, because it's changing how we are making offers as investors. I myself am actually doing a lot of training for my team and for my students right now on the pivots we're making in our business and what's happening in the market. So this episode is some of the things that I'm finding to be successful so that you can just go replicate the pivots and the changes I'm making real time because you must be adapting. So first of all, I would encourage all of you, if you don't have it already, make sure you get Privy. So privytsof.com is the website. Make sure you have it because it is a relatively free,

it's $97 a month resource that is helping us pivot real time in the marketplace without having to learn by spending a lot of money in marketing. The thing I've seen over the last 15 years in this business and the last eight years educating others is they end up spending a lot of money to keep up with the times,

the changing market, things that are happening, and they're trying to keep up with adapting, which is great, but they're cutting bigger checks to do so. So in this market, what I've actually relied heavily on is Privy. Again, privytsof.com. It'll be somewhere on this video.

Again, if you're not watching this, go to JustinColby.tv and watch this episode. So what we're doing is talking to realtors. Now, here's the caveat. Up until this point, most realtors really didn't feel like the market was moving. They've all gotten fat and happy over the last two, three, four years, and they didn't really see any data directly affecting their marketplace. Well, it's starting to catch up. And it's not just simple comp data, but it's the fact that the offers that are coming in are a lot lower than the list price. Now, that immediately will tell agents, oh, we are off on price. I just quite literally right before I shot this episode was on the phone with an incredible agent out in Cleveland, Ohio. She and I were going back

and forth about, you know, the offer she was getting were 50% of the list price. Now I'm assuming those are some rookie wholesalers that really don't know any better and they're taking some ARV minus rehab, et cetera. This home didn't really need much work. Quite literally, it had a remodel at some point in the recent history. Could be a great rental. It's currently renting around $1,200 and probably could get up to $1,500 if you went section eight. So her and I just started discussing and I said, what do you think is changing in this market? By me asking that question, it's actually allowing her to have the opinion. That opinion was in alignment with how I would have approached the subject, which is people

can't afford what they used to be able to afford based around interest rates. So now that we have this symbiotic relationship, I can come in at a number. And truthfully, I gave her a number of 90 grand on $125,000 listing. I don't know yet if it'll be accepted, but she was very grateful that it wasn't some low ball investor offer. It might sound low to some of you. I mean, $35,000 off of a $125,000 list price is a decent amount, right? It's like a 30% haircut essentially, but it really is closer to the right number. If I were to wholesale it, I think I could wholesale it around that 90, 95. Maybe if I were to keep it as a rental, it's a good rental because I'm buying it for 90 and it already rents

for roughly 1200. Again, doesn't need a big repair. Doesn't need a full remodel. Doesn't even need a repair type remodel. When I define the difference between a repair type remodel, a rehab, and then a redo, what I'm talking about is price per square foot. So a repair would be $20 a square foot, a rehab would be $40 a square foot, and a redo would be $60. So this one, I don't even think it would be $20 a square foot. I quite literally think it would be twenty dollars square foot i quite literally think it would be five dollars a square foot just little paint little you know she was telling me

there's a little chimney issue just stuff right so you know i think it's 1300 square foot home so i'm saying 10 grand or less is what i would need to be into this for that means i'm into it for 100 grand if the offer gets accepted as someone who would buy it as a rental it's a nice little cash flowing property you know depending upon where the loan interest rates end up. But I also believe that I could probably sell it to someone who also probably see the same thing I am seeing. So I have the buy it for myself as a, as a landlord, uh, you know, buy and hold, or I potentially can wholesale it to find someone who would want to do that. Now, why I bring this up and why this episode is maybe different than the previous episodes is because the agents are actually

starting to feel it. This is actually starting to hit home for them and they're having to have some difficult conversations with the homeowner who owns the home. And those are hard conversations for realtors, right? They're never easy telling them, you know, we missed this price point, but it's now becoming a reality and that's their job. So what I like about this and what makes this an important episode is there is what I call blood in the streets, blood in the water, right? They know that the market has shifted and they're not going to be getting top dollar, which makes our offers become more appealing to some extent. You still need to find motivated sellers. So

this discussion with this realtor specifically, she was letting me know this seller's motivated because he's already in contract in another home in another state and is contingent upon him selling this home. So I already know there's motivation because literally this home needs to sell for him to buy his new home, which is probably something he really wants to do. So that being said, even if 90 isn't my right number, there's enough motivation that I can probably find the right number that will work for him and for me. This is not the time to hide. This is not necessarily the time to spend extra money in new marketing channels trying to adapt.

Be consistent. I would urge all of you, if you don't already have it, get Privy. Go to privytsof.com. It is a great resource, especially if you're looking to do this stuff virtually. It can be a great resource for you. With all that said, this is the time to really hunker down and get focused on making offers. It is not about just doing activities. It's about doing revenue-generating activities activities. Privy allows that Privy allows me to make offers. It's a great tool for me right now to train some of my team about the changes that are going on in the market real time. But it also is a great tool for you and me to actually get deals right just contracted another deal yesterday up in Cleveland that agent different agent. He's phenomenal. He's like, Hey Hey man, we need to start, you know, helping these homeowners understand. Let me know where

your offer is. I'm going to write it up for you. Um, and it will start the negotiation at very least. That is a much different conversation that I've been having with most realtors over the last, you know, three months. Again, I say that to say things are changing. Things are moving in a positive direction for us because the agents and then the homeowners are becoming a lot more realistic with what is happening that works for us. So keep doing what you're already doing. Again, if you haven't yet go over to justincolby.tv, make sure you subscribe right there at the YouTube channel and make sure to give me some comments and five-star reviews on iTunes. As always, I appreciate you guys and I'll see you guys on the next episode.