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Why the Real Estate Market is So Hot Right Now!
Joe: Why the real estate market is so hot now. There’s quite a few reasons. I think one of the biggest drivers of the market right now are hedge funds. One in five properties are being purchased by hedge funds which means that there’s a lot fewer properties for people who want to move into them to buy. Which raises demand. Which raises prices. Which makes it harder for you to find the property that you want to live in. Which makes it harder to find dramatically under market value properties.
Joe: You know, it makes it a challenge sometimes for real estate investors, the mom and pop real estate investors. Because the hedge funds, they go in and they’re buying properties at full market value, full price and a lot of them they’re not even doing anything. They’re not even filling them. They’re just holding on to them for the long term and considering them as assets that are going up in value.
Joe: And since they’re sparking the market they’re actually creating their own value in their properties. So if they buy, let’s say the buy a $200,000 property, that value goes up 3%, 4%, 5% over a year, over two years, it’s 6%, it’s 8%, it’s 10%, within two or three years they’ve made much more money on that property even if they don’t have much income on that property. So it’s, well, it’s a stupid strategy.
Joe: It’s a stupid strategy unless you’ve just go so much money you don’t know what to do with it and I think that’s what we’re running into with these hedge funds and their impacting the entire economy. And I think that ultimately they’re going to have to dump them back onto the market because they’re going to have a hard time managing that many properties.
Joe: Another reason the market is hot is because of COVID. I think we all know that people are working at home these days and they want to live in a better place so they’re upgrading where they live. They’re working at home. They need more space. You know, I think this is going to be the way of the future. People are discovering something that I’ve known for many years. Working at home is pretty great, you know, and I think that employers are starting to discover that allowing their employees to work at home makes a lot of sense too because they don’t need as much office space. So it cuts their costs dramatically and employees actually get their work done when they’re working from home.
Joe: So we’re seeing a lot more people buying homes and improving the size of their homes, improving what they need from their home. And we’re seeing a lot of people that are moving out of some of the big and more expensive areas like Silicon Valley and areas of California. There’s a lot of people leaving those areas because the values are so expensive and people have discovered that they don’t really need to spend that much money on their lifestyle.
Joe: So with the market going crazy like this should you be buying properties? You know, does it make sense as an investor to buy properties if it’s harder to find them? Well, yeah. That’s what you do for a living so you’ve got to keep buying properties. You’ve got to keep growing your business and there’s plenty of deals out there. You just have to learn how to find them. And one of the things that I’ve found, one of the things that we teach is the For Rent Method. And that’s going to people that are selling their homes For Sale By Owner and asking them if they’d like to sell their home rent to buy.
Joe: And if they do then we take that property and we go out and find a rent to buy buyer and you know, raise the price, get a down payment for it. We get the down payment, we get them the buyer at the price that they want. They actually make more money doing it that way than if they sold it through a realtor. With a realtor they’re going to end up paying 8%, 10%, 12%.
Joe: So what’s important is finding the best deals that you can find. You still have to find good deals to make this all make sense. And that means you have to look at different types of lead sources. The first one that you want to look at is the For Sale By Owners. For Sale By Owners on Craigslist and Zillow are wonderful sources of deals even today. And people come to me and say well, Joe, they’re selling their houses, you know, in ten minutes when they put them on the MLS. And that’s true. But they’re still not selling them on For Sale By Owner. And when you reach them while they’re still For Sale By Owner you can talk to them about need versus greed.
Joe: There’s two reasons that people are selling their home For Sale By Owner. One is they can’t afford a realtor to do it and that’s happening less and less often. Those are the need people. Those are happening less often right now.
Joe: Now there’ll be a time when that changes and there’ll be a lot more people that can’t afford realtors because their values haven’t gone up enough to cover their mortgages. But that’s not what’s happening right now.
Joe: So the second type of seller is the greed seller, the one who wants to make more money. And the reason they’re selling it this way is because they know the market’s hot and they think that they’re going to be able to sell their property For Sale By Owner. But the statistics still show that For Sale By Owners are not selling. They’re still 70%, 80%, 90% of For Sale By Owners do not sell. They have to either list them with realtors or take them off the market.
Joe: So if they don’t get them sold that means they have to pay a realtor fee to get it sold. That’s going to cost them, you know, 8%, 10%, 12%. After they pay the realtor fees, they have to pay closing costs, have to pay the negotiation fees, after they pay the repair costs, all the other things that are going to be associated with selling a property using a real estate agent. And you can keep them from having to pay those simply by doing a lease option for them. And if they’re willing to do a lease option, they’re going to make more money in the long run.
