What the market looks like for 2015

What the market looks like for 2015:

The market continues to slow and it looks like sales volume keeps dropping. Sales volume collapsed by 6.1% in November as reported by the NAR.  We are playing a game of chicken with Sellers not lowering prices and buyers not raising bids.  Sellers are not taking to kindly to this high stakes game and have begun to pull houses from the market or waiting to list them.  Spring should be very interesting, as we will see Sellers decide to start to list homes or else wait another year to sell. Those that can not wait will be forced to sell.

New home permits continue to be dismal in historical terms.  Builders need to step into the market but they are still feeling the sting of the 2008 great depression. At this point builders are only taking on projects one phase at a time.  The one bright spot is apartment construction, which was very steady in 2014. 

Investor competition continues to drop in the SFR market as cash purchases dropped to 25%.  Overall it looks like Institutional Investors have been signaled to exit the market.  This will leave the professional in the game and give us some breathing room.  I would be looking for Institutional Investor that bought at above $200,000 to begin to sell since price appreciation has slowed. If inventories in high dollar markets begin to rise dramatically then this may be the reason and should help buyers.

OIL SHOCK: 

The one wild card in the real estate game is Oil.  Nobody predicted that Oil would stay this low for so long.  This will impact every market in the world and has created debt detonator that will force liquidity.  Those entities that have poor balance sheets will be forced to sell. I do see the OIL SHOCK reaching into the real estate market since so many banks and institutional investors have real estate assets.  Banks are a little more protected with the passage of the last Government spending bill that protects derivative losses ( search; Jamie Dimon himself called to urge support for the derivatives rule in the spending bill) but I do feel even they will be forced to raise capital.

In closing 2015 will be a great year for wholesalers and Birddogs with many people needing to sell.  Much more so than 2015.  As the 2008 great depression continues the economy keeps trying to gather its footing. Each time it does something always comes up to knock it down. In Real Estate terms 2015 should be a much better year for property investors with interests rates so low and so many new opportunities to find deals. 

Good Luck and happy hunting.

Daniel Valle.

The Capital Mercantile Exchange.

dv@capital-mercantile.com

Why the "Millennial Generation" will hate their parents? A life time of debt & no new home buyers

I was at the tail end of the Generation X cut off.  Almost straddling two generations.  So I like to think that I understand Millennial better than the older generations.  The millennial's are an extraordinary generation that is going to surpass the accomplishments of the greatest generation.  Not with Peace but with tech.  Already we are starting to see new techniques and ways of completing work that have not been seen since the turn of the century and the Industrial Revolution. Millennial's will choose to forgo work for work's sake and instead focus on what makes them happy. They will focus on what they feel will make them a person that will be productive in society and make a difference. 

As with all generations the term education was driven into our brains at a fairly early age. 50 years ago getting an education meant joining a community of students organizing to learn around a common idea. Philosophy would focus on philosophy and medicine would focus on medicine. Together professors and students would solved problems and create a better society.  Graduates would usually go back to the farm or family business and try to apply new found knowledge.  In today's society what we have is a system of college that only teaches us to learn and regurgitate data that is not of any use in the world. Millennial's are now graduating college and finding that they have no real purpose in life and that they lack the skills necessary to actually accomplish work. This wouldn't be such a problem except for the fact that they are now saddled with huge amounts of debt. Adding insult to injury; the reality is that you are now a college graduate but your degree is basically worthless piece of paper that you paid $100k + plus for.

How will this affect Real Estate and why will the millennial's eventually blame their parents?

Unfortunately it is just part of succession. As we get older we realize that our parents best intentions resulted in not the best choices. That's how we learn and make the next Generation better. Today many students are being pressured by parents to attend high-priced colleges to get an education in order to achieve a job. As the students go into the workforce they realize that the degree probably would not have made much of a difference in obtaining the position they seek. Why would you pay $150,000 for a student loan and degree when you could go to any trade school or a unknown low-cost college and get the same piece of paper. In the end you have just as much chance as another student has at getting an entry-level job. This is forcing thousands of out of work students to stop taking the advice of their parents and focus on what they love.

