If you are trying to make sense of the current real estate market and get a better handle on the type of offers you should be making and advertising, you are not alone.

There is a lot of confusion over the state of the economy. Some claim it’s red hot. Others feel we are already in a deep recession.

The claims of many major news outlets, real estate brokerages, and what others in the business are predicting may not line up with each other or your experiences.

Even the Fed seems to change their mind about the economy and their plan to fix it every day.  So, how are real estate investors to make sense of the direction of the market, how much they should be bidding for homes, and what they can expect to flip houses for?

Consider these alternatives to headlines or all the questionable claims and data out there…

Ask Your Local Pawn Shop

Pawn shop operators have a great pulse on the market. They know if people are buying and paying back loans fast, or whether they are losing their stuff, and are having to bring in family heirlooms and their personal valuables for whatever few dollars they can get.

Go To The Gym

For one, you’ll see how many people are still paying for their gym memberships. You’ll also overhear whether others are buying, selling, investing, refinancing, or moving, and get a real feel for the local market.

Talk To The Cops

The Sheriff’s office handles evictions. They’ll know if there is a surge in squatting incidents, homelessness, and evictions. Which also indicates how healthy landlords’ finances are.

Check Out Old MLS Listings

How many aged MLS listings are there? Are days on market growing? What percentage of home sellers are making price cuts? Are agents offering bonuses for fast sales or offering to cut their commissions?

Run Some Ads

Put up an ad for a house for sale. Are you swamped with immediate full priced offers? Or are you only getting occasional low ball offers and questions from buyers that don’t follow through?

Get On Tinder

Financial distress causes a huge amount of relationship stress. Money is the number one reason couples seem to end up arguing. Divorces also drive distressed listings and rental demand. So, is your local Tinder pool swarming with new dating profiles? Or is it shrinking as couples get together and move in together?

Although some commentators in the media are extremely bullish about how strong the housing market is right now, there is no question that more deals are becoming available to investors.

Sellers are becoming increasingly stressed and motivated. Which means more cheap house deals.

Distressed Sellers

Between inflation, squatters, new property tax bills, higher interest rates, and a deteriorating employment market, owners are under a lot of pressure to sell. In many cases, they feel they need to not only beat creditors in selling fast, but to race against what may be a declining market in some parts of the country.

A surge in foreclosures and abandoned properties also means that local authorities once again need to get ahead of a potential zombie home crisis. In Baltimore, MD, this means that homes are being offered to buyers for as little as $1. A common strategy in times like these.

Contrast this with inflation at retailers. The Dollar Tree says they will now begin targeting prices at $7 an item. Along with some closing stores.

So, we have this interesting market dynamic where distressed sellers are selling cheaper, and yet on the other hand, retail end prices are going up. Those are ideal conditions for wholesalers.

Buyers Are Being More Selective

While real estate is an ideal and essential investment at this time, and buyers still have plenty of cash, they are being more selective.

Expect buyers to be a little more cautious, more selective in their acquisitions, and to conduct more due diligence.

Wholesalers should stay ahead of this, and keep their pipeline moving by providing as much upfront detail as possible.

Squash concerns and objections in advance with information on flood zones, rehab estimates, and realistic market data.

Not All Cheap Houses Are Good Deals

Whether a house costs $1 or $1M is really irrelevant in terms of it being a deal, or profitable.

Look at the margins and dollar potential for your end buyers, along with their perceived needed room for error.

It’s a great time to buy low, and sell low to serious investors who are still financially strong. Many of them have been sidling capital just for this moment. Show up, give them confidence in your inventory, and you can win some new high volume clients.

While most media outlets proclaim that house prices just keep on rising and will this year, many real estate investors, sellers, and agents are finding the market much more challenging in reality.

Of course, all real estate is local. Ongoing population shifts and new secondary rounds of migration between states and cities may certainly be pushing up prices in some areas, while others struggle.

Still, there is no denying that there are mountains of distress in the shadows. With as much a $1T in real estate loans set to default according to at least one economist.

Of course, doing nothing is only going to hasten your demise. You can’t stop doing deals, or let your money sit idle. So, aside from changing the geographies of where you are flipping houses, what else can investors do to keep doing business and make money, without taking on too much risk?

Of course, nothing is without risk. Not even keeping money in the bank or under your mattress. Yet, there are certainly ways to squash risk to the absolute minimum.

