Today’s REI Classroom Lesson
Today, Joe Calloway talks with us about the hyper market and what you need to do so that don’t go bust.
REI Classroom Summary
Joe Calloway emphasizes the need for you to know the market, including what’s fueling the particular area. In the hyper market that we’re currently in, make sure not to get into any irrational behavior that you’ll later regret (think bidding wars).
Listen to this REI Classroom Lesson
Real Estate Investing Classroom Show Transcripts:
Mike: Welcome back to the FlipNerd.com REI Classroom where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Joe: Hi, I’m Joe Calloway with RE Investor Professor and RE360, and today I’m your host of REI Classroom. Today we’re talking about managing the hype of a hyper market.
Announcer: This show was sponsored by passiverental.com.
Joe: The real estate market is good. It is very good right now. Many people who haven’t been in the game for the last 10 years don’t realize how good it is. It’s important to understand that we are in a hyper market and how to manage that hype is important for you not to go bust.
I’m going to give you three quick tips on important things about hyper markets. Number one, study the market. Understand what it’s like to be in a hyper market versus in a downturn market. You can learn these from books or anything on the Internet, like Google. You can just start googling and you can see what has happened in the last forever, 100 years every time there’s a bubble or something going on.
You must understand what your market is being fueled by. Is it being fueled by great solid job growth, people moving into the area for solid reasons? Or is it being fueled by a bunch of cool restaurants moving into a certain area? That is not something that you are going to drive a market in perpetuity by having great veal chops at a great restaurant.
Another things is identify these irrational behaviors. If you’re showing up to a house that needs tons of work and it’s a competitive bid situation on the first day of the transaction, you’re probably in a hyper market. If you thought the property was worth $50,000 and someone’s paying $100,000 for it in one 24-hour period, that is probably a problem and I have found you’re best to just lay off and let it cool down and go bust.
A key, don’t get in over your head. That’s the second tip. If you’re in a hyper market and you’re seeing everyone going crazy and you start going from doing two flips a year to doing 20 flips a year, you’re probably going to go bust. You’re going to run out of money, or you could run out of time because this market will not continue and if you have 20 deals in the air and the market starts to cool off, even by a mild 5%, you are going to lose a lot of money on those 20 deals, versus coming out alive on one or two deals. So take it easy. Get in there, do it, but take it easy.
The other thing is don’t worry about others. Everyone’s going to be capitalizing on these great deals. There’s going to be a lot of things that make you a lot of money fast. But if you’re an investor, you’re here for the long haul, so don’t get influenced by the next cool big thing, whether it be flip flop and double property buy-back scenarios. Don’t worry about that.
Do what you love. You love rentals? Keep going at the rentals. If you love flipping properties, move methodically through these flips, make your money and move on to the next one. Don’t worry about what the guy’s telling you on the Internet about how much money could be made over there when you’re right here.
You can check me out more at reinvestorprofessor.com or follow us on Facebook at the same, RE Investor Professor, and I’ll see you next time on the REI Classroom.
Mike: Passiverental.com is your source for turnkey, done-for-you rental properties. If you’d like to be an investor and not a landlord, please visit passiverental.com to learn how to purchase cash-flowing, professionally managed rental properties in the hottest rental markets across the country. We can also help connect you with financing for your next property. Invest the easy way today, and get started by visiting passiverental.com.
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