Jim Fleck Audio from January 2008
Hello and welcome. This is Jim Fleck. What we are going to be talking about today is basically, I really couldn’t keep a lid on it any longer, I’m going to be talking about how the next year or so is going to be one of the best times in the last 25 years in this business to make an awful lot of money in real estate. The past few years were excellent, there is no doubt about it. But there is a lot easier ways to make money coming up. Now we are going to make more millionaires than we have done in the past. The real estate market, there is no doubt, it is slowing down. There is just no doubt about that. And what I would like to do today is kind of a behind the scenes discussion on how smart investors are making big money because of this slow down. And also, we will talk a little bit how you can actually sell properties in just a couple of hours. And that of course is one of the main objections people have is how am I going to sell this property if I actually buy it. If people are working on foreclosures, if I get the short sale accepted, how will I sell it. If I buy this thing subject to, who am I going to sell it to? If I get somebody’s deed or wholesale a property, you know, how am I going to sell it? Well that’s the easy part.
You know if you got any interest in really pulling in a lot of cash and learning how to really take advantage of what’s going on in the real estate market, this real estate meltdown. In fact it’s quite frankly without risking your own money, without even
risking your credit and it’s without even picking up a phone to call a seller. Or even leaving your house for that matter. I don’t go look at properties, I don’t go call sellers, I don’t prescreen sellers. If you stay with me today you are going to find this is going to
be really the most important and profitable message you actually get all year. And you would really like to do yourself a favor, turn your phone off and spend some time with me today.
So, what I want to talk about is real estate cycles. And one of the keys of this business is cycles. The basics don’t change. I want to make sure you don’t fall for all the negative
crap that we hear on TV, you see it in the newspaper, you hear it on the radio. Because I can show you how smart investors who understand how just a little bit about this business. Actually take advantage of the negative publicity while everyone else runs to hide. It actually makes the business easier for us. I’m sure you heard people talk about how you
should be buying, people are selling, you should be selling when people are buying. Whatever the general population is saying it is almost always a good bet to be doing the opposite. And as you probably hear people talking about these days is that you can’t sell
houses, how am I going to sell houses? So if you can’t sell houses why would you even be in real estate?
So, we are going to talk about exact techniques that I and some of my students, the real real estate insiders use everyday to make a lot of money in down markets. And there is ways to make thousands and tens of thousands and hundreds of thousands of dollars and there is always ways to make quick $10,000 in a couple of days, in a couple of hours. If you have never invested in real estate before even if you have barely any money to your name and your credit is no good, you can do this. I don’t do real estate the old way. It is not, it is as I say not your father’s real estate investment business. You don’t scour the classified ads looking for key words that show you that people are motivated sellers and then you have got to go around town putting up bandit signs. And you have got to make a hundred offers to get one accepted. None of that happens.
In my line of business you might make three, four offers a week. You might if you choose, go look at one or two properties and buy one. And the other one you end up buying, you know, a couple of weeks later. It is a pretty easy game. And when you get it set up correctly you can buy two or three or four a month and never leave the comfort of your own home. So, and you know there is nothing unethical about this business. These are properties and deals that are out there and people are wanting to sell them. You are not taking any advantage of anybody. I just don’t do business that way, don’t
teach people to do business that way.
So, you know, let’s talk about some things. And oh by the way, I know you are probably skeptical, I know you might think you know what this is about but the odds are pretty high that you don’t. So let me just you know, this isn’t about short sales. It’s not about buying and holding property for appreciation. It’s not about fixing up pretty houses or fixing up ugly houses. It is not about negotiating with banks and foreclosures and **** signs. And you know, risking your life savings. This is about a life and business change. It is about investing in real estate in the new century with all the new lending regulations and banking environment and technology and all the things that we put together over the years coming into play. So, that is what we are going to talk about here today. It is going to be a pretty short recording.
And so let’s get right into it. There is no doubt that the market has slowed down.