In time Millennials will figure it out and learn how to be productive.  They really have not choice.  The "Baby boomers" will soon be gone from the work force and "Gen X" just doesn't have the numbers but the simple fact of the matter is that student debt is not going away. A Millennial graduate with $100,000 or even $200,000 student loan will take an entire lifetime to pay off including interest. These are moneys that could be used to pay for income property or to buy first time homes. It is income that for decades will be lost paying interest expenses and not be used to buy real estate or big ticket items We may have an upcoming apocalypse where first-time homebuyers are not buying houses because they can't afford it and baby boomers are selling houses because they need money for retirement. For now it seems the compromise has been that the students will just move in with their parents until they figure out what to do next. Eventually it just gets old living at home with mom and dad.  Eventually baby boomers will be forced to sell and this will force millennial's to make a move. Even if baby boomers let their kids live with them forever, eventually millennial's will want to start families and they will start aging. What then? Millennial's will be forced to rent and baby boomers will be forced to sell. This will leave a huge gap for decades to come where we will be missing the much-needed trade up market. The trade up market where a first-time homebuyer sells his house and trades up for a larger one. 

How does this relate to Real Estate and how can we make money from this?

There will be opportunity for real estate Investors as we search for baby boomers that need to sell quickly for cash. Investors should create marketing campaigns that target baby boomers with houses that need repair or that need to raise capital quickly.   As we see that Millennial are forced to rent for decades, Multi Family unit housing will be a great Investment Vehicle that will provide steady cash flow.  Investors can create cash flow by rehabbing apartments and making Millennial friendly.  Landlords can take the market for Millennial looking for cool places to rent that are also affordable.

Happy Investing.

Today is MLK DAY. Slavery In the World Today-- End it

What I learned in 2013

My Mom was down for the holidays and reminded me that ever since I was a small child I always told you what I was thinking, even if it was harsh. I never second guess what I write or say and worry how people will take it. If you take it the wrong way its on you. I'm quiet most of the time and when I finally say something it might come off the wrong way. That's just the way I am.

What I learned in 2013 is when you appear back in somebody's life, doesn't mean you have the right to suddenly start acting like you never left. Some people could care less. It also shouldn't mean you should have to change for anybody, I sure as heck won't.

It is pretty sad that society has been corrupted to the point where the things we say have to be second guessed, but again I never will. People today take things to the point of making the statements perverse or a dramatic aberration. They take things the wrong way. You can't control how people see things or take things. Just keep speaking from the heart.

Happy 2014

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Calling all deadbeats, Scum, bottom feeders, wankers and Real Estate Investors. Low Balling time.

By reading the title above you might think I'm calling all Real Estate Investors Scum bags.  On the contrary. I'm referring to what some fear sellers might say to you when you're making low ball offers.  Personally I've never been called anything more than a bottom feeder and it was indirectly. The seller politely stated "I'm not taking any bottom feeders offers. I want my asking price."

It is exaggerated that all sellers get angry at low offers.

I have heard from other Investors that they have received calls from angry agents and sellers after making a #LowballOffer.  Some of the sellers are incensed that somebody would disrespect them by making such a ridiculous offer on their pride and joy.  In some cases they have a point, but when making low ball offers you don't have the time to research every property, so you just make blind offers. Its a numbers game and eventually you'll get the call you've been waiting for. What are some of the typical scenarios when making low ball offers?  How do you handle the objections to your low ball offers?  How can we turn a angry call into a new real estate deal?

Typical Scenarios that take place when making Real Estate Low Ball offers and how to handle them:

Scenario 1)  We discussed this above.  You may on some occasions get an angry call from a seller or agent.  Be polite and never lose your cool.  Simply state that you thought the place needed work or was a fixer upper.  You can even say you buy houses for cash site unseen and you thought this one needed major fixing. Turn the situation into a lead and ask the agent or seller if they have anything else.  If you're talking to the seller directly ask him if he's buying any other real estate or looking to invest in the future.  Ask if he has others for sale. Follow the advice in my other blog about using your personal network of power and turn this into a lead. 

