Today, Mike Singletary chats with us about knowing your numbers, from estimated repairs to city characteristics. Know what features of a home people are looking for in a particular neighborhood and determine your costs for your planned exit strategy.
Mike H.: Welcome to the We Buy Ugly Houses show, where real investors share real investing stories and lessons from the trenches, where our team buys thousands of investment properties each year. Now, let’s meet today’s host.
Mike S.: Hi. My name is Mike Singletary. I’m a DA in Austin, Texas. I’m your host today for the We Buy Ugly Houses show. Today, we’re going to talk about understanding your numbers. I’ve been fortunate enough to work in three different territories and I started about 2013, but I’ve worked in Houston, Austin and now we just opened up another franchise in Waco. And it’s really important that you understand your market demographics and you understand all the numbers that it takes to be successful in this business. One of the big indicators are neighborhood characteristics, economic indicators. A lot of mistakes that people, especially beginners, do is that they over escalate ARV and underestimate repairs and that can really get you in trouble.
One of the ways you can circumvent that, obviously, is come up with a repair list or some kind of contract agreement with your contractor. So when you know you’re going into a buyer call situation, you already have your repairs and your analysis predetermined. That’s a huge help. It’s very beneficial. Each segment of the city, each neighborhood has a specific characteristic that you have to really take into consideration.
One of the biggest things for us, when we moved to Austin, was it’s a totally different animal and we had to adjust. We lost some deals in the beginning because we weren’t really tuned into that specific neighborhood. It doesn’t fit into the typical 75% minus repair criteria. We lost some deals back then and we had to definitely take a look at what was going on. And we found that to monetize each deal, we had to do some other things. We had to do some additions or even new construction and we weren’t ready at that time.
What we had to do is figure out the people that were doing that, what was their criteria so we could put it under contract and sell it to them. So understanding your numbers, understanding your exit strategies beforehand is vital because you’re paying a lot for your leads or you’re paying for your leads and you want to make sure that you’re maximizing every opportunity that you can.
So, with that being said, you want to know your cost per lead, you want to know your cost per buy, cost per contracts and you really want to work backward on how you want to scale your business. How many houses you want to buy is really going to be determined by those numbers. Fortunately, we have that data with HomeVestors available to us so that exponentially increases our learning curve right off the bat. But it’s so vital to run it like a business and be very consistent in that aspect.
Once you have your repair analysis more fine-tuned and your ARV also, everything it’s a lot easier you can just go into your appointment knowing that you have several steps on your exit strategies and it just makes the whole process easier.
Let me give you a prime example of a situation that happened with us. One time, we thought we were going to wholesale this property. We did more of an auction-style wholesale. That essentially means that you have everybody come and in a very short segment of time and they give you their bid afterward at a designated time. And so everybody was in the same price range and there was this one person that was a little bit above that price range. And after talking to him, I knew that he knew what I was doing so I knew I missed something.
And after we finally closed the deal, I called him up and go “Hey, let’s go have some lunch. There’s something that I must’ve missed. I know that you’re happy with the deal, I’m happy with the deal also. I’d like to pick your brain about the situation.” He’s like, “Absolutely.” I’d say, “How did you get to this valuation because I know, I could tell you know what you’re doing. What am I missing?” He’s like, “Well, I’ve been working that neighborhood quite a bit and one-car garages in that neighborhood are not a big deal.”
It blew my mind because I drove by the neighborhood countless of times looking at my comps and your mind has a way of playing tricks on you. You see what you want to see. Of course, after that conversation, I went right back over there and sure enough, I saw nothing but one-car garages. So you have to go into a situation without a preconceived notion of what it is and try to find the best way to monetize it. I hope that helps and I will see you next time.
Mike H.: Are you looking to get started in real estate investing or take your investing business to the next level? HomeVestors, the “We Buy Ugly Houses” folks, is the number one home buyer in America, where our franchisees purchase thousands of houses each year, many of which started with little to no experience. If you’d like to chat, please visit UglyOpportunities.com/contact. Learn more from the We Buy Ugly Houses Show, an amazing HomeVestors team, by watching more shows at UglyOpportunities.com/show or by finding us on iTunes or Stitcher radio.