That’s clear, it should be clear to you, it’s clear to me. But that doesn’t matter because the techniques we use actually work in any real estate cycle. And you would have to say these days it is a buyer’s market. And that is what matters to us right now. At times it’s a seller’s market when a couple of years ago when properties were skyrocketing in Phoenix, in the Phoenix area, you could buy a property and you could sell it two weeks later and have 10%, 20% appreciation. So that was a seller’s market. Right now it is
obviously a buyer’s market in most areas. So we are going to talk about that. It will be valuable for both beginners and seasoned investors because we have both on the call today.
And as I mentioned the next 25 years in this business you could have made an awful lot of money. And the last couple of years when the lending was freewheeling and every single person in America could get a loan, the sub-prime market was there, the lending was there, everybody could buy, buyers were easy to find. You know it was pretty easy. And you know what, it is getting easier actually. So and that’s because of the cycles we go through. And we are going to make more millionaires this year than we ever have. And so we will talk about cycles because this business again is cyclical and all you have to do is watch the trends and there is only a few things here and there you need to pay
attention to. And we will talk about that. You will know what cycle. But the basics of real estate investing never really change. So you don’t want to fall for things you hear
on TV and radio and in the papers. It is just, you want to stay focused. And I will show you again, how we can actually take advantage of all that negative publicity because all the other investors are taking off and hiding. And a lot of the new people decide well I’m not going to get into it because you can’t sell a house these days, there are so many houses on the market.
So let’s talk about it, I mentioned it was a buyer’s market. It’s you know, buyer’s market, seller’s market. If you have ever run a business it is just a matter of supply and demand. I’m sure you all remember supply and demand from I guess maybe high school or college, you know. And that’s all it is. And when people start not buying or not
selling or believing that they shouldn’t buy or shouldn’t sell it is usually just because of the media. And you know, there are certain things like interest rates going up that start reporters writing and people start getting scared and you know, when people start getting scared then there is more articles and it is just a vicious circle. When the buyers slow down, it’s a buyer’s market. And there is a feeding frenzy like a few a years ago it’s a seller’s market. And so it is just again a supply and demand. And that supply and
demand again can be affected by the media, can be affected by interest rates and that vicious cycle beginning.
So when we talk about a seller’s market which is you know where a seller can ask their price, there is just only a few sellers out there and there are buyers everywhere, the sellers can ask whatever they want. And they usually get whatever they want. And in the past couple of years if you think about it, what has happened in the environment was the interest rates ****, correct? There was a sub-prime market lending money to people also. So that made it possible for anybody to qualify for mortgages. And if it’s easier to qualify it’s natural there is going to be more buyers out there instead of renting
apartments and trailers and houses they are actually buying them. And then when you have a seller’s market, what else happens? Well the prices go up. There’s less supply
and there is more demand. There is a lot of people out there need stuff and there is not enough there. So what is there, you can raise the price. It is no different than you know a stick of butter.
And so in the last few years, especially like in the Arizona market, California and other markets also this didn’t happen as much in every market, but you know, prices just sky
rocketed. And the demand, there was so much demand it just kept driving prices up because everybody wanted to buy property. And so there was a big increase in prices and you know, there is low **** that is also a part of this. The real bottom line is, you can make a lot of arguments for a number of economic reasons and you can turn on one of a dozen TV stations and listen to a myriad of reasons but really it was demand. And the interest rates are always going to affect the marketplace. No matter what cycle we are in and so in the last couple of years it has been up and down a little bit. But for the most part it has been within a point or two. And very often they don’t raise and lower very much.
So that’s not really the driving force. The real driving force is people just get into cycles and it is the vicious cycle I call it and it starts with the media. I mean you can see it happening now because the media is talking about the foreclosures a lot and also talking about, you know, home prices are dropping and people can’t sell. And then you start talking to real estate agents and they are getting the same way. So it is really a media problem. And it just ends up again being a vicious cycle which is almost like a self-fulfilling prophecy.
So it just keeps going and the best thing about it is this is where you want to step in. If you are not investing in real estate right now, this is the best time to do it. Okay, we want to take advantage of this situation. I mean you look at, I mentioned it earlier and you know, if you want to talk to some of the wealthiest people in the world, wealthiest people in this country, you will find people that were buying when everybody else was selling and selling when everybody else was buying. That’s not just real estate, that’s
stock market and business in general. So when the markets and the news gets bad, that’s when I actually get excited about things.