Scenario 2)  When the agent or seller calls you and isn't angry but is happy you made an offer.  The problem in this scenario is the offer is to low but the bright side is that the seller wants to make the deal work.  He or she needs to sell or you may have a hungry agent who really needs the commission, or maybe the seller just want to close this chapter and move on. The problem is they would never sell for such a low price. Might as well give the property to Uncle Jack or rent it out for a few more years until it sells. This is a great position to be in.  Don't focus on the why and try to work out a scenario that will benefit all parties.  You may still have to come up with some money but in this scenario the likelihood of getting a deal done is very high.  If you don't have the money try wholesaling or bird dog the deal to an Investor.  Here is a recommended Investor that will give up to $2000 per deal or take over your contract.

Scenario 3)  They take the offer or counter with minor terms. What?  You mean this actually happens?  Why yes it does.  In my opinion it is much more rare to get a house that is in perfect condition for Cents on the dollar but it can happen.  Often in this scenario you'll get a discount because the house is dilapidated or needs major work.  Do you care? NO! This is what you're looking for.  The beauty of getting a house like this is that not only will you get a discount but you'll also be able to get past all the problems and see a diamond in the rough.  That's really the only real trick to #RealEstateInvesting.  See what others can't see and create what other couldn't create.

For some the pressure or even the time that it takes to send out low ball offers is too great. Low balling for profit can be a win win situation for those of us that are dedicated and willing to put in the work. The best transaction are those that benefit all parties so never take advantage of a seller.  Remember the RE investment world is a small one and it only take one bad deal to ruin your rep.  Be courteous and never give up. Hard work always pays off and you'll find the perfect deal.

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Why Online Marketing is Oxygen for your Real Estate Business?

If sales is the life blood of a business then what does that make marketing? Oxygen.
Sales is the fuel that feeds your blood. With out marketing even seasoned sales executives will struggle. Since the Internet is changing the way we do business, we have to change the way we find leads. Everybody wants make money today, not tomorrow.  So how does a traditional Investor transition and leverage the power of the Internet to drive traffic to his or her business?

By utilizing SEO technologies, Email campaigns, and animated websites, a business can create a whole new segment of leads. Some Internet Savvy Investors have been able to transform their businesses overnight. The bottom line is that Internet Marketing can take your Investment career from no deals; to hundreds of closed deals in a very short time.

Internet Marketing can be costly:

You need to do Internet Marketing right or it could end up costing you a fortune. Be careful not to get carried away. Paying Google to bring up your site with high priced key words like "Foreclosure" or "Private Money" is a bad marketing campaign waiting to happen and can cost you tens of thousands of dollars. If managed correctly a couple of hundred dollars can transform you into a multi million dollar Investor.

Build Leads Organically; We all have social networks and we should start with those first. See my post about using MLM techniques to build networks. Scroll down to using your personal network of power.  Most of us have at least 300+ social media friends but have you ever asked your FB friends how they are doing in a direct message? Have you introduced yourself and told them what you do?  Most likely you haven't.  Simply giving them a hello and signing your name with your website is enough to get them curious.  Most of the time you don't even need to mention what you do until much later.

Update webpages, fan pages and social media groups often; Keeping your site updated with your current deals and having a sign up form is huge lead generation tool.  It lets people know what your doing and gives them a way to stay connected to you.  Keep your FB fan page up to date with new events and connect directly with people that have liked your page.  Post to forums and look for other RE related website to network with other Investors.  

There are many sales channels on the World Wide Web.  You just need to start to channel those leads and create an end less supply of BIG leads.

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How to find Private Money Lenders because Banks are useless.

While going to make a deposit today I remembered an important point about banks. They take zero risk on any deal and typically are pretty much useless when it comes to investing in real estate.  The issue I had at the bank today was that I had a check in the name of an old business. In comparison to my monthly deposit volume the check wasn't for allot of money. I explained to the banker and even the branch manager that if I did not deposit the check in the name of the old business, I would have to go back to the client and tell them about the name change.  My motto is if it ain't broke then don't fix it so I really didn't want to have that conversation with a smaller client.

