Netflix was a hugely successful business story. Sadly, like Zillow and other giants, they may now become most famous for their failure.

There are essential lessons to be drawn from their rise and fall. Leverage the good, and avoid making the same mistakes if you want your real estate investing business to grow, and avoid collapsing. Especially with the market changes on the horizon.

Unique Solutions, Adding Great Value & Convenience

These are the things that made Netflix, and put the final nail in the coffin of the physical Redbox and Blockbuster before them.

The price was low. Better than renting DVDs. It was convenient and easy to use. They were the leaders in the space.

Scale Fast, Grow Your Brand Name

Netflix leveraged and grew fast. They established their brand name as the verb for watching TV and film online.

They got big and seemed dominant. Then appeared to forget what it was that made them successful.

They started going in the opposite direction. It seems everyone else in the world except for the executives at Netflix could see the writing on the wall, and knew their choices were going to self-sabotage the company. It was just common sense. Unfortunately, their investors are paying that price dearly.

Don’t Sacrifice Your Most Loyal Customers

Like other multi-billion dollar companies that have steeply declined, one of Netflix’ most obvious mistakes was to begin sacrificing their most loyal customers.

Not only did they seem to stop innovating, but they began raising prices on their biggest fans, instead of rewarding their loyalty.

Raising Prices, While Stripping Value

Raising prices when it is necessary is one thing. Raising prices, and giving less value is something else. It is always a losing strategy.

Power users found little to watch, and were already interested in other competitors. Netflix basically forced them to the competition. Depending on your plan, you may be paying $16 a month for Netflix, and just $1 for Hulu. A service that seems almost the same, with more fresh content for new users.

Failing To Keep Innovating

Even if it is working right now, you can’t just keep on doing the same thing. If you aren’t constantly innovating, your company is going to die.

You must constantly be improving and offering new things.

Doubling Down On What’s Killing Your Business

Of course, the inevitable happened. People stopped using Netflix.

In just one day the company lost $54B in investor value.

Then at the time of writing this was falling off a cliff. Already having lost 5 years of gains, and with its stock price down by over 70%.

So, did they correct course? Offer more content and value? Cut prices to be competitive?

No. Instead they are talking about adding back in advertisements. Which we can get on regular TV if we want them. Or on YouTube for free. They are further cutting back on shows and the content they will offer.

It is a race to the bottom.

Learn from their mistakes, and what they once did well.

 

We could be in for far higher interest rates than most are expecting. Just how high might they go? What will it mean for real estate investors?

High Rates For Solving Inflation

It is being posed that we need extreme interest rate hikes to take the bite out of inflation.

To really make a dent, or halt inflation, financial experts and experienced CEOs say that interest rates need to be raised to at least the same rate as inflation.

This would make it more expensive to borrow for most things, and may cool consumer spending. Of course, it can have the opposite of the desired effect too. Simply making things more expensive and driving up inflation to breaking point.

Some may argue that the current hyperinflation economy has been purposely created and manipulated. It may not be based on real fundamentals. Either way, the Fed seems to be planning for rate hikes.

To match current inflation, rates would have to go up to at least the official rate of inflation which is approaching 9%.

If you look at your own expenses, you also know that you are actually paying 30-100% more for many things.

Are Rates That High Really Possible?

Many investors and homeowners have never seen rates that high. They probably think it is crazy talk.

However, looking at the facts, we see that it has happened before. The Fed has jacked up their rates to over 22% in the past. Average mortgage interest rates have been over 16%. That’s a whole world of difference from the 2% rates some saw advertised last year.

What Big Rate Hikes Mean For Real Estate Investors

One of the first things to watch out for is obviously any floating and adjustable rate debt you may be holding. Otherwise the payments on that debt could theoretically soar by 8-10x what they are now.

This will also clearly throw millions into bankruptcy. Or at least mean they can no longer afford their bills and housing.

This will bring many opportunities to help owners get out of debt, and to buy their properties from them. Start marketing to them based on leading indicators of potential distress. Like large amounts of revolving debt, ARM mortgages, and missed payments.

Using low rate transactional funding investors can take advantage of these opportunities at scale, do some good, and grow their own finances.

 

Even simple and affordable tweaks can help you significantly boost your real estate investing business and net results.

These are some of the simplest, most affordable and best value adjustments that may have surprising outcomes.

Update Your On Hold Music

If you are generating inbound voice leads, and service any of your customers via phone, updating your on hold music is a low cost, yet impactful way to keep more of them waiting, and in a good mood until you can handle their call. It may make all the difference in your net marketing ROI, conversion rates and deal volume.

It may sound unimportant, but how many times have you been annoyed by frustrating phone systems, and have just hung up? Maybe you went right on to call their next competitor or ended the relationship. Imagine if your on hold music was actually pleasant to listen to.

Get to know your demographics and what really resonates with them, and pick a better soundtrack.

Job Titles

Many real estate businesses decided not to hand out bonuses or raises over the past year. Why not show your appreciation to your team by giving them a better job title instead? It may not come with more money yet, but it could if they perform well in that position. Job titles matter. They are valued and can be meaningful. They can keep your team members focused on what you really want them to achieve. They cost you nothing to hand out.