So speculation you know is something I want to talk about also. There is a lot of deals all over the country and you know, what I really call get rich schemes in real estate and you know, people jump all over things. And then they start paying prices that are too high and it ends up being a bubble or a ponding scheme or a number of other things. But the bottom falls out of it. So you want to be careful. You don’t want to be just chasing anything that’s hot. The best way to make money in this business is to just do the fundamentals, pay attention to the cycle you are in and just do the deals and stay with the basics. And then what happens is the gravy deals fall in your lap. The pre-foreclosures, the 30, 60, 90 day late deals, absentee owners, vacant houses, luxury homes, these all can fall into your lap.
So the deal really depends on the buyer and what you know. That’s the key to any cycle. So when you pay retail for a property the only way you are going to make money is you got to sit around and wait right? It’s got to go up. If property is worth $100,000 and
you pay $100,000 for it how are you going to make money? You have got to wait for the price to go up. Well if you don’t pay retail, you don’t pay $100,000, you build in equity and the problem really is that people go out and pay retail price for these schemes and these hot trends and they are not building in any equity. Then they have got to weight around and wait for something to go up. A lot of that is, you know, in the condo market in Florida. That is what was going on and now that has the bottom fallen out of that. People were going in because condos were going up and they were hot and selling and you could buy it for whatever, it didn’t matter. People were buying them for full retail and then sitting on it. And now they are not going up anymore. People were still buying them for full retail up until a short time ago.
So, that is a problem. So whether you are buying those condos or houses, commercial property, pre-construction, anything if you pay retail you are going to take your biggest
chance. And so you have got to not pay retail, that is one of our keys. And so let’s talk about the seller’s market a little bit more. It does bring in a lot of competition, one of the things that I like to talk to people about is the people who get the education in the business of real estate investing and they learn buying and selling and they learn both sides of it, you really don’t have any competition. So it doesn’t matter if it’s a seller’s market. It doesn’t matter if it’s a buyer’s market. You know when it’s a seller’s market there is so many people, you know, call themselves investors and they don’t really get trained. They just go out and buy and they are selling and because it is a seller’s market they can sell their properties easily. They think they’re investors.
And then something comes along like today’s market where it appears that prices are going down, the days on the market for a house are going up, etcetera. Now they are not so savvy, they are not looking so smart, they are going bankrupt. There are all kinds of things going on and they had friends and family and business associates talking about how they have the Midas Touch, now all of a sudden they can’t pay their bills. So, in a seller’s market, you know, you don’t have to be very smart. And that’s how I was the last
couple of years. I mean you buy a house, you can pay too much and it goes up and you still make money. And you know, you are the talk of the town. It is kind of hard to make mistakes.
But if you want to start in this business and you don’t want to get educated you are going
to be taking your chances. You have got to get yourself educated. I don’t care what business you are in. I’ve had mail order businesses, I’ve had consulting businesses, real
estate businesses of course, I have had Internet businesses, businesses that deal in TV, I don’t care what business you are in if you don’t learn the basics of the business you are in trouble. And that is okay. I like that. I love people that decide they are not going to get educated and they are going to try to do this business because they are not around very long. And they end up finding their way to one of our events or something and they can get back into the business or they find somebody, they find a way to get educated but, you know, the real estate business isn’t the problem. That’s not the fact that things look
bleak is not the problem. It is the person running the business. And again it doesn’t
matter if it’s the restaurant or a chiropractor or a consultant or a contractor or a real estate
investor. You know, you have got to know the basics. And one of them is if you pay
retail, you are going to have a hard time making money. And so you basically have to
wait around for the market to go up. It is not how we make money in real estate.
And unfortunately there is a lot of training out there to just go out and buy and hold and
sit around and wait and the price goes up and that you may get lucky and that may
happen, but that is very highly risk oriented. And if you want to take that risk, go ahead.
And if you want to wait 10 or 15 years possibly in some areas then go ahead. So, I’m
going to make sure that I get across the point that currently we are in a very great time to
buy houses and so let’s talk about how the cycle has changed and what marketplace
we’re in and why is there so much opportunity for all of you today. I mean it is the
perfect time to really use your training that you have been given either by me or
something else or maybe you haven’t yet and you still need to get training. But it is the
best time to invest in real estate without your credit and without losing money. And it
doesn’t matter if you have money. You don’t want to use your money. If you go out
and get loans you may or may not know this but the banks are only going to give you so
many loans in your name and that’s it. And then you are going to have to pass on deals.