Wholesaling Real Estate

Wholesaling is a far lower risk real estate strategy than fixing and flipping houses, buy and hold, or new construction. It’s all about buying low, and selling low, which is what the current market is all about.

Find The End Buyer First

Make sure you have an exit before you get in. This is how you actually invest with confidence versus just gambling on what could happen. If you have an end buyer, especially one under contract, and with money on the line, you know you are already going to exit and get paid before you make an acquisition.

100% Funding

One of the best ways to minimize risk in real estate investing is to use financial leverage. This allows you to share risk with others.

Best Transaction Funding till offers 100% financing, including closing costs. That means you really have no skin in the game to lose should things really go off the rails.

Summary

This year is likely to bring a very interesting economy and real estate market. There are lots of opportunities. It is all about finding the right structure, strategy, and model to lower risk, and increase profit margins, so you can get busy making profits, with confidence.

New data from Zillow and Bloomberg shows that as many as 90% of home buyers are now factoring in climate and natural disaster risk to their choice of where they are buying a home.

How might this impact the real estate market? How will it affect property investors? How can you stay ahead of it, and use it to your advantage?

Climate And Disaster Risk

The data shows that nationally 83% of buyers are weighing this factor in their home buying choices. Including hurricanes, flooding, wildfires, droughts, and extreme temperatures.

Many are just tired of dealing with the same issues every year, and seeing their lives interrupted, or homes damaged again and again.

Others are just thinking forward as they try to make the best home investment possible.

How Will It Impact The Market?

The most obvious answer is that this shift in awareness and decision making will alter where the most volume of demand is for home purchases and investment properties.

However, a Zillow survey interestingly shows at least one quarter of respondents reporting they are actually moving to a riskier, rather than safer area.

This may be primarily due to other drivers in the current market. Such as rising crime in some cities, and lack of affordability in Northeast states.

We may see old high end housing markets continue to become more dominated by second residences, with buyers choosing primary residences in safer and more affordable areas.

It is not just about geographic risk either. A lot of it is also about specific properties. For example, choosing newer inventory that has been built to higher standards, and at higher elevations. Which in some areas is causing issues and potential devaluation for existing older homes that are now flooding due to run off from higher neighbors.

Staying Ahead Of The Curve

As a real estate investor it is vital to evolve with market shifts like this.

It may influence where you target making real estate offers in the next few months and years. As well as the types of properties you are targeting, and how you formulate and price your house offers.

No matter where you are buying and selling homes, use this as a big highlight in your marketing. Point out security features, like new hurricane shutters, adherence to new building codes, and where your listings have low risk levels compared to your competition.

Check out our 1% interest rate MEGA SALE now, and submit your Funding Request to get your next deal done.

As the real estate market changes there will be a few big winners, while the majority of players end up folding and going to try and find jobs elsewhere.

This clearing out of competition, the bad apples, and those with poor operational skills is a great thing for serious real estate investors and business owners.

In order to be one of those survivors that comes out stronger, with more credibility, and in an even better financial position it is critical to avoid these classic mistakes which can take down the largest companies, as well as newer business owners and individual portfolios.

It’s really all about avoiding falling into scarcity mode. You must keep up that positive mindset that got you the great results you want more of.

Stripping Service & Product And Charging More

This is always a huge mistake. If anything, customers want and need more value and better deals. If you cannibalize your most loyal customers they won’t forget. It will cost you a lot over the long run.

We’ve seen this with banks like Wells Fargo in the past. As well as streaming services. Recently Mercedes Benz thought it was smart to start charging an extra $1,200 a year if you want your car to accelerate at its full capacity. No doubt leaving many customers frustrated that they aren’t getting what they thought they paid for.

Thinking You Can Get Away With Faulty Products

Some get desperate and will find all kinds of excuses to justify selling faulty and harmful products. In the past we’ve seen it with house flippers going into areas hit with flooding or hurricanes and simply covering over the dangerous mold. Or builders building new home developments on contaminated land. More recently there has been a huge movement among victims of Camping World which has developed a reputation for selling RVs that are leaking when brand new, and may have mold and other dangers for families. It will catch up with you sooner or later.

Burning Your Sellers

Developing relationships with buyers and sellers is vital for long term success and profitability. Especially volume buyers and sellers. Don’t burn relationships that could be a steady source of income each month for one deal. Such as by backing out of contracts. Do your due diligence first. Don’t tie them up and cost them money, only to leave them hanging.

