Foreclosure Deals Coach Podcast

Making Crazy Profit Spreads by Investing in Pre-Foreclosures

May 18, 2023 Chris Lawler Season 14 Episode 31
Foreclosure Deals Coach Podcast
Making Crazy Profit Spreads by Investing in Pre-Foreclosures
Show Notes Transcript

On today's episode of "The Foreclosure Deals Coach" podcast, hosted by the knowledgeable Donny Coram, dive into the lucrative world of pre-foreclosure investing and discover the secrets to making crazy profit spreads. Join Donny as he shares his expert insights and strategies that can help you capitalize on the pre-foreclosure market, unlocking opportunities for substantial financial gains. Whether you're a seasoned investor or just starting out, this podcast is your go-to resource for learning how to maximize your profits and navigate the pre-foreclosure landscape like a pro. Tune in now and unlock the potential for extraordinary financial success in the world of real estate investing.

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What's up, deal Hunters. It's Donny Corum, your Foreclosure Deals Coach. And in this episode we're gonna talk about how to predict the future of the foreclosure market. Stay tuned. Welcome to the Foreclosure Deals Coach Podcast. The real estate market is shifting. The time is now. The Foreclosure Deals Coach Podcast is your home for the mindset, tactics and tools needed to break through your limiting beliefs and find freedom by investing in foreclosure deals. Don't buy a house, buy a deal. You need to get into this right now. And now your host, the Foreclosure Deals coach, Donnie Corrum. Oh, hello. Hello, and welcome back to the Foreclosure Deals Coach Podcast. I am your host and foreclosure deals coach Donnie Corrum, and in this episode, We're gonna talk about predicting the future of the foreclosure market. As always, we'd like to start every show with our mindset piece of the day. Let's hop on over and check out the mindset. This comes from famous, famous, excuse me, stock trader, Jesse Livermore, who said to anticipate the market is to gamble. But to be patient and react. Only when the market gives signals is to speculate. So what's the difference? A lot of people look at real estate investing as a gamble. They're thinking that you can't actually predict the future value of an asset, but this is simply not the case. By doing proper deal analysis based on what is selling in the market. At the moment, you are basically speculating, not gambling. Here's the difference. When you're gambling, you're working off of what the rest of the market is saying, which very often is a sky is falling mentality. Have you seen that in recent years? Have we seen a lot of people comparing the market to where it was just about six to 12 months ago and creating this attitude that everything is ending? Well, it's not the case. We know that deals are happening right now in this market. So you have to use the signals from the market to determine what is going to happen next. So how do we do that? How do we determine what signals the market is offering to us right now? Well, no one has a clear view of the future. So when you react, To what's happening based on news. And you know, a lot of times real estate agents are offering bad advice in that space. Other investors who may have bought at the wrong time in the marketplace, and now we're saying it's all done. When we buy a house to flip, we're taking the purchase price of that property, we're adding on. What we believe to be the rehab budget, which comes from doing construction estimation. And then we're taking the current comparable sales, which are properties that have sold in the last six to 12 months at most. If we can find comps that's sold three to six months, that data's even better because although the market is shifting all of the time, it's unlikely to shift a whole bunch in a three to. Three to six month period. Okay? Because it is such a large purchase. Now, this is not true. The stock market, you know, if you have any trading experience, as our quote comes from today, that the market can shift really quickly in the stock market. One day you're on top. The next day you're seeing these massive swings. We don't see that as much in real estate. You've got a little bit of time. So if you're using current market data, To speculate on the future value of the property, you're in pretty good shape. Why is it speculation then? Well, because nobody ultimately knows what the property is going to sell for, but if you've done proper research on what the market is doing at the time, you've got a great idea on what the property should sell for. So just doing a little bit of, so the Fed Reserve recently has talked about how they're going to. Continue to raise rates. We've seen that over and over again that they're raising rates. Well, what changed recently is now there is talk, and I'm gonna this article real quick so you can see it. Stop with this increase in the interest rates. They understand now that they're causing some problems in the market with all these rate increases, and they're now working to settle down rates. This is a market signal, guys. What they're saying now is we've seen what happens if we continue to increase rates, and what happened was there was a slowdown in the real estate market, which was necessary. We definitely saw a little bit too much appreciation. In the short term based on the low interest rates, but a lot of people would argue that increasing rates 10 times in a row, it was going to cause other problems. Well, the Fed doesn't speculate on anything. Their entire life, in my opinion, anyway, is gambling. They set things in motion. With the hope desire that it's gonna work out in the favor of the company country's economic system. In this case, it kinda worked. It slowed down inflation in the housing market, but it caused a bunch of other problems. So Chairman Powell is now talking about that. Maybe we need to stop this streak of rate hikes. You can see in