Foreclosure Deals Coach Podcast

Reviving Your Real Estate Game Plan During a Flat Market

September 28, 2023 Chris Lawler Season 15 Episode 6
Foreclosure Deals Coach Podcast
Reviving Your Real Estate Game Plan During a Flat Market
Show Notes Transcript

In this video, I'm going to show you a way to revive your real estate game plan during a flat market.

Many real estate investors may be feeling frustrated and lost during this challenging market. That's why I'm here to help! I have decades of experience in the real estate market, and I'm here to share with you some tips on how to succeed in a flat market.  I'll show you tips on how to revive your game plan and turn your house into a profitable investment!

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What's up deal hunters. It's Donnie Corum. And on today's episode, we're going to discuss how to trade when the real estate market is flattening out. 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. Get into this right now. And now your host, the foreclosure deals coach, Donnie Corum. Hello. Hello. Hello, and welcome back to the foreclosure deals coach podcast. I am your host and foreclosure deals coach, Donnie Corum. And on today's episode, we're going to discuss how to trade real estate when the market is flat. Now, people often ask. You know, you're the foreclosure deals coach, but what is it you actually do? Well, guys, if you really describe what I do, I am basically a day trader in the real estate space. Now, unlike day trading stocks or commodities or futures and et cetera, you can't literally trade a house in a day. There's a process that takes place from buying the property to selling the property. But a lot of the same principles that apply to day trading in the stock market and any other market really also apply to trading in the real estate market. Well, interestingly enough, for the past three to four years, we have seen a consistent uptick in the real estate market in 2020 and 2021, we saw crazy appreciation in the real estate market being driven very heavily. By two factors. Factor number one was a lack of inventory. See when COVID hit, nobody wanted to leave the house, much less invite potentially six strangers into their home. You want to talk about an inventory hit. People were not willing to let you in the door. And if you did come in the door, they wanted you to put on a gas mask and a hazmat suit. Right? That market did not make it conducive for buyers who wanted to buy houses. And a lot of houses slid off the market as people who were concerned about their health, did not want people visiting their home. And as such inventory dropped to all time lows, couple that with a crazy government interaction that flooded the money with a bunch of money. Excuse me, with a bunch of money at the same time and interest rates dropped into the two percentile range. We had never seen anything like that, but the buying power of people who are buying homes at two and 3 percent mean you had a whole bunch of buyers coming in the market and not a ton of supply to get those buyers. The net effect was trended upwards for several years, it was going upwards. At a staggering rate. Well, like every great party, what goes up must come down. And boy, did we see that about 2022, the fed, our wonderful government hopped in and decided, Hey. We have got to stop the inflation of homes. And although it was ultimately bad for my business, I got to tell you, I didn't disagree with them. Okay. We could not have continued to go up at that pace. And what, what goes up at that pace has to correct. And about the. Third and fourth quarter of 2022, we saw the market trending downwards. Not as much as we thought, I'm not going to kid you. I thought the correction was going to be painful. I thought we're going to see a massive correction in the real estate market. A lot of people reported the same, but what actually happened is the market. Flattened, which is where we are today. You're dealing with a flat market, which means house prices are not trending upwards at the pace they have, but they're also not trending downwards. What we want to discuss today is how to work within that state of mind. And it's always. We like to talk a little bit about the mindset of real estate investing. So let's hop into our mindset piece right now. Our mindset quote today comes from Mark Douglas, where he says, if your goal is to trade like a professional and be a consistent winner, then you must start from the premise that the solutions are in your mind and not in the market. And I really believe that is the case. You see all of the. Issues with the market are internal. The fact remains that people are buying low and selling high all the time. Okay. The market is always working in some capacity and they're always going to be opportunities. As we speak, somebody's five year old kid is putting crayon. On the, on the wall of an otherwise really nice house. Now, some honors homeowner is going to clean that up right away. We're not going to know what happened, but there's a very large supply of people who don't care if their property gets dilapidated, as we speak, a hailstorm is heading this direction. That's going to damage the property. A dog is chewing on a railing somewhere, right? And you got to really make light of it because the whole reason we're in business is because stuff happens to property all the time. They're not going up in condition. They're going up in value. Okay, and because every house is slowly depreciating condition, there will always be an opportunity for investors like us to find properties that have the deferred maintenance that are in that reduced condition and to be able to increase that condition to even above where it was originally and get it to the point where it's now a nice, you