Letting Great Talent Go (To The Competition)

The majority of companies, all the way up to the largest and best funded global corporations seem to be making mass layoffs and are freezing hiring. Many may have hired far too many people, too carelessly, and too fast. You may have to right size your team too.

However, great talent is your best asset. Great people are extremely rare to find. Don’t let them go if you have them. Or they will go to the competition and become your competition.

Skimping On Marketing

You’ve got to show up stronger than ever right now. Those that keep marketing will keep on gaining market share as others slow down or try to be cheap and publish lower quality content. This keeps shifting the power and profits to fewer players that keep getting stronger.

Here are the smart plays to make to not only be one of the last standing after this next phase of the real estate market, but to win big while others are freaking out.

Eliminate Exposure To Risk

A lot of players are currently exposed to massive risks. Solo investors, top selling Realtors, banks, and multi billion dollars funds and tech startups won’t be immune to the evolving market. It may take time for the waterfall effect to hit them, but once it does it can be too late to escape bankruptcy.

Holding onto properties, and holding debt are two of the biggest risks.

Eliminate your exposure by liquidating all of your mature investments, and switching to a wholesaling model. Use transactional funding to finance 100% of your deals, so that you are in, out, and paid in hours, without capital at risk.

Expand Your Network

Your network of contacts is what will get you through the next couple of years, and determine your level of success.

If you’ve been neglecting it, revive it now. Expand your database with new connections. Invest in  strengthening your relationships.

They will all be lead sources soon. Including Realtors, attorneys, other investors, bankers, etc. They may not want to sell on your terms right now, but they’ll soon need you too.

Educate Your Sellers

It may be hard to get sellers under contract for 30% of recent asking prices when they keep on hearing about how fast the market is growing. Some just won’t get it. Arguing with them will only turn them off.

Instead, take a consultative and educational approach. They may not sell now, but they will respect you later, and know who to contact to sell when they need to.

Educate them on market changes, how prices are formulated, and their options as they get into uglier situations.

Do this by publishing content online, by mail, email, and text message.

Don’t Let Leads Get Wasted

Investors have been spoiled with leads in recent years. They cost a lot, are hard to land, and easy to burn. Find a way to make money on them. Instead of only cherry picking the one or two out of a hundred you love, find a way to turn them all into dollars. Wholesale, keep them, refer them out, or find a partner for a JV.

Play The Long Game

Shred your five year plan. You’ve got to keep making money now. Yet, to get through this, and stay on top, you’ve got to think long. Think about where the market is likely to be in 7, 14, and 21 years, and how that will impact your liquidity, net worth, and lifestyle.

 

With the fast changing real estate market many investors are wondering if they need to be changing up their offer strategies, and how much they are offering sellers. So, what should your offer formula be now?

The Changing Real Estate Market

The economy, finances and real estate market keep on changing at a face pace. There have been plenty of twists and turns, with more to come this year.

The housing market has continued to beat expectations. Multifamily is very strong too.

Tens of billions of dollars are chasing deals in this space right now. Which is also leading many investors to question their offer strategies. Especially as they find it more challenging to secure deals with often overly optimistic sellers.

The big question is how much to offer to still ink profitable deals, and keep up deal flow? You’ll starve without doing deals, but don’t want to be losing money by overpaying either.

Be Wary Of Rules Of Thumb

There are many books, articles, and speakers out there plugging their rules of thumb for making offers on properties to flip. Much of this is outdated and out of touch.

You cannot just stick to one rule of thumb and offer formula. Market dynamics are changing all the time. Some investors are used to making offers in the 60-70% range. Others have driven hard bargains at 40 cents on the dollar during crisis times. In other phases of the market a lot of money has been made offering 90% of the retail value for homes.

In the past some appraisers and lenders have gone up to 125% of the value knowing the market is growing so fast.

Be Wary About Overpaying

Overpaying will catch up to you eventually. Even these big funds blatantly paying 50% over value for properties will eventually find they pay for it.

At the same time, you may need to be more aggressive, and be willing to pay more for property than you thought it was worth over the past couple of years. Remember, it is about what the market is willing to pay for it.

Still, with prices expected to rise, at least one guru has been advising his followers to make offers based on pending sales, not closed comps. That is extremely dangerous.

Pending sales often don't close. They are not used for lenders and appraisals. It can mean big trouble flipping, and being restricted to only cash buyers willing to over pay.