We don’t say don’t use your own money, just as a lark, there is a reason you never use
your own money. But one of course is if you aren’t using your own money you aren’t
risking your own money and another is you can do a lot more deals when you aren’t
using your own money. Unless of course you are sitting around on top of $10 million.
So, again, this is one of the best times. And a couple of decades ago you know, you
could go, in fact it pretty much feels like it was a couple of decades ago you can see
advertisements in papers where there is just dozens and dozens of houses listed for
auctions. I mean we went years and years without seeing things like that. Now you
will see an advertisement at the bank and there will be 200 homes on the auction block
and that is what it was like years ago and you just go down peeling off properties and
auctioning them off one at a time. And for those youngsters you might not remember the resolution trust corporation and the credit union fall out. But that is what was happening back then and it actually changed some tax laws. And it changed the cycle back then. And those times have come around again. Banks are having a lot of properties, I mean, find a local REO real estate agent and see what they’ve got. Go to buybankhomes.com, see what they got and you will see that banks are taking properties back at an unbelievable pace right now.
And you may know that our country has no savings rate, it is a negative savings rate which means everybody is spending more than they earn which means if somebody misses a paycheck or two, it’s disaster and they go into foreclosure. And those go right
back to the banks. Again, we are not talking about investing in foreclosures here today but just want to get you understanding the environment. And so these banks have got to get rid of these properties and they can’t sit on them and they have got to get rid of them.
They don’t want real estate. It basically just affects their business as a whole. They have got their non-performing assets, their bad debt, causes their stock to go down, you know, they can’t lend as much money and people get fired and government steps in like
they are starting to do now with the sub-prime mess, they are starting to try to figure out ways to assist people that have these bad loans and all that’s happening again. Just like it happened a couple of decades ago.
And so the good news for us is if you learn how to buy property correctly and you are not writing checks, you are not guaranteeing your debt and you are not out there saying you can do things you can’t do there is a lot more to choose from these days and you don’t have to work as hard. And, you know, when everybody is doing well sometimes it’s harder to find these flexible sellers and motivated sellers and find these deals. Right now there is an abundance of them. And so again, it is just a matter of supply and demand. So, if you want to get into the real estate business, again, this is as good a time as there has ever been. And it is a buyer’s market it is where there is, you know, more sellers than buyers. There is more inventory. There is the supply is there. And the
demand is not. That’s great because the media is saying that you shouldn’t be investing in real estate. So that lowers the demand, the supply is higher. It has nothing to do with reality. So, you can actually ask a realtor if you have access to the MLS, just go look at the active listings in your zip code. And then go look at your active listings from 12 months ago or from last month and you will see active listings rising, that means inventory or supply is going up. There are more sellers than buyers. That doesn’t mean
those houses actually sell. It just means they are listing them.
In Arizona, you can list a property and it could be gone 2 hours, 3 hours later. It could be gone 10 minutes later. That doesn’t happen anymore. There is always going to be
certain areas in the country where that does happen. Where it is still a seller’s market and there are still some pockets around the country. But, you know it takes a while for sellers to understand that they are not going to sell their property right away. It takes them a while to realize that you know, it is going to take 6 months or 11 months and that they have got to really be proactive about selling their property. And they either have got to take charge and get it sold themselves or they are just going to have to wait it out and they are going to have to, if the average days on the market is 11 months, they are going to have to wait for that. You know things can change rapidly. And that is what things are doing now. And that again is opening up the opportunity for us.
You just get up one morning and all of a sudden interest rates are rising, it’s taking on our sell homes and you know, the supply is down, or the supply is up and the demand is down. That doesn’t matter. Because you don’t really care what cycle you are in, the basics are the same. So you can see a lot of builders are slowing down. They are not out of business they are just slowing down. They are not building as fast because the demand is not there. They adjust, businesses adjust. And it is the same thing with real estate investing. You don’t just get out of the business. Or you don’t just wait to get into the business.