know, Retail gorgeous property that somebody is going to love and pay top dollar for. Okay. So you have to understand that any issues you believe with the market are internal, they are in your mind. So getting back to it, how do we trade when the market? Is running flat. What do we do to do deals at a market that's not trending upwards? Well, guys, you got to really focus on your numbers. And I talked about this a lot, but there are three numbers that really matter in your real estate investment space. And no matter what the market is doing, these three numbers are going to define whether your flip is a flop or not. Okay. So number one, as we talk about is your acquisition price. When the market is trending flat, wholesalers struggle to find deals. And the reason they're trending flat, they struggle right now is because a flat market doesn't present as many obvious opportunities. When the market is trending upwards, whether you're, whether you're buying at it right now, it doesn't matter as much as what it's going to be worth in three to six months when you're selling it. So wholesalers were able to put deals together. Put silly markups on it. It was the generation of the wholesaler for the past two years. It's been a wonderful time to be in the business of finding properties. We're not seeing as many deals out there. So you got to focus on better deals, which means you got to buy below market. Now that's always the case, but in this market, you really got to know that you're buying significantly below market. Your numbers are going to vary, but in my market, I am generally only looking at. Properties that are going to have a minimum gross spread, which is a spread between what I believe the after repair value is and what I'm buying it at of a bare minimum of a hundred thousand dollars. If I don't see that minimum, unless there's pretty much no remodel or a very easy remodel to be done, I don't want to look at that deal. Okay. So for me, an excellent buy price would be somewhere below 300. If I can get something for two 50 to 300 that I believe I'm going to sell for three 50 to 400. That is a deal. I want to look at, start with the end in mind, look at properties that have a spread. The market is trending flat. So we cannot count on appreciation to bail you out of a bad purchase. So you've got to buy it right to begin with. And by buying on the numbers, Again, in my market, a minimum spread of 100, 000. Now note, I did not mention a percentage. There's a lot of people who are encouraging you. You got to buy at 70 percent of value minus for pairs. And listen, if you can buy at 70 percent of value, minus repairs, then good on you. Right. I'm going to tell you that in my. Experience. We have to buy with a profit target in mind in my market. There are certain markets where the 70 percent rule works great. You have to define what it is for your market, but I will tell you that trading with an end profit target in mind will generally. Always yield you the ability to find a consistent stream of deals to do in your local market. Whereas trying to trade on that percentage model, that's so many of the flipping gurus flying to town and tell you about, but then really can't support it with actual deals that you can do. If trying to trade on that, it's gonna make it very difficult to get a deal done by with your end profit in mind. So if we are buying at a hundred thousand dollar gross spread. Right. And we're going to spend 50, 000 on the remodel, which is, you know, I try to do remodels that are somewhere between 30 and 50 grand. Now we've got 50, 000 left in gross profit after cost of funds, transaction costs, and et cetera. We should be walking out of that deal with a 25, 000 profit on the deal. Right. And 25, 000 for most people when done consistently can be life changing for you. Okay. Now there are markets where you can make 50, 000, a hundred thousand, 150 grand on a flip. I love that. And if you're in a market where that's the case, good for you. But most people are just getting started. They just want to get that first taste of profit so they can transition out of whatever. Day job they're doing in a full time investing, or so they can supplement their income and build out a system that can do 25, 000 profits consistently. So that's what I teach. That's the model we work off of. Once again, you have to, in a flat market, really see that growth spread. So you're using comps in the last three months or so that have sold and you're buying at a number that's at least a hundred grand below. That's the market that I follow here in Colorado Springs. And that has served me well for a very long time and will probably work well in your market as well. Okay. Now, if you're doing a multi million dollar flip, you're buying a house at 800, 000, 900, 000, if you're buying that far ahead of the median, I can tell you, you're probably not, it's not going to work out. Cause your cost of remodel, your cost of funds, everything is going to be higher. But in my experience, if you're buying at three or below and selling it for below these numbers, pencil out your mileage may vary, but do your analysis carefully and know your numbers. Okay. From there in a flat market, you really have to fix exactly to market. We got a lot of leeway. In the increasing market, we could over improve a property by a little bit, and because the trend was heading upwards, it didn't count, it didn't matter, and it was okay. Guys, that is not going to be the case in the flat market that we're in right now. And obviously the market's in a constant state of flux, but my prediction is, now that interest rates are higher, we are probably going to be trending flat. For the next six to 12 months. And then we'll have to see what happens from there. But I can tell you that in a flat market, you