Stay Flexible

Be aggressive enough to land the deals. Yet, conservative enough to not lose money and get stuck with dead weight you can’t sell.

Sellers won’t hold out forever. If you hold firm, the sooner they will fold. There is a lot of distress building. Especially with inflation in gas, insurance, and medical bills. As well as declining consumer debt performance.

Ideally you already have end buyers lined up in advance. You know their numbers, and can base your offers on that. Then with transactional funding your risk is incredibly low, deals are presold, and you are in and out, and paid.

 

There are a lot of myths and misconceptions about real estate that can confuse investors. That’s in addition to changing trends which can lead to focusing on the wrong deals or not being active enough in the right areas.

Here are some of these factors that you want to be alert to now, and use to guide you in maximizing your potential this year.

Community Isn’t Really That Important

As with micro lofts, and tiny urban condos before, there has recently been a lot of hype about multifamily, and developers building in fabulous community spaces.

According to Pew Research, 69% of those surveyed found the most meaning in their life within their families. Just 16% said they were attached to their local communities.

That may suggest the real estate that is most in demand is going to be single family homes, or multigenerational homes in the suburbs and beyond, rather than tiny spaces in dense urban areas.

Big Flips Are Being Supported By Inflation

We are currently experiencing some of the most fierce inflation in almost 250 years. That’s bad for most people, but is definitely working in favor of real estate investors, flippers and wholesalers.

Rental rates are up 70% in many areas. 30% plus home price appreciation seems very common.

This is enabling investors to make amazing profits. Such as the recent $190M flip by fund billionaire Dan Och, who more than doubled his purchase price of $93M in 2019.

Yes, They Are Making More Real Estate

One of the biggest myths in real estate is that they aren’t making more of it. That’s simply not true.

It is an old saying used to pump up offers on prime real estate. Yet, over the past couple of decades we’ve seen that it is possible to create more land.

Dubai has been building artificial islands for luxury real estate projects for many years. All of the space exploration we’ve been doing is even opening up the potential for real estate deals on other planets. Now, one professor has recommended expanding Manhattan artificially to lower property prices, and for building thousands of new affordable housing units.

Some may be disappointed if they held onto once prime real estate too long under the cloud of this myth. Yet, you can still make uncapped money wholesaling in old and new areas.

TikTok Overtakes Google

Last year TikTok overtook Google as the most popular website in the world, and surpassed Facebook as the most popular social network.

This is likely changing how people get their information, their perceptions and tastes, and more. Consider that when you are evaluating which properties will be in the most demand.

 

The college class of 2020 is moving into a different reality. The same coronavirus crisis which ended the school semester earlier than expected has changed the world as they knew it, including the real estate market. Now, as these new college grads head out into the professional world, they dream of living somewhere with the following criteria.

Affordable Housing

Most college graduates will continue to pay student loans even years after graduating, making affordable housing a must. A home’s affordability depends on how much the individual earns and how much of it can go into housing. Senator Elizabeth Warren popularized the 50/30/20 strategy, which suggests that no more than 50% of a person’s income should go into mandatory expenses. Whether renting or buying, a new home must be budget-friendly—considering the cost of home or renter’s insurance, utilities, monthly rent or mortgage checks and property taxes. A reasonably priced place will allow the owner or renter to still save up while meeting his payments.

Safe Neighborhoods

No one wants to live in a crime-ridden area, especially single young people with no homeowner experience. Having faced the repercussions of the recent riots and protests all around the country, college graduates are looking for spaces they can afford and still feel secure from robbery and violence. Several websites and crime mapping services are great tools to determine an area’s security. Living in a safe neighborhood brings both guaranteed protection of assets and peace of mind.

Public Transportation

Most college graduates can not afford a car of their own or the extra costs that come with it. Public transport offers a timely and reliable source for the young professional. From buses to trains to city bikes, the low-cost options abound.

Pedestrian-friendly Places

Similarly, recent graduates look for cities where they can commute on foot from home to work. This helps them save up on gas and car maintenance, in addition to lowering the famous carbon footprint.  A pedestrian-friendly place promotes community, exercise and safety.

Corona-free Zones

 

Finding themselves finishing classes online, college graduates are sick of the coronavirus. With a few cities around the nation still highly affected by the pandemic, the idea of moving into metropolitan areas has subsided. But the American economy is reopening, and with it the country itself. The Center for Disease Control and Prevention’s COVID Tracker can help young house-hunters discover where to move next.

