Don’t let the Red Bull effect kill your real estate investing potential!
Everywhere you look today real estate investors are whining about the almost 10% net jump in REO prices over the last year. Is this the end to the easy ride of flipping houses?
Much like the rush of throwing back a big gulp sized can of Red Bull investors have been charging into the real estate market to corner all of the REO properties they can, causing prices to spike.
So what happens when the adrenaline starts to crash? Is it time to adopt a “5 Hour Energy” investment strategy and stick with buy and hold or are over-stimulated investors freaking out for no reason and potentially sabotaging their own financial futures with the wrong tactics?
Nationwide statistics are confusing at best and often terrible skewed. What some of those panicking are not taking into consideration is:
- In the best markets retail home prices are rising just as well as REOs
- FHA was just accused of burying details of a 73% jump in foreclosures in April alone
- There are many more foreclosures to come – meaning plenty more deals for flipping
- Many careless investors who overpaid for rentals in the last few years will default, putting a new line up of fresh bargain deals on the table for wholesalers
For all the Red Bull drinkers out there you will have noticed recent pressure has lead the company to dial back its 2 cans for $4 pricing and raised the price of the smallest sized can by 25% to $2.50.
Yay, they make 25% more net profit per unit sold right? Yes, but now people are buying one can instead of two, reducing the average sale from $4 to $2.50. It doesn’t take a genius to figure out that even though net profit per unit is up, the top line and total net profit figures must be shrinking rapidly. That’s a lose-lose, besides driving more customers to competitors.
Pay attention as this may be one of the most important real estate flipping tips you will ever read!
When it comes to flipping houses and responding to rising REO prices investors can boost their retail prices and demand higher profit margins. To many this probably seems to make sense – do fewer deals but make more profit right?
No. Because you will be sitting on homes longer, bleeding holding costs and incurring risk daily, while ultimate bringing in less net income for the year!
Why not soak up some of the ding, focus on offering great deals and sell twice as many homes, while creating raving fans and masses of referral agents who will bring you a ton of business for less next year? The end result – more cash in the bank and if you automate and systemize like you should be you don’t need to put in another hour of your own time.
Don’t let your prospects go to the competition Monster…