really got to dial in your numbers. I won't lie to you. I got a little haphazard in the increasing market of 21 and 22, because no matter what we did, we couldn't miss the market was trending upwards. We were selling the properties before we'd even completed the remodel. We were not as focused on the numbers and honestly didn't need to be. I had access to capital. I had access to construction crews. As long as I kept moving at a consistent pace, I could get a lot of deals done. And that's how we were able to get 47 deals done in our best year. This is not the market we're trending in right now. And as a coach, I am heavily advising that we focus very carefully on the numbers. Obviously you need that gross margin, but you also have to fix the property just enough that the market will absorb it to get that. You got to know your comps. You got to know your numbers and in a flat market, it is so important that you are absolutely trading. On those numbers don't over improve. And as a result, I did a whole show on the project management model versus the GC model. And why are we moving to product managers? Because we have to pull the additional profit out that GCs we're charging. Okay. You got to know your numbers, you got to trend flat, and you've got to control your costs to get this done. But if you're able to do that accurately, you've got your growth spread, you can fix it to market within your budget, and you can get that back in 25, 000 profit. You should be able to find a consistent flow of deals that will keep you busy. And when the market is trending elsewhere, I'll be honest with you. Trending downward. Is great for us, a downward trending market, which we're going to head to, I believe, not a huge big collapse, but I think a slight decrease is coming as the economy starts to fail a little bit. We're already seeing signs of this recession that we're pretending that we're not in, but we clearly are in a recession, but when the world is actually reflecting recessionary times. Unemployment is high. There are issues with doing financing and funding and et cetera. There's going to be some great opportunities today. You're at a flat market. You got to buy on the numbers. You got to fix the numbers. And then finally, in a flat market, you've really got to control your transaction costs. Okay. Gone are the days. Where we can overpay an agent 3%, 6 percent to list a property gone are the days where we can pay a premium for title insurance, et cetera. If you're going to make money in a flat trending market, you absolutely have to control your, your costs and make sure that every cost that the minimum amount it can be. While this is always true, it is more true in a flat or declining market. We have been gotten used to, and maybe a little bit spoiled by the increasing market we saw over really. The past six to seven years. Okay. So most investors have not accurately experienced a declining or flat markets. This is going to be a weird time for people just getting into the industry. There's not a lot of experience in the agent market. Most people got their license. I think a large percentage, I don't know the exact statistic. But we're talking a huge percentage of the agents got their license in the three to last three to six years. So all they've ever seen is an upward trending market. That makes it very difficult for your agent to advise on what to do in a flat or descending market. Okay. And as such, though, I love my agents. A lot. If they haven't been around through a, at least one market cycle, you're probably not getting the best advice that you could be getting when you're doing your flip and as such, you want to make sure that you're getting proper advice from either other investors, getting coaching or mentorship. Or really, really, really studying your local market. So, you know what it looks like in a flat market, you need to trade to get actual experience. So if you're going to trade in this market, your best bet is to bring in some solid advice or mentorship or coaching, so it doesn't affect you in the longterm guys. I don't want to frighten you off here. Okay. My motivation here is that now that you know. We are in a flat market. How do you trade within this market? Continue to do deals, consistently putting money into your pocket and heading to your next deal with a consistent profit margin. I can certainly help you, but if you're going to venture out on your own to do this, make sure you understand the dynamics of a flat market, control your costs, control your, your analysis and fix to market. You can still do this in a flattening market. Things are going to get even better from here. And I appreciate you guys tuning in and being a part of this all the time. And, you know, before we wrap up, I just really want to extend my heartfelt gratitude to each and every one of you who joined me on this episode of the foreclosure deals, coach podcast, your time and attention mean the absolute world to me. If you've gained any valuable insights today, I encourage you to hit that subscribe button. Don't miss out on our upcoming episodes. And the wealth of knowledge me and my team share with you each week. And guess what? The journey doesn't stop here. I also invite you to become a part of my community of deal hunters by joining us on my Facebook group. Click the link below or search for foreclosure deals coach. Let's connect, learn, and succeed together. With that, this is Donnie Corum, your foreclosure deals coach. Thanking you yet again for tuning in and reminding you don't buy a house. Bye. 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 podcasts. 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 Donnie Corrum, the Foreclosure Deals Coach to determine if coaching is right for you. And remember, don't buy a house, buy a deal.