 

Who will be the biggest winners in the real estate market this year?

These five factors will be among the most significant differentiators between the winners and leaders versus the rest in real estate for this year and beyond…

Follow Up

This is still the number one make or break factor for real estate professionals. Fortunately, it is still probably the easiest way to get the edge. The vast majority of Realtors, wholesalers, builders and sellers seem to be doing terrible at this. In fact, their follow up is mostly non-existent. Most deals are lost and leads burned because of a simple lack of follow up. Just one more email, text or call could have converted those leads. Those buyers and sellers are all going to buy or sell. Just normally with the professional who keeps following up after the others drop the ball. Make sure that’s you.

Staying Healthy

You don’t need six pack abs or the best squat game in town to win in real estate, but if you’re out sick you aren’t making money. If your supply line dries up, your users are going to the next wholesaler in line to fill their deal flow needs. It will be far harder and more expensive to win them back. So, take time to stay healthy and avoid burnout.

Anticipating & Overcoming Objections in Advance

Most sellers, agents and buyers won’t take the time to layout all their real objections. They’ll just pawn off the easiest excuse on you. The most successful are those who invest the time to foresee and overcome objections in advance. It’s basic sales 101. What questions or concerns could hold sellers and buyers back from taking your offers? What can you do to champion that ahead of time?

Marketing

Fear will cause some to pull back on their marketing this year. That will be another nail in their coffins. Others are doubling up on their content marketing. Make sure you are consistent, are looking for voids to fill, and are focusing on quality marketing that makes you stand out.  That may be online, in mailboxes, through networking, or sheer hustle and asking for the business. Most important as the market changes will be the ability to create product and demand.

Eye on the Big and Long Game

 

The focus should probably no longer be on what you earn this year. That should be the result of the seeds you planted last year. Most of what you are doing this year should be setting up your success and revenue for the next 2+ years. This mindset helps avoid dangerous short term thinking while ensuring long term survival and growing profit margins.

 

How can real estate investors really find out what’s going on in a real estate market?

More new investors are getting into the game, and more experienced investors are finding they have to move into new neighborhoods and cities to get the same returns they were a couple of years ago. To make smart investment moves investors not only need to know the numbers on the deal they are looking at, but what the local real estate market is like too.

There are tons of online tools and resources at our fingertips today. Most of the best known ones are also best known for being wildly inaccurate. The numbers can lie. You can buy properties sight unseen in destinations you’ve never been to and make really good money. However, you can really lose your shirt and get stuck with dead weight that you can’t get rid of either. When you can, you want to get boots on the ground and get a real feel for a real estate destination yourself. When you do, here are five of the resources where you can learn a lot about the local market, without ever having to go online.

The Gym

Head to a few local gyms when you get in town. They will instantly tell you a lot about a destination. What gym brands are in town? How recently did they do their research and choose to make an investment there? This is a lot like tracking Walmarts and Starbucks. What are the people like when you get inside? Are there short term passes available (suggesting the area gets a lot of visitors)? If there are no gyms that may be a red flag that the area isn’t doing that well economically.

The Supermarket

Supermarkets and grocery shopping will tell you a lot too. What types of chains are in town or are moving into town? Is there a Walmart or Whole Foods? Supermarket chains can instantly tell you a lot about the strength of the local economy and whether it is a wealthier area or low income area, as well as what brands are betting on growth there. What types of foods do they have? Just the basics or gluten free, organic and more fashionable luxury items?

The Coffee Shop

Coffee shops are a great place to get the inside scoop on a potential investment destination. Are they serving fancy coffees or the basics? Is Starbucks moving in or shutting down stores there? Are there a lot of deals being made around you and people working online? Are people rushing or have the luxury of plenty of time to hangout? How much are they spending on their coffee? Talk to people and find out how they feel about the market. Are they buying, selling or investing?

The Park

If you’ve got kids the playground and park can be especially great places for some recon. Talk to other parents. Are there a lot of local activities for kids? How are the schools? How safe is it for their kids to run around by themselves? Are they finding enough house with their budget to fit their growing family into or are they thinking about moving somewhere cheaper?

Hotels

Local hotels will tell you a lot about who visits, passes through and lives nearby. They say a lot about housing costs, what type of workers are being housed there to develop infrastructure, and the features that are in demand. The hotel staff can also be a great resource for learning where the average local worker lives, how much they pay in rent, how much they make, and where they’d prefer to live.