The point is if a bank won't even risk a small check deposit for a client who has deposited a lot of funds in their bank, imagine the sleepless nights that they would face if they ever invested in one of our Major Fixer upper deals. I remember back in the beginning of my investing career I went to a prominent loan broker and created a great presentation on how I would purchase 10 properties in one year. I showed him with intricate graphs how I would fix them up and sell them for a profit.  I spent a lot of time and money creating the presentation. I even offered to give him a personal guarantee.  I still remember how angry I was when after two weeks I heard nothing. This was during the heyday when all you had to do to get a loan was fog a mirror and yet I still did not get a call.  Later I learned that most bankers and brokers only really care about how much money you bring to the table. If you have no money then they are not going to waste their time with you.  I understand why, this is their livelihood and they are trying to make a living but this still does not help your cause.

http://www.debtonation.org/2010/04/banksters-for-parliament

Yet a lot of us that are starting our real estate investment careers automatically want to try to use banks to fund our deals. In the real estate investing game we can pretty much evaluate and identify that banks are completely useless for most rehab projects.  Even most Hard money lenders in this tough lending environment have become so strict that its almost worthless to use hard money. Hard money lenders will require a down payment even if you're getting the property at $.60 or $.70 on the dollar.  With a proven track record and strong financials some Hard money lenders will lend 100% of the purchase price on a property at the right LTV. I am not saying it's impossible to use Hard money or even banks but what I am saying is there is a better way. I am a huge fan of private money for a couple of reasons:

Number One: Anytime you can bypass the big institutions and go direct, I am always for that,  but private money allows us to do something even better. Be the first to the deal and be the fastest.  In short, SPEED AND PROFITS!!

Number Two: The second reason I am a big fan of Private lenders is cost. Most private lenders are much better with their terms and much more lenient with their requirements. The best private lenders are those that are seeking a stable return in exchange for a promise to pay with a guaranteed outcome.  And there is no better guarantee then under market hard real estate. 

Which brings us to the question: how do you find private moneylenders? Are they like the Lock-Ness Monster and only to be found once every 100 years? Are they like Santa Claus and only appear to those that believe?  They do exist, yes they do lend money and yes they are fast. A good private lender can lend money and close within 7 to 10 days.

Using your personal network of Power.

Finding Private money lenders can be tricky but it is possible to find them in your area.  Talk to all the people around you and use your personal network of power, including social networks. Tell them what you do. Tell anybody that will listen. Even if you think the person is not in a position to invest, tell them anyways.  Explain to them that you find real estate at under market value and fix up properties and resell them on the market.  Explain to them that you are looking for private money lenders and you are wondering if they would ever be interested in investing. Once you finish your pitch always end with the following:

"Thank you for listening to my pitch, I really appreciate it. Even if you're not in a position to invest, I wanted to let you know what I was doing in case you know anybody else that might be interested. I'm going to leave you my business card and if you ever find anybody that's interested I would be more than happy to give you a referral fee." 

In a few weeks follow up with them and find out if they have thought of anybody else that they could refer you to.  If they can't think of anybody then help them brainstorm. Everybody knows somebody with money. It could be the local gas station owner, the owner of the local grocery store, a favorite insurance salesman, a retired executive, or even family and friends. Those of you that have ever done MLM will recognize this technique.  It is a powerful technique that the major MLM's have been using for decades and has proven to be very powerful. In this particular case you are not trying to sell them a product but merely trying to expand your network. I will elaborate on this even further and say never leave a network at a end point. That is to say that you will never accept a dead end.  Never leave that contact until they give you a name. It's kind of like an old detective trick where they sit you down and don't let you go until you give them a name. This may sound like a very aggressive sales technique but it depends on the delivery. Never make it seem like you're being pushy or aggressive but merely asking them to really help you expand your business. It doesn't even matter if at the end of the day all they give you is the name of the water delivery man. 

The harsh truth is that finding real private money sources takes dedication and hard core salesmanship. If you are really trying to find true private money that is endless and fast it will take some time for you to dig and find the right contacts. Be dedicated to your business and never give up a lead. Eventually you'll turn up a source that is too hot to handle.  When you're starting from zero you have no choice but to build your network and expanded until one day your network of private money lenders is so big that you are funding all the deals that you can find.  

Good Luck and Happy Investing.

Get on the buyers list that will give you the deals first.