Re: Know Your Enemy

Wondering why most investors are having trouble finding properties to fix and flip?

Competition?  Sure.

But look a little closer.

It’s not just you and me competing against each other.

Look a little closer still.

 

We are both competing against the banks/hedge funds and private companies.

But the banks are selling properties.  How are we competing against them?

Because they are not leaving anything on the table for us as rehabbers to make money when we renovate and flip a property.

Let me explain.   It might help to take a quick peek at the foreclosure page we have posted on our WREIA site.

The numbers don’t lie – but they will creep up on you.

The abundance of distressed properties in some form of foreclosure are in the low to middle price range.  100-200k is common across the country.  In our area it skews slightly higher.

But here is something interesting. Retail home prices across the country are dropping – slightly.  But the prices the banks are getting from distressed sales are steady.

So – who is getting squeezed here?  You the investor!

When you have a tighter margin to deal with, combined with falling prices – watch out – someone is about to get burned.  Don’t let it be you.

History tells me the banks will make out fine.  Especially if we let them get away with this nonsense of pricing the distressed homes too high, especially with their marginal renovations.

It’s especially tempting for us here in the DC area.  MD is near the top of the nationwide leader-board when it comes to foreclosures.

So what can you do to protect yourself?

1.  Don’t think it’s a deal just because it’s a foreclosure.  Most of the margin has been squeezed out for investors.  (Your mileage may vary.)

2. Be careful if you are investing in these heavy foreclosure areas.  Know the inventory.  When banks dump these properties on the retail market, prices drop.  Economics 101.

3. Be smart and don’t over-renovate.  I see new investors putting tons of upgrades into homes in neighborhoods where the bank inventory is their competition.   For the first time home buyer if they can save 50k and buy a bank renovated property with new paint and carpet only – they will be happy.

Lastly – put a good team together.  People that know the local markets.  Odds are pretty good that a “mentor” from a high priced coaching system sitting at a desk in Ohio or Utah doesn’t know the difference between Capitol Heights and Capitol Hill.  They certainly are going to have a hard time helping you on a street level basis.

Our guest speaker at WREIA this Monday night knows the local market.  She is a mortgage pro at a local bank and has been an investor as well for a number of years.

Some of us think of business as going into war.  Every day you face an enemy.  As Sun Tzu points out – you need to know your enemy and know yourself.

If you need help understanding the money end of this business, and how specific mortgages can help sell your properties faster – join us Monday at WREIA.  Your going to learn or be reminded of a few things.

It’s not 2007 any more and some of us need a refresher to fully understand the 2017 market.  Knowledge is power in this business.  Sun Tzu would agree. 

It helps tremendously to have a local mortgage pro on your team who understands mortgages but also knows what it’s like to be an investor in the DC area.

Are you just getting started?  Or maybe you need financing for your 4th rental property?  Either way, April 10th will be a good night for you to come out and get an insiders perspective on lending in DC and the surrounding areas.

Bring your financing questions, bring your wholesale deals and bring a friend.

See you on Monday!

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