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MichaelC

Think YOUR Market Is Tough?

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I'm sitting in the midst of all this craziness, and it just seems to be getting worse, (or better), depending upon one's perspective. Take a few minutes to read this article in today's Sun-Sentinel, Broward County's daily newspaper.

As an investor, I can't justify what is happening, and am greatly concerned that buying at today's prices is not investing but, rather, speculating. Big difference in my eyes, and one where the risk to reward ratio is way out of whack. I mean, 1400sf selling for $400K in two days is insanity!

However, all that glitters is not gold, according to this article. Getting a lot of play down here is the pre-construction and condo conversion craze. As a result, this market is full of n00bs and first time investors. This market may very well lead the way to a correction.

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Man o man!

 

Quite the opposite up here.

It's an easy buyers' market.

There are some areas, though, that homes go pretty quick.

Then again, your market is anywhere from 4-10 times higher in price than mine.

 

How are you adapting to your market, Michael?

Are you mainly having to stick to CAs?

 

Wanna come play up here?

-- deals all day. :unsure:

 

You're Italian, I'm sure you could "figure something out". :lol:

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How are you adapting to your market, Michael?

Are you mainly having to stick to CAs?

Even CA's are tough in this market. As the article mentioned, the technique du jour seems to be buying preconstruction condos, and condo conversions. And like I mentioned, that's speculating, not investing. :unsure: Especially when the stats tell us that approximately 3 of 4 new units are being purchased by investors, not the end user. Man, what happens when all those units are completed and enter the market for sale around the same time? I imagine there will be some bargains to be found... :lol:

I'm working with one or two folks in the Vegas market, and that area went from 40% annual appreciation to "take my property, please!" in a few short months. Seems a load of outside "investors", (and I use that term loosely), poured into Vegas dreaming of easy riches, brothels, and bling-bling. These "investors" paid full price, thinking they could then turn around and mark up the same property by 50K or more. Ah, yes, the American Dream. Unfortunately for them, the market unexpectedly turned and now those same properties are worth less than what they paid, and the going rents leave 'em with a $500 negative cash flow each month. Plan B exit strategy? They didn't have one. I see much of the same happening down my way in the not too distant future.

Bottom line is I have my partners and/or students in other states I'm working with, in markets that are more reasonable and sane.

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It seems that in this market (I'm just up the street from MC) that you're going to have to offer 10-15% below market (and that's possible if you can show them the savings on commissions and fees, etc) and then flip it quickly to a buyer. They are lining up in certain areas and making 10% on a 300K house is 30K.

 

I'll take that all day.

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What do you think of this?

 

 

I live in a new (less than 2 years old) community in South Florida that sold pre-construction at $150K - $170K. There are 4 models of homes in here and the model that I bought at 170K is now flying off the shelf for $310 - $320K. :P

 

My thought process is to approach everybody and offer something like 94% of market value, by-passing the realtor and her commissions.

 

___________________________________

POSTCARD CAMPAIGN: :lol:

 

I would like to buy your house within the next 60 days and will offer you 95% of appraised value. Save on realtor's commissions and sell FAST! "No Fees, NO Commissions, NO B.S".

 

Call XXX-XXX-XXXX

_____________________________________

 

Take a 60 day option and MARKET LIKE A CRAZY PERSON. ;) This gives me a $15K spread (OR MORE) in most cases around here.......now I have some valuable paper and people looking to get in.

 

I can even offer to sell them the paper for 10K and give them 5K instant equity. Or run an auction for either the OPTION or the house itself.

 

It is a RED hot market.

 

DOES THIS SOUND LIKE SOMETHING THAT MAY WORK?

 

I am really looking to tweak this strategy, so any help in fine tuning would be greatly appreciated. :lol:

 

Thanks ! :D

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Rich, I think it's a valid approach. Granted, as you already know, the majority of homeowners won't be interested. But we're not trying to get everyone to deal with us. A few are all you need to make this a profitable venture.

I don't see any downside for either you or the homeowner. From a net selling price standpoint, they're doing better than using a Realtor. And for you there is no risk.

