The Market Has Changed! 1. Locally (in Fresno) There is a Feeding Frenzy Especially on REOs 2. Banks are now receiving full price offers and above full price 3. Multiple Offers on all REO sales This is Way Different than it was 3 months ago....
1
Questions We Must Ask 1. Is this just local to Fresno? 2. Is this a blip on a continuing slide or the beginning of the big ride back up? 3. Is it “Too Late� to find good deals? 4. Have the formulas changed? 5. What other strategies should be considered with this new market?
2
Remember: Principles Dont Change! 1. Principles are Universal like Gravity 2. Beware of anyone who has dicovered a “New Principle” (and is selling CD’s and Seminars about it) 3. Strategies Change Principles Remain Constant. 4. Let’s sort thru our teaching, Separate the Principles from the Strategies and.... 3
Strategies For The Current Market & Best Guesses For The Future... Buy Low, Sell High This is a principle that doesn’t change It is informative about how we choose our neighborhoods to invest and do our work in. Spread. The difference between Buy and Sell prices. Simple Simple Formula has emerged after my first 5 houses 4
Sell Price - Buy Price = $100K (simple is always best) Breakdown of Dave’s Simple Formula Wow Package = $20,000 Energy Package = $20,000 Done Package = $20,000 => Gross Margin = $40,000 Costs = (Utilities, Insurance, Interest, Commission, Marketing, Closing Costs and Oops! Factor) = $20,000 Target Net = $20,000 5
Sell Price - Buy Price = $100K Q. With the changing market, can we still find deals like this? with $100k spread so we can get in and out and earn our profit? A. Yes, Just last week I got an offer accepted in my target neighborhood for the lowest price I’ve ever paid. If the project doesn’t have close to this spread after final negotiations, it is best to just pass on it.
6
27 Principles That Haven’t Changed 1. Find an area and stay in it. Improving the neighborhood as you go. Creating your own comps Assisting Appraisers to justify their appraisals. 2. In and Out Quickly 3. Minimize hourly labor to control your costs. 4. Know your exit before you enter. 7
Principles That Haven’t Changed 5. Pre Sold is Good 6. Staging works if you need it. 7. The Wow! Sells the house. Energy Geeks get used to it. 8. Stay in the Blue to collect the Green. (Blue Collar Neighborhoods that appeal to first time buyers work well for our strategy) 9. Stay out of War Zones 8
Principles That Haven’t Changed 10. A good realtor is essential on the front end. Among other things they will provide accurate CMA reports so you can know what your sell price is before you begin. If your realtor doesn’t want to run CMA reports per your requests, they are not the right realtor for you. 11. This work is simple (But not Easy)
9
Principles That Haven’t Changed 12. We are looking for Ugly Houses The Uglier the Better Even more so now with the current feeding frenzy among investors. 13. Dont go cheap on the Wow! or assume that buyers can visualize what you are visualizing. 14. Use your first project as a show room to sell your second one. 15. The System Is The Solution eliminate surprises. 10
Principles That Haven’t Changed 16. 5 Olympic Rings Buy, Design, Build, Market, Sell it Right. Do all 5 and you win the gold. A miss step at any point can rob you of your gold. 17. You really can sell your projects without a realtor’s services. (Last week’s interview with Ron Roberts) ( and pocket most of the savings) 18. Have multiple exit strategies. You may need them. 11
Principles That Haven’t Changed 19. Dont quit your day job. This is a perfect opportunity to do on the side. A good routine is to stop by on your way to or from work, or both, and communicate with your contractors by email and cell phone with an occaisional face to face visit. 20. Original Buying Formula Still Holds. Max Price = ARV * .70 - Repairs (After Repaired Value) It wont work in every neighborhood find one that it will work in. 12
Principles That Haven’t Changed 21. After you get a project in escrow, dont forget your “due diligence” (Inspections and further negotiations = The HairCut) 22. Dont waste time signing offers Get digital. 23. Plan on offering a lot. Babe Ruth struck out more than anyone. 24. Dont get emotionally involved in a project during negotiation. Keep it a math problem 13
Principles That Haven’t Changed 25. Cash is King. And Quick is a close second. Dont load up your offers with lots of contingencies and “get out” clauses. You only need one. 26. Eliminate your competition by producing a unique product. This includes the Wow!, Done & Energy Packages. There really is nothing like it in our market. So the houses sell quickly. 27. Build the Plane in Flight! A moving car is easier to steer. Get Started. 14