The Science of Flipping - The Biggest Challenge For Real Estate Investors

Episode Date: August 30, 2022

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You need to take a step back and look at what is happening in the micro, not the macro. For most people, if you're flipping a couple homes, you're looking at all the homes, you're thinking big numbers, I want you to actually dive deeper into the properties, specific properties, look at the big issue, and then break it down to the principles first.

What are the main reasons you're gonna lose money or this is a challenge? And then have a solution for each one of those main reasons. What is up, everybody? Welcome back to the Science of Flipping podcast. I am your host, Justin Colby. And on this episode, we're going to be talking about the hurdles and challenges right now that is happening to real estate investors in this ever-changing market. Very specifically, those that are fixing and flipping homes, the challenges that they're up against and how to overcome some of these

with great creative ideas. All right, as always, our main sponsor, MinutePages, is bringing you this episode. MinutePages is the one-stop shop for credibility, influence, and authority online for us real estate investors. It's an incredible website that SEOs and is very specific to make sure that you have the credibility, influence, and authority when talking to homeowners, realtors, contractors, and buyers. If you don't have a MinutePages website, you need to get it now. Go to minutepages.com, get your website so you have a presence online.

All right, so I am a part of several masterminds, very high-level masterminds across the nation, and so I am constantly surrounding myself with the highest players in the game. The reason being is this exact moment in time. The real estate market is shifting real time. There are real challenges, and I always want to be ahead of the curve. I always want to be looking around the corner.

Well, I just left the Boardroom Mastermind, which I would argue is the very best mastermind for experienced real estate investors. And we had some members in the mastermind just going through the challenges of what's happening in the market. Whether they were scraping and building and developing spec homes, whether they were buying and remodeling, whether they're buying rentals. There's a challenge based around the price point. So I want to get straight to the point of what we need to be doing right now. We need to be thinking more creative. It's the imagination. You know, Albert Einstein has a bunch of different quotes about the imagination, but ultimately

we are only limited by the scope of our imagination. So that's what I posed to some of these members that were just having challenges in the market as a moment right now. You know, some of them were flipping homes and where they thought they would exit that home is no longer the case. Now, they were buying on what we call speculation. As someone who has done that before in my 15-year career, I highly encourage against it. However, sometimes you have to go through those challenges and experiences for you to know it yourself. So here's what I would encourage you guys all to do if you are flipping homes. If you're

having a hard time exiting homes, I encourage you to think more creative. So specifically for the flips, if you're in the middle of a remodel and you feel like you're not going to get the number that you intended on by buying it with speculation, I would encourage you to list the property mid-rehab. That would be point number one. Second point is you need to really run the numbers. You need to really understand if I have this home, how much am I standing to lose based around the projection of holding costs, debt servicing, commissions at sale, etc. And depending upon where your pain tolerance is, it may just be worth taking the loss and moving on.

Also, you have the opportunity to potentially sell it in a very creative way, meaning you can sell it on seller financing. Well, most people are buying and rehabbing homes with a hard money loan first, and then they're selling it off. So you would have to refinance out of your hard money loan into a much more stable loan. From there, you could sell the property off seller financing, make sure it makes sense for the buyer. And the key here is most buyers, the biggest challenge is most buyers can't go get a loan because they can't afford the interest payments. Well, you might be a golden savior and you might even be able to get your top dollar by being more creative on how you sell the property with creative financing. Ultimately, I want you to think principles first, right? This is a concept Aristotle first came up with, but many very successful thinkers and

business owners really adopt it, specifically Elon Musk, which is break the big problem down to literally the principles first. So all the way down to what is the main reason it's not going to sell at 500,000 and I'm going to lose money is because I might have bought too high. Okay, so why did I buy too high? What was I doing? And then how do I take all the basic fundamentals, the principles of why you're going to lose money on this deal and start to get creative with the concepts that you're doing? Well, I bought too high, but really why that matters is because I have too big of a loan. So my interest payments, my mortgage payments are too high, which is ultimately why I'm going to end up losing money because I'm going to have to carry this for six

months. Well, if that's the principal foundation of why you're going to long-term lose money, do a refinance and do a longer-term loan with a better interest rate. Then you might be able to resell, sell or finance, get a higher number, etc. But you need to take a step back and look at what is happening in the micro, not the macro. For most people, if you're flipping a couple homes, you're looking at all the homes, you're thinking big numbers. I want you to actually dive deeper into the properties, specific properties, look at the big issue, and then break it down to the principles first. What are the main reasons you're going to lose money or this is a challenge? And then have a solution for each one of those main reasons. The best way I know how to do that is to ask why five times.

Why, why, why, why, why? And you will have no assumptions need to be made because you'll have answers to those whys. If you dig that down, you'll have a solution. If you're liking this, I want you to smash the like button. Make sure you are subscribed to my YouTube video, youtube.com forward slash Justin Colby. And if you are liking this and you are listening to this on iTunes, then you got to give me a five-star review. I greatly appreciate

it. So the moral of the story is things are changing and adapting. If you're caught in the weeds, I want you to pause, take a step back, look at the micro, not the macro, and do a principle first analysis. Look at the big problem and then break it all the way down to the fundamental principles of why it became a big problem. And then you can start to have a solution. Hopefully this helped. It is happening.

The market is shifting. You need to be aware of it. You need to make moves, adapt, be fluid, and you will be able to sustain. And not only sustain, you'll make a whole lot of money during these changes, just as I am. Hopefully you found this well.

Smash the like button. Make sure you subscribe. And make sure you give me a five-star review on iTunes. See you guys on the next podcast. Peace.