My only concern is the "95% of appraised value" comment. You know that people in these parts don't want to hear that. I would reword that along the lines of "I'll pay you a higher net price for your home. No Realtors fees, no BS, etc." I just think that a homeowner reading that 95% comment will feel as if you're tryng to steal from them. Keep in mind with a postcard your goal is to make someone to pick up the phone and call you. Then you can begin to explain in detail and try and work them. Asking a homeowner to take less than full price in our present market is a going to meet a lot of resistance. However, once you pique their interest and can begin speaking with them one on one, your chances are greatly improved.

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Rich, I think it's a valid approach.  Granted, as you already know, the majority of homeowners won't be interested.

 

My only concern is the "95% of appraised value" comment.  You know that people in these parts don't want to hear that.

 

I just think that a homeowner reading that 95% comment will feel as if you're tryng to steal from them. 

 

Asking a homeowner to take less than full price in our present market is a going to meet a lot of resistance.

 

WELCOME TO MY WORLD! :lol:

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Hi, all. My name is Erik. I am using my father's name because I don't have a computer to go on. I am 18 years old and I have been reading at lot of the posts on this website, plus I have been reading MC's manual, which also belongs to my dad. Anyhow, together we are trying to start investing the way MC says in the Manual. I have started to make calls to FRBO's. No deals yet, but working on two as I am writing this post.

As a rookie I would like to know how is all the news that I have been reading about prices skyrocketing going to help or hurt our way of doing business. My dad is trying to teach me as much as possible until he can give up working and do this full time. But now, with all this news, I am wondering if he will ever be able to let go and run this business. Well thanks for the help.

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Hi Erik. How's the old man doing, anyway? :lol: It's great to hear you share your dad's interest in this stuff. Working together with him makes it easier. It's good to have some support when you're trying to get started.

Yeah, as anyone around these parts knows, our market is out of control hot. Does it hurt or help, you ask. Well, if you're a property owner, you're thrilled at the increase in values. On the other hand, if you're an investor or a buyer looking for a bargain, you maybe become frustrated and discouraged as the market continues to run away from you.

For a n00b in our market, this means you cannot invest the old fashioned and traditional ways and expect to succeed. Buying traditionally and holding long term is not a realistic strategy right now. With median prices fast approaching $400K, there is no way the rent covers the monthly payment.

Rehabs? Possibly, but the line of competitors is so long that even hovels in bad areas are going for above asking price. Not my game.

Then there is the latest craze of buying pre-construction condos, with the expectation of cashing in on the appreciation that occurs during the building process. Risky, at best. And it requires ten percent down to hold the unit.

That leaves us with what it is we do here. Options of one kind or another. You're approach in this market should be either Pure Options, or Cooperative Assignments. Offering less than full price these days will get you hung up on or thrown out the door. On the other hand, if you can give the homeowner a better price, a better deal than anyone else has offered, you just might get their attention.

You'll need to work this market hard, Erik. It's a tough one right now. Market like your life depends on it! If you can hang in there and perservere, and not give in to the doubters around you, it will only get easier as this market levels off. It will, just impossible to say when. But this area can't sustain these levels. The affordability index is off the charts for housing prices in south Florida.

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I just heard yesterday that 4 major companies are either changing their minds about locating in Palm Beach County, or are moving out of Palm Beach County because their employees and those they would be bringing in will not be able to afford to live here......either buying OR RENTING !

 

This market has to go thru a correction soon or the economy will collapse.

 

Rich

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Rich, I had not heard that. If that is true, that is an ominous sign, to say the least. Much of the driving force behind this market has been a strong economy and virtually full employment job market. If there is a change in that, the housing sector will surely follow suit.

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Much of the driving force behine this market has been a strong economy and virtually full employment job market.  If there is a change in that, the housing sector will surely follow suit.

 

Those points plus the ease with which lenders have been handing out mortgages over the past few years. It seems like anyone with halfway decent credit can get 95-100% financing so they're out in the market throwing around money that they don't have. Why do you think that there's something like 15+ markets around the country that are seeing double digit appreciation rates?

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