Joe: First of all, if the person exercises the lease option over that three year period they’re going to get full price for their property without having to negotiate any numbers. They’re going to get full price for their property, they’re not going to pay any realtor fees and they’re going to be able to you know, do a lot better than if they sold it with a realtor right now.
Joe: During the time that they hold it they’re going to get cash flow for the property. Whatever the difference is between what they have to pay monthly versus how much money they’ve got coming in as income which is usually they get positive cash flow. They also get tax depreciation on their property so that makes a lot of sense for them. And the likelihood that the lease option buyer’s going to exercise the option is very low. So it’s very likely they’re going to get the property back after the three years and the values are going to have gone up during that time. And let’s say it only goes up 3% a year. On a $200,000 property 3% is $6,000 a year. So now we’re looking at about a $20,000 increase in value on top of not losing the money that you had to pay for the realtor.
Joe: So greed makes a lot of sense for a seller. So when you approach sellers with this offer, it’s not something that they’re going to discount for no reason. Now a lot of people think that they want all cash. That’s what they’re doing, that’s what the plan is, they don’t know any other way, they don’t understand what it means to be a landlord which you don’t really have to be if you’re selling it on a lease option. So those are things that you can explain to them and help walk them through that process. So that’s one type of investment that you can do.
Joe: The other type is doing it, you know, expired listings, doing it with absentee owners, and there’s lots of different types of absentee owners. There’s people that have mortgages, people that don’t have mortgages. People that live in that town, people that live outside of the town. Lots of different types of absentee owner lists that you can get. And you can buy these lists, have them skip traced, you know, get phone numbers, get cellphone numbers or get landline numbers on them. Import them into a system like the Automarketer. Pushbutton Automarketer allows you to import absentee owner and expired leads and then you can put them into campaigns and start sending them text blasts and voice messages to ask them if they’re interested in selling their properties.
Joe: And we have different campaigns that drip on people over a certain period of time, typically three months, where we’ll drip on that same lead over and over again, you know, first day, third day, seventh day, fourteenth day, you know, twenty-first day. It just keeps dripping on them and you know, tries to gain their interest. It also sends them to websites and says, hey, would you like to sell this way? Maybe subject to? Would you like to sell this way, you know, all cash? Would you like to sell this way, maybe do a lease option? So we have different websites that give different types of offers that get dripped on these leads over time. And we do this with both For Sale By Owners, expireds, absentee owners, we have different campaigns for each type of lead that we’re working with because they are attracted by different types of offers.
Joe: And when you’re dealing with off market properties, like an absentee owner property versus a For Sale By Owner it’s more likely that you’re going to find somebody who’s more motivated than it is if you’re finding somebody who’s actively in the process right now, at least to try to get it sold.
Joe: The other type of property that you could look at in a market like this are low price properties. And you can find these all over the country in rural areas and in a lot of urban areas. And specifically properties that are under $100,000. And even properties that are $10,000 or $20,000 or $30,000 that may need a lot of work. Those types of properties can be extremely profitable and they’re pretty easy to track down using you know, everything from For Sale signs or We Buy Houses signs, the bandit signs that we put up sometimes. Or using Facebook and bringing in people that you know. Or putting signs in the yards of properties. What I do is put signs in the yards of properties that we own in these communities that say We Buy Houses on them and our tenants allow us to do that. And then we find other deals using those sources. Also just using the absentee owners in those areas has been pretty effective for us as well.
Joe: So those are all great ways to bring in leads and put deals together and find people that are currently off the market that are willing to sell at a discount or on terms or subject to. It really isn’t that hard to make it happen. When the market is having challenges there are some opportunities that you’re not ever going to get at any other time. And it’s wonderful for investors when that market comes along even though it’s pretty hard on the rest of the country.
Joe: But in the meantime the things that I’m teaching have been evergreen for us in the high end markets, low end markets, appreciating markets, depreciating markets. There’s no reason that you ever have to stop investing in real estate. I’ve lived and worked in these markets for thirty years, up and down and I’ve been able to do deals all the time, every month we’ve been able to do deals. And there’s not reason that you can’t do the same.
Joe: All right. I hope that helps. If you like this channel hit the subscribe button, hit the thumbs up button. Go to ZeroDownInvesting.com and find out about my mentor program. Go to PushButtonAutomarketer.com and find out about the automation system that we use. Also JoeCrumpBlog.com. You can sign up for my free newsletter. I send out materials to that group that I don’t send to anybody else.
Joe: All right. I hope that helps. Good luck.