In the classroom today, Coach Collard discusses the need to have a strong understanding of the fundamentals when you’re getting started as a real estate investor.
Coach Collard emphasizes learning how the financials work for real estate investors, including different ways to secure money for deals as markets shift.
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.
Coach: Hi, everybody. It’s Coach Collard once again, out here in Las Vegas. Excited to be here on today’s FlipNerd.com REI Classroom. I’m excited to bring you guys some great content. And today, I want to talk to you about having some strong financial knowledge in the business of real estate and real estate investing.
Mike: This show was sponsored by PassiveRental.com.
Coach: So one of the mistakes I see a lot of people make is that they become pigeonholed into the industry and they’re just one-trick ponies. And I think I mentioned that in one of our messages before. But what I think will help you get past that and be dominant in your market instead of just trying to compete will be understanding the fundamentals of real estate investing from a fundamentals place. You can’t build a house without a foundation, correct? So you need to have wide knowledge and you need to have foundational knowledge.
And some of that foundational knowledge is rooted in the tenets of how finance works for real estate. Most people just think, “Oh, I’m going to buy a property. I’m going to flip it. Let’s go get some cash.” And they either go borrow money from a friend, or maybe they have a private money partner come in, or maybe they hit a line of credit. But I want to let you know all markets will shift, right? And so we’ve got to be prepared to have better financial knowledge so that we can make strategic decisions to help us shift in those markets.
So one of the things that I like to do is when you’re flipping a property and you’re buying a flip is you might consider hard money as well. I’m just going to give you an example of what we’ve run into here in Las Vegas. We bottomed in the market in December of 2011 in Vegas, and since then, it’s been going up pretty good. For the first two years out of the gates, we appreciated 21% to 30% right out of the gates and everybody was just flipping.
Well, then it softened on us and a few people got stuck. So one of the things that I encourage people to do, where we are in the market right now at 60% to 70% of what I think it could appreciate, it’s kind of getting to a level where a guy like me, as a market specialist with my fundamentals, thinks that the market’s too risky to be doing fix-and-flips unless you get really steep discounts.
So one of the things I encourage people to do is to use hard money or private money instead of their own cash and it gives them a better leverage point. Now, I’m certainly not saying, “Hey, walk away from that.” That’s not the idea. But the idea is to use OPM and do more transactions because sometimes, and what I’m seeing right now, is the hard money and private money will fund higher than what I would do if I wrote my own check. And so, hopefully, this is making sense for you guys.
Let me give you one other example as I close out today, guys. Hopefully, this makes a lot of sense to you. I also want you to consider, when you’ve got an unrealistic seller, and the seller’s wanting this number, and you’re wanting this number, and you miss each other by $10,000 or $15,000 and it’s because they’re just a classic unrealistic seller, why don’t you consider partnering with them?
You can be the money partner, you buy into part of the deal, and then you let them know, “Hey, if your ambition to sell it at this real high price, if it actually works, we both win. But if it doesn’t, we’ve got a conservative model.” And the only way you have a conservative model, guys, is if you’re foundationally sound, which will then maximize your ROIs.
So, hopefully, you guys got a lot out of this today. I appreciate the opportunity to be here. I’m going to close it out right there. Thanks for being here at FlipNerd.com, the REI Classroom. We’ll see you again soon.
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