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Fix It & Flip It · The Jon Sanchez Show

• Jon G. Sanchez: Good Tuesday afternoon to you. Welcome to the John Sanchez Show on News Talk 780K. It's a pleasure to be with you into the month, into the quarter. But the real pleasure is I get to be with my two buddies, my best friends in life. Mr. Corey Edge of Agility. Welcome back. two days in a row. And the little bird told me that we get you on Thursday also. So life good, Corey. Life is good. Cory Edge: It's a it's a holiday week, man. I couldn't think of a better place spend my Fourth of July than with you guys. ⁓ Dwight Millard: ⁓ Jon G. Sanchez: Yeah. Dwight Millard: Yeah. Jon G. Sanchez: Exactly. You you heading out of the you always head up to the lake over the fourth. You you heading up there this time? Cory Edge: No, we decided not to this year. Like stay out of the crowds and stay down here. So Jon G. Sanchez: Okay. Yeah. Yeah. Keep keep the sanity a little bit. ⁓ I I expect that homemade vanilla ice cream at your party for the fourth of July this year. That's what I expect. ⁓ Cory Edge: Yeah, I try to, exactly. I will find somebody to make it and it'll be here whenever you want to show up. Dwight Millard: Ha ha ha. Jon G. Sanchez: gonna make the rounds. I'm like Santa Claus. I'm gonna make the rounds on fourth of July. I got a bunch of friends to go see in Reno on on on fourth. ⁓ Millard on Q Home Loans. Welcome back, my brother. We missed you on Thursday. I know you were a bit under the weather as we told everybody. Hopefully you're feeling better and you're you're as handsome as ever. Great to see ya. Cory Edge: Absolutely. ⁓ yeah. Dwight Millard: I I wonder if it's just mortgage you know, sickness or something. I don't know. I didn't feel good, but it's good to be back. I mean, you know, I just feel beaten and battered all the time, but we'll get through it, right? You you you you Jon G. Sanchez: That could be. Yeah, that could be. Let's talk about it. Let's talk about it. Why you feeling beaten and battered? Dwight Millard: Wait, you you gain a little ground, then you lose more ground than you gained. And people are getting very short tempered, let's say. Their their patience is yeah, their patience is wearing thin when it comes to this. I mean that it it's it's it's interesting, you know, John. You you know, 'cause you start out telling somebody something and then it's different in a week or two weeks. I didn't I don't I don't control it. Yeah, I don't control it. And Jon G. Sanchez: Are they really? Interesting. A Yeah. Turns you in turns you into a liar when you don't mean to be. Yeah, no, not at all. Dwight Millard: Everybody's just trying to gain extra money, you know, from the homeowner's insurance we've talked about to everything. It's just costing people a lot more. And I guess I'm the guy that they take it out on, you know, because I'm the one that you have to show up and make the check to. So it's just it's just a different difficult time because this is, know, John, we're we're we're now, you know, March of twenty two, right? I mean, we're going on four and a half years of this, you know, ⁓ mess. And you just yeah, yeah. Jon G. Sanchez: Right, right. Yeah, yeah, exactly. Yeah. Yeah. With no w unfortunately with no relief in sight. You know, that's the problem. There's no relief in sight. Dwight Millard: And I think people get a little bit of, I don't know what Corey sees, but I think people start to feel they see headline, John. We always see and start to feel, here's my this'll, you know, and i i I I I would have to think that the there's still quite a bit of cancellations out there. You know, we had a we did a show on that at one point in time, you know, with the cancellations, but I I still gotta be out because ⁓ you know, it just coming. The affordability is just not kicking in for these people. Jon G. Sanchez: Yes. I mean, Corey, how how's ⁓ you know, we're a little off tangent, but I w is important stuff. How how will affordability how it ever, if ever, will it ever come back? I I don't see it happening, guys, because you hear inflationary numbers, the CPI, the PPI, the PCE numbers. There's no s there's no break in sight. So how can we expect some type of a break on inflationary pressures on the housing market, Corey or Camus? Cory Edge: The system breaks. I mean, at some point that'll happen. I'm not saying it's today, but it'll happen. I I mean I can share with you conversations I had yesterday that were incredibly eye-opening to me from developers. ⁓ a deal that we're going through right now that will kind of echo Dwight's point that he just said, that people are kind of at their wits' end. ⁓ and so everything he just said has happened to me the last twenty-four hours. So if it's happening to Dwight and I you can imagine across everybody else. So Jon G. Sanchez: Okay, okay, okay. Right. Really? D do interesting. No kidding. Yes. Cory Edge: Yeah, it's it's rubber band is very stretched at this point. Jon G. Sanchez: We see folks, that's the value of this show is these two gentlemen in the trenches, like I am on the stock market side. They are in the trenches every day. You don't hear this on CNBC or Bloomberg or anywhere else, right? You gotta be in the trenches living, eating, breathing, and talking to human beings, right? That's what you guys do every day. You're talking across sitting across the desk, wherever it may be, and you're hearing this. So ⁓ invaluable. I'm gonna press you on this a little bit. Corey, I'm gonna go back to you. Can you share with us what what this develop this discussion with this developer because that's important. Cory Edge: Yeah, so two different kind of things. But yesterday I had without giving out all the specifics, had a conversation with a really good friend of mine. They deal with a lot of incredibly large land acquisitions and sales and I mean just th th they handle pretty much everything in this entire