Weekly WIT, November 14, 2022

This week in Summary

Investing Tip of the week

Consider carefully the use of debt. It brings leverage into the picture, but also risk. The only good debt that exists is low-interest fixed-rate long term debt on stable income-producing properties. Some would argue that even that is too much risk saying that complex financial modeling may seem to be sophisticated, but may NOT be the way of wisdom. 

 

Questions to ask yourself about debt:

  1. Do I NEED to borrow the money? If the answer is “yes” it’s probably not a great decision.

  2. Is the interest rate relatively low?

  3. Is the property stable (both in terms of income and the community it is in)?

  4. Have I thought through the issues of “return on equity,” “opportunity cost,” and “net income”?

 

If it were not for debt, there would be no large buildings – arenas, skyscrapers, hotels – you name it. But ask yourself if you have similar business skills to those who are deploying debt in those structures. 

Joke of the Week

Q: What is the opposite of Artificial Intelligence?
A: Natural stupidity.

Blessing of the week

 

Here’s to the health of your enemies’ enemies.

This week's Video: Real Estate Investing for Beginners: 7 Rules You Need to Know

You can get the PDF of this by going to FlippingAmerica.net/SevenRules

The Flipping America Show

Episode 569 Ad Words
November 7, 2022
A wise man once said, “until you make a sale, you are not in business.” In our business we can’t sell until we buy and in order to get buyers we have to do some selling. One of the best ways to generate leads for your real estate business is about to rise up and tap you on the shoulder. 
 
Episode 570 Seven Rules for Real Estate Investing

November 9, 2022
Here are my almost famous Seven Rules for Real Estate Investing. If you want the Cliffnotes or Sparknotes or whatever the abridged version is called these days, you’ve come to the right place. For some of you – this may be the only real estate instruction you need – ever.

Flipping America News

We are working on an episode (maybe a regular feature) on the REI tech tools people use. Do you have a favorite? Tell us about it – send an email to info@flippingamerica.net.

 

Predictions for 2023 on the way. 

I’m reading the tea leaves, peering into the crystal ball… nah – actually I’m immersing myself in economic and market data, combining with my experience with human nature and my intuition into macroeconomic trends – and beginning in a few weeks we will start reviewing 2022 and predicting 2023’s biggest real estate trends.  

 

Got a funny, clean joke? An interesting real estate story? Submit them to info@flippingamerica.net.

Real Estate News

Mortgage rates take a tumble:

The average for a 30 year fixed mortgage declined from 7.25% to 6.62% last week, making for the largest one day drop in history. What to make of it? Not much. I still believe interest rates will wind up about 7.5-8%, which is probably where they should be in a balanced market. 

 

Redfin gets out of the home flipping business:

It turns out they can’t do it better than Zillow after all. None of the large-scale high tech house flipping businesses are turning a profit, which continues to surprise me that people would invest in them. I know they are betting on the upside, but I don’t believe it’s coming. Zillow and Redfin should have had a leg up on all the other iBuyers and if anyone could do it, they could. 

 

Why the iBuyers will ultimately fail:

  1. No amount of computer modeling can make up for the lack of local knowledge.

  2. They do not have a profit motive. Surprising, right?

  3. Their business model relies in part on deception. People can be fooled, but not forever.

  4. Their business model relies in part on above average home appreciation. There is an “average” for a reason. The past seven years have been above average, but all they did was balance out the losses of 2008-2012. 

 

If you build your business depending on exceptional circumstances or the stupidity of your customers, you will fail. And you deserve to.

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