this article here, and you can also check out this article for yourself in this show notes below. But now that we know that Ray kites are looking to cease, maybe not stop entirely. But looking to cease for a while, we can now accurately predict that the market is now slated to hopefully start to show an increase. What we saw when rates went up is pretty logical, right? If a bunch of people now had higher interest rates, if your buying power went from a$500,000 home to a$400,000 home for the same purchase price due to interest rates, we saw a lot of pressure. On the market in the lower stages. This was actually super beneficial. We were buying properties still below market cuz wholesale reacted as well. And now we were selling those properties at a much higher price than we predicted because all the pressure from the interest rates drove buyers from the upper price ranges to the lower price ranges. Do you see the power of that now? What do we think is going to happen next? Well, in my opinion, and obviously. My crystal ball's not working any better than yours is, but in my opinion now that the lower price homes are heading up in price, people are adapting to the fact that if you want to buy a nicer home, you are simply going to have to spend a little bit more money. And if you look at the showing traffic, this is important. My agent, who I work with brings in our weekly meeting, shows me the showing traffic from showing time, which shows us where people are looking at properties at the highest rate. So you can look at. Price ranges, neighborhoods, other identifying factors and showing time and see that a lot more showing activity has taken place in recent months. In the upper end, well, what we consider to be upper end price. Just a little bit ago, it really was pretty close to the median price. So my advice is you wanna stay in the median price whenever possible. Okay? Because median and below is where the vast majority of your buyers are. Thus the median, the middle, the. So if you go above that, you're heading into riskier territory if you go above the median price, but there's also more money to be made in the upper end price brackets. The more money you're willing to invest in your property, the more return you should get as a result. Now, this is not always the case when you looked at luxury flipping or buying an upper end property. As you increase your. Purchase price. You have to get better contractors, you gotta invest in better materials and your cost per sale. Agent commissions, closing costs, everything goes up as a result. So you really gotta be dialed in a little bit more to the upper end. This reminds me of a story of a property we did check out hashtag Springs Hell House. Now, the Springs Hell house was a property that we purchased here in the local Colorado Springs market that made the national news, and I'm gonna make sure. We post a video link to where the news came out and interviewed my wife and I about this property. It was an awesome moment, but the house made the news because it had gotten, it needed a lot of work. Uh, obviously a lot of our flips do, but in this case it was in an upper end neighborhood and that work was a little less common. There was graffiti. The previous tenants were upset about being removed or evicted from the property, so they spray painted it. They let some cats die in the laundry room. Is a pretty sad story, okay? But as a result of how bad this was, it made the national news and we were instantly interested in getting involved in that because what a great way to not only get exposure, but do an incredible deal. Okay? So we buy this deal, we fix it up, it goes back in the market. Now, when I first did my initial analysis, I predicted we'd be selling the property speculating, right, for seven 50 to seven 70. But if you remember the 2021 market, if you looked at a chart of property values in most neighborhoods, this is what it looked like. It was almost straight up the, the. People were paying overt, asking price. There's a big bidding war. Interest rates were still very low in the three to 4% range, so the buying power of the buyer was extremely strong. Bottom line is by the end of this deal, we went from the desire to sell it for seven 50, which was my original speculative value to actually selling the property for$830,000. Think about that for a moment. Okay? In this span of time, because the market pressure was so strong, we increased the purchase price, the speculative purchase price by over 80,000. So what's the point here? You want to start conservative? You want to begin with the lowest price within reason. Don't, don't be so conservative, you don't do the deal, but find a conservative value to get going. Look at the market comps and base of those market comps. Try to stay in the middle of those values. Don't air to the super expensive comps. That's what I call the idiot factor, and that's the people who are generally willing to overpay for things and every market has that. Okay, you're gonna find people who wanna pay too much for a property. You can't base your comps off of that because not everybody is gonna use that number or desire to overpay. You also don't wanna go too far to the other extreme where you're, you're not getting enough value on the property, so you're trying to find a middle value. Now, guys, I know this sounds complicated, but this gets better over time. The more analysis that you do, the better you're going to get at doing. Deal analysis. So in my coaching program, I send homework to my students where we work on, just give me the general idea of what you think this property is worth. So you get a better feel now for how to do that deal analysis. So when you're really in the game and you're working on a property that you would buy for yourself, you are far more qualified because you've done lots of deal analysis. Like anything, you're gonna get better at this the more that you do it. So you want to do it more. That's pretty