area, period. ⁓ and we were just talking about a piece of land that we were Jon G. Sanchez: Yeah. Cory Edge: both kind of looking at but he shared with me that they are working on a huge, huge, huge project right now. And without getting into all the details, the cost to improve this raw dirt into finished lots I don't to give out the exact numbers, but it was it was it was more than what a a national developer would be willing to pay period for the finished lots. Jon G. Sanchez: Yeah. Cory Edge: So the cost to get them there does not even include the land that you have to purchase. ⁓ and so when we did the math backwards, if a developer was to come in and buy, and this is a very large subdivision, they were to come in and buy this at that cost, plus buy the dirt, plus build the houses, that initial thing would have been almost 50% of what they could charge for that house. ⁓ it's just, it's a it's crazy numbers. And needless to say, the conversation went to Jon G. Sanchez: No. There's no buyers. All right. Wow. Wow. Cory Edge: This massive deal was an escrow and it completely blew up because the costs the costs to get it to where it needed to be were just way, way, way outside the bounds of what anybody could think of. Jon G. Sanchez: Did it really? W what what are they looking at, Corey, when you get to that level of of land development? Interest rate costs trump what Dwight deals with, dealing with the the the the the home buyer, right? I mean, obviously we're talking millions or if not hundreds of millions of dollars. guys are savvy. So if they can't make the they can't pencil out to make it work, what does that mean for everybody else? Cory Edge: Sure. Well, the interesting thing with this specific scenario is the companies that would buy this, they don't need to go to the they don't need to go to their local bank. They go to the stock market. They raise debt. Sure, that I mean there's always going to be an interest rate component in it, but it's not like they got to worry about a mortgage rate. The interesting thing on this was even aside from that, let's say that they were just paying cash, the numbers are completely upside down, period, because of the cost that goes into turning this raw dirt into finished lots now. Jon G. Sanchez: Sure. That's right. Okay. Okay. Cory Edge: is just astronomical. Jon G. Sanchez: In that ⁓ don't have a lot of raw cost going into developing lot. You have Cory Edge: ⁓ are you kidding me? That's where all your costs are. So if you take, let's say you take, again, no, I don't want to get specific. Let's say you take 500 acres and we're gonna turn it into 250 home sites. To get it to finish lot, I've gotta go through all the municipal stuff, which is gonna take me, if you don't have your lots already papered, that's gonna take you a year and a half. easy. In the city of Reno, maybe longer. Then you gotta do your undergrounds, then you gotta do your streets, then you gotta do your sidewalk, then you have to do he was telling me one development, the county pushed them so hard that they made them improve four, four water tanks that had nothing to do with the property they were improving. It's just a push, push, push. So there are to give you an idea of the numbers of this, at the cost per lot that this would have been, the number was 150 million dollars to go from raw dirt. Jon G. Sanchez: Sure it was. Yeah. Cory Edge: to finish lots. So it's a huge chunk of money. Jon G. Sanchez: Which which could sell for what? Cory Edge: Well you got the finish lot, which might these are production homes, right? These aren't these aren't, you know, anything special. So the houses on Jon G. Sanchez: Right, right. But but you're gonna sell that raw but you're gonna sell that raw dirt to a developer. Right? They're they're coming in, they're developing the raw dirt into buildable lots. Cory Edge: Correct. So big national builders do not develop dirt. They buy finished lots. They do not want to get involved in the entitlement process. It's too messy. There's too much ⁓ distraction in it. So they will buy a finished lot. Again, in this specific instance, these lots were going to cost close to a quarter million dollars per finished lot. Now, a developer that comes in might be able to sell houses on those lots for 700,000, 650, depending on where this was. Jon G. Sanchez: Okay. Right. Right. Right. Cory Edge: The numbers just had make absolutely no sense. It just doesn't work. Jon G. Sanchez: Not enough profit once once once the sticks come out of the ground. Going backwards. Wow. Dwight? Cory Edge: You're going backwards. Yep. Dwight Millard: You know, it's interesting, John. I had that conversation with a builder today. that the the misinformation that these builders' margins are where they're at, where they think they're at, they're not even close. And Corey's point, that's why. So when they come in and say, Hey, I want fifty thousand off the sales price, I'll buy your house, they don't ha I I my suspicion and and I'm not, you know, listen, I yeah, my dad's a built was a builder when I was growing up. I ⁓ I it, they they take a lot of risk out there that people don't ⁓ Jon G. Sanchez: Mm-hmm. Yeah. Dwight Millard: you know, account for. But but Jon G. Sanchez: Sure. But but guys, these major Wall Street firms, they're making money hand over fist. at least on the quarterly earnings numbers, they are. So we're we're Cory Edge: So remember when we remember when we did, was it DR Horton or whoever we did that day, their numbers came out and we took out their their it was a quarterly or annual profit divided by how many homes they did and their profit margin, you remember that? And don't remember what it was, but it was minuscule. So they're doing the Walmart stuff. They're going out and saying, Yeah, we can spread this out, and maybe this'll take us 10 years instead of five, and maybe it'll take long. So they can spread out that cost and the Jon G. Sanchez: Mm-hmm, mm hmm. Mm-