Soliciting Feedback From Your Front Line Team

People feel valued when you ask for their opinions and ideas. You don’t have to implement all of them. Yet, more often than not your front line team members are closest to the action and know best what is and isn’t working and where improvements can be made.

This can apply to your receptionist, cleanup crew, landscapers, marketers, sales team and more. It costs you nothing to ask them, and just a few minutes to listen. Yet, it may unveil more tweaks you can make for greater performance, while keeping your employees engaged.

Optimizing For Regret, Not Success

On a recent episode of the Dealmakers Podcast, one highly successful entrepreneur suggested making decisions based on optimizing to minimize regret, not for success.

That means, instead of just doing the sure or easy or most profitable thing. What if you worked on the one thing you will regret most not trying, even if there are no guarantees of huge scale success.

When you look back in 3, 5 or 10 years, or at the end of your life, what will you most regret not doing or trying?

If you do succeed it will likely have the most impact on your finances. More importantly it will make the journey a lot more fun and enjoyable.

Switch To Pre-Orders

Of course, while progress relies on trying new things, experimenting and being willing to fail, it is just common sense and good business sense to eliminate risk and ensure the profitability of your efforts and investments before you get in.

One of the best ways to do this in real estate is to switch to a pre-order model. Pre-sell or lease every property before you buy it. Have your exit inked and paid for, before you enter.

 

A good crisis can make or break investors and business owners fast. You can either be one of the majority which fail and disappear every time the cycle turns, or use it as a building block to stand out and amplify success.

Knowing what to do in a crisis is just half of the battle. The other 50% of surviving and thriving through it is knowing what not to do.

These are critical moves to avoid as we navigate the months ahead and future crises. Know them and bookmark them so that you can stay on top.

Stopping Marketing

At the first hint of a crisis many novices immediately slow down and stop their marketing. That is just a nail in their own coffin. It leads to a painful and drawn out death of your portfolio, finances or business.

We saw that at the beginning of COVID. Those that stopped marketing haven’t come back. While the few who kept consistently making the sacrifice to keep their marketing machines running, or even do more are still going strong.

Raising Prices

It can be tempting to raise prices in a crisis. Many companies do it just because they can. Banks like Wells Fargo have increased service fees, and mostly on those who are financially hurting the worst. Netflix raised their fees because they knew people were stuck at home and were more likely to want to keep their streaming services.

The thing is that people notice, and today they have so many options. When they do feel financial pressure themselves or have the choice, they will move to the competitors who didn’t try to take advantage of them in these moments. They will ditch those that tried to take advantage of them, and they won’t go back.

Reducing Services

Many companies shoot themselves in both feet at the same time by simultaneously raising prices and reducing services. If banks closed branches, reduced customer service, ended lending products, and then charge more at the same time, customers aren’t going to be happy. It’s true that some customers may not be buying much from you during these crisis moments, but if you let them go, then you can’t expect to win them back when they get back on their feet, nor all of their referrals.

This is the time you should be offering better deals and more value, and investing in your customers’ long term success. They will reward you with their loyalty.

Hide

Don’t hide in a crisis. Anyone can do that. You will instantly lose credibility. Even if you are wrong on your predictions or don’t know what's coming, just keep showing up. People need you to lead, and if it’s not you then someone else will lead them.

Panic

This crisis is probably a much smaller a deal when you look back at the big picture. Providing you don’t panic. Emotional selling will rob you, and emotional buying will too.

Giving Up

Don’t give up on things that won’t change. Real estate has survived every crisis in history so far. From wars to the Spanish Flu to the Great Depression and Great Recession and COVID, real estate is still needed and in demand. Some things and best practices may change, but don’t jump ship into the storm and then realize you are stuck out at sea and missed your one chance to get where you really wanted to go. Some things may change, like viral infections passing through hotel and apartment building ventilation and demanding we change up types of real estate. Traditional annual rentals may not perform for another year, but you can offer owner financing or use government subsidies to keep cash flow coming in from them. People still need shelter. That will never change.

 

It’s that time of year to be polishing and refining your plans for the next year. But, are you thinking big enough?

Before you ink those new goals, share them with your teams, make budgets, and commission marketing materials, are you really sure you shouldn’t be thinking bigger?

We have a whole new year that millions of people are looking forward to with optimism. Don’t count on an end to the mayhem commanding the news headlines for the past 12 months, but that shouldn't get in your way. Bigger income, more wealth, more impact, and more of the lifestyle you want is possible, but don’t expect bigger results, without bigger thinking. In fact, 90% of your results in the next year are all about what you think about over the next couple of weeks.

If you want more, why waste time? It takes the same energy to think and do big as a little. It doesn’t take much more effort to close on a $100M home than a $10,000 home. Or to close on a 100 unit apartment building instead of a 10 unit one. So, go big. There is so much good you can do with it.

Need some prompts to think bigger?