logical, right? So getting back into it here, once we see this pressure from the Fed to stop, the interest rate increases, they're now saying based on this article, that they're not gonna keep increasing. And lar of that came from the bank failures that took place as a result here when the money stopped moving as a result of the higher interest rate. There are some bank failures. Well, the country as a whole. Does not want to see failures in our banking system. We did see that once, remember 2008, 2009, you had mortgage banks failing left and right. They did a movie about it called Too Big to Fail because they, they were bailed out by the federal government because the size of these lending institutions was considered to be too large, to let them just go under. They were concerned about the ripple effect it would have on the economy. Have you noticed that's exactly what's happening right now. Recently you had Silicon Valley Bank, a massive tech bank. Fail public, just a public failure, no longer gonna be able to maintain the deposits, and the federal government stepped in quickly to make sure that this didn't happen on a larger scale. Well, although they offered some assurances by bailing out this one bank, once that ripple effect is set in motion, guys, it kept going. A couple other banks have failed, and by the time you see this, We will probably be facing a couple other bank failures as well. Because it's starting. Am I saying the entire monetary system, the banking system's gonna fail? No, I'm saying they have not contained the damage just yet. Okay. But we do know that the Fed is aware that they caused a problem and that's forcing them to reconsider continuing to increase interest rates. I think they're saying like, I hope you're saying. That enough is enough. We've got to find a different way to curb inflation. So they've slowed inflation by increasing the interest rates. They've gotta work on other methods to do that, and they continue to on the economy. By increasing the interest rates, they're now realizing is not the only solution. Okay. Big picture thinking on this, if there's a ton of pressure to reduce interest rates in the near future, could we relive the years of 2019 or 2020? The answer is probably not, because that was an extreme case based on those extremely low interest rates. But I can tell you this, a lot of buyers were forced to sit on the fence because rates went up so fast that it pushed them outta the market, at least in the short term. Okay, that had the desired effect of slowing down the economy. But the big picture is you can now look not only in the entry level price bracket, which is gonna become more in vogue if rates settle down, but now it's gonna open the door a little bit to people who want to buy in the median and just above median price ranges. Guys, understanding how your market is operating is a critical component. In your success. Going back to the stock trader example, this is a guy who traded stock in the 1940s, made himself a hundred million, which is a huge sum right now, but adjusted for inflation. That's over a billion dollars. He made trading using the mindset that you don't wanna speculate and gamble. You want to go out there and speculate based on data and if you have supporting data, if you got your belief system as to what the market is going to do next. Then you're in a much better spot than people who are just a victim to the market cause it's happening to them. Okay. You as a listener to the Foreclosure Deals Coach Podcast are taking enough action that nothing's happening to you. Am I right? Deal Hunter. You know what you want. You know you wanna do some deals and you know that you can make a profit if you buy. The deal correctly if the market is also trending upwards. If you can buy and by the time you sell it, the property's gone up even one or 2% in value since you purchased it. That's huge. In the case of that deal, on the hell house we're talking, I went up like 20%. Almost of the value in a matter of months, 10 to 20% in that short period of time is absolutely ludicrous. Okay, but how does that happen? Interest rates, market conditions, speculation, everything that is what investors do in the real estate market. So to conclude, we wanna provide you with a tool. How do you go ahead and do your analysis on a consistent basis? Well, to do that, We use, I use the deal check application. I'm also an affiliate of deal checks. If you sign up, please use my affiliate link to get going on deal check. I greatly appreciate that. The link will be in the show notes below, but the idea behind deal check is it's allowing me to analyze the market, not only to define the value of the property that I'm looking at buying, but also to see which direction the market is trending in right now. So I'm gonna add this to stream here so you can take a quick look. But I want you to get a real feel for the how deal check functions. Uh, real quickly here, we can put in a new property. You know, you can search for that property by importing the property data. I'm just gonna bring up a property that comes first when it comes to mind here, right? You find the property, you search for it. It brings up the details on the property here, and from this standpoint, you can now figure out, once you save it in here, you can bring up your comps, load all the comparable sales into the system, and be able to tell what this property is worth. Here's the sales comps and a R v. It brings up its own suggestion on what the property is worth, and then from there, you select the ones that you want on your report. Now this serves two purposes. One, it allows you to do analysis very quickly. We want to avoid that analysis paralysis thing that stops so many people from actually doing deals. Cause we're looking at this and going, I can't get all this data into one place that stops you from making the decisions that you need to make quickly to be effective at this. Okay. Two, it gives you a template to provide to your hard and private money lenders. So you can say, you've already done your homework. Here are the comps that you should be using for this property. And in doing so, you're gonna look a lot stronger to the lender and you're gonna have the conference that you need to get the loan done. So this solves a lot of problems in a very short period of time. Guys, you've gotta take advantage of the. Fact that there is this kind of data available to the general public. Cause this was not always the case in many years. In the past, you had to have MLS access to get this sold data. Now you can get it from deal check, you can get it from Privy, you can get it from Prop Stream. There are multiple places with sold Data is now readily available to the public if you're kind of floating through this investing thing and don't have a data provider. This is a very cost effective solution here with Deal Check that allows you to do the analysis that you need to do. Consistently so you get better at doing deal analysis. Now, when you sign up with coaching, we're gonna do the first couple of deal analyses together, and when you're buying a deal, we'll have that confidence together. But if you're trying to get started on your own, if you really wanna take those first steps, you need something like deal check, privy prop stream to find deals and analyze them carefully. What's neat about this tool is it spits out a really cool report that I can now use to. Get the data that I need to my lenders so they're ready to go. This streamlines the entire process of the lending. So you're not hunting for money as long, you're not spending time selling your deal, you're using your proper analysis to tell the lender, yes, this is a solid deal, and yes, I'm ready to go. On this deal, so you gotta take advantage of that. In the end, guys, the market is always in a state of motion, so if you can do proper analysis consistently, you won't worry about whether the market's trending upwards or downwards because you make your money when you buy. You realize that gain when you sell the property, but until you've bought something, Okay. Until you put that first motion and risk capital out there to actually do a deal, you are thinking about it, not acting on it. I'm not suggesting doing a bad deal, and I understand, as you may understand, that 80% of people who take on their first slip solo. Tend to lose money on it, right? That, that's just the reality of the times. Cause they buy it with a motion, they're not supporting it with data. And listen, the hard money lenders are not, a lot of them aren't gonna stop you. Okay? If you're willing to pay their higher interest rates and you got the money to put down, they'll let you do a bad deal. If you're putting enough money down, Okay. There's not a lot of guys out there who are bad actors of the hard money industry anymore, cuz it's very easy to expose that. But I'm telling you, if your numbers don't make sense, they'll probably let you fund the deal Anyway, don't do that. Make sure your numbers line up with what you actually believe this property should go for. Do your homework, get deal checked. Do your deal analysis and make sure you understand. Fully the trends that the market is working off of. If you spot your trends well by the time you sell, you may be selling for more than your original guesstimate, which is the best place to be in. On the flip side of that, if you don't spot the trend, you could find yourself selling the property for less currently based on the interest rates. My belief is that the trend is upward, so if you're looking to do a deal, you definitely wanna do it During an upward trending market, we can do deals and downward trends. But it's harder. You gotta buy'em cheaper. You gotta fix'em cheaper, and you gotta kind of chase the market down. Today, the signs from the market are that with this interest rate flattening, we should see more people coming back to the market, adjusting to the higher rates, and getting a better deal on those rates, thus allowing'em to buy more property. If you give them a nice property and a nice neighborhood that you've remodeled, taking the time to do the work on it, I assure you there's a buyer for every home and there's a profit to be made. When you buy the property correctly. So get the deal check tool, check out deal by going to FDC deal check, and that'll get you to my affiliate link for that. Sign up for that. Start doing your analysis and if you are ready to rock. Okay, if now is the time to start investing in real estate by doing your first foreclosure deal, I implore you to reach out, click the link below to schedule a free coaching assessment call where I will go over with you how I find figure. Fund fix and flip a deal with you so you can get that experience, develop that process, get better rates, find better deals, and get a higher net profit by employing my coaching system. With that, that is our show for today. I hope you enjoyed it, guy. Guys, I hope you're really ready to start your deal analysis journey. Cause I'm telling you, once you get good at doing deal analysis, you'll never look. Back. It's gonna make your life easier to make a lot of money investing once you understand which way the market is trending and how to capitalize on that trend. With that, this is Donny Corrum, your Foreclosure deals coach, reminding you yet again, don't buy a house, buy a deal. Thank you for tuning in to the Foreclosure Deals Coach Podcast. If you like what you heard here today, remember, new episodes are uploaded weekly. Subscribe wherever you listen to your podcast. Do you want more of the foreclosure deals? Coach, are you ready to learn the mindset, tactics, and tools required to be a. Successful real estate investor. If so, click the link below to schedule a one-on-one coaching. Call today with Donny Korum, the Foreclosure Deals Coach to determine if coaching is right for you. And remember, don't buy a house, buy a deal.