Property Prices

There are plenty of properties to be bought and sold at the low end of the market. Yet, how many more deals do you have to do in that range compared to being in the luxury range? A new Beverly Park, CA listing just hit the market for $160M. While it may sell for well below $100M at auction, it wouldn’t have to be flipped for much more to return more in a single transaction than most real estate wholesalers aim to make in a year.

On the commercial real estate front companies like Google and Apple have been setting up the $1B mark as the new price tag for acquisitions, and big tech companies are making more than ever.

Volume

If you feel you missed out on the incredible opportunities of 2008, consider that 2x more properties may now be in distress than during the Great Recession. In many areas demand for homes hasn’t been this strong for a long time either. What if you started buying in bulk?

Geography

Travel may still be limited through 2021, but that’s not a roadblock to serving investors worldwide, or diversifying your investments and wholesale deals around the country. You can now get in front of billions of customers, and trade from a pool of over 100 million properties right from wherever you are.

Before you start doubting yourself, remember the key to making these leaps is not about your resources. It is about resourcefulness. Don’t say “I can’t,” but “How can I?”

Despite all the talk about distress, mortgages in forbearance programs, unemployment, and businesses being locked down, the wealthy have not only survived unscathed, but have been enjoying great gains.

How are they doing it? How can individual investors and small real estate businesses make this their best year ever too?

Banking Billions

Data from Business Insider and The Guardian shows that America’s billionaires have only been enjoying more gains and wealth creation through the COVID pandemic and other chaos happening in 2020.

Within just 23 days of the first lock downs they added just short of an additional $300B to their net worth. By the summer they doubled that again to over $600B in new gains, adding almost $5B a day in profits.

Finding A Sweet Spot In Real Estate

One of the most notable trends we’ve seen since the beginning of the coronavirus pandemic is a growth in house prices.

Some data does show that there are a significant number of households that have been lagging in paying their mortgages and rent. Yet, House prices keep on heading up. Partially in response to a major shift in where people want to live and the types of housing that are needed now. As well as an enormous amount of capital fleeing other scary and more volatile and risky investments.

We’ve continued to see the likes of Jeff Bezos adding to their big real estate portfolios.

House Flipping

More and more celebrities and business icons seem to be increasingly relying on real estate to protect and build their wealth.

Given the recent disruption in the retail industry you can bet that Tommy Hilfiger has been honing his skills at flipping houses over the past few years. He is now reportedly on his eighth house flip. His recently listed house in Greenwich, CT is asking $47.5M. Over $16M than he paid for it.

In the Hamptons, one luxury home flipper has just relisted a 6.7 acre compound for $72M. That’s a potential $27M gross profit on a property purchased in the middle of the pandemic in April 2020.

Scaling Your Own Wealth

You don’t already have to be a billionaire or a fashion celebrity to make this kind of money, or to make this the best year for your finances yet.

• Set really BIG goals

• Try joint ventures with new partners

• Use transactional funding for financial leverage

• Look to undervalued areas where the most people are moving

 

Mortgage scams are far too common again. What do real estate investors need to watch out for now?

There are significant threats from mortgage scams in 2017. Some are old classics, and others are new. Investors need to educate themselves, be on the alert, and skillfully avoid them, if they are going to keep growing their finances. Here are some of the common ones to be on the lookout for today.

ID & Wire Theft

One of the biggest threats today is identity theft. This can be a result of the recent Equifax hack, or perpetrated through email phishing scams. Criminals may try to take out loans in your name, redirect funds that are supposed to go to closing, or hijack bank accounts, and clear them out. It is important to keep an eye on your money and credit, and to double verify any wire instructions, before sending money.

Upfront Fees with No Closing

Some inexperienced loan officers and bankers are just bad at processing and closing loans. Others may be making big sums by charging upfront fees, and never delivering a loan. Either way, it gets expensive fast. Make sure you are working with a lender who is a good match, and has a good ratio of applications to funded deals.

Bait & Switch

Bait and switch scams are some of the oldest, and most aggravating. Lenders reel in borrowers by underquoting them on rates and fees, and then when they know the borrower has little choice, is worn down, or will lose more money by not closing, hikes those rates and fees at the last minute. Make sure you know what the final terms are before you go to the closing.

Broker Chains

WHile not technically a scam, it can be when presented wrong. Many new sites and lenders are popping up, claiming to be direct lenders with lots of their own capital. Many simply plan to send your deal to another mortgage broker, or shop it on various crowdfunding platforms and get others to fund your deal. They may have no money to lend, and no influence in the process. This can be highly frustrating to borrowers who have to deal with many parties to get their loan underwritten, or who are given the runaround for weeks or months, before the deal falls apart.

Insurance Scams

Leading up to the foreclosure crisis forced placed insurance scams by lenders and loan servicers put many property owners into default, or cost them thousands of dollars on individual properties. With 2017’s record setting storm activity many may also be finding lenders trying to hold onto their insurance claim checks. If there are two counter signatures required for a check to be cashed, lenders may try to keep that money, and find a way to apply it to your loan, instead of providing you the funds needed for repairs. Have the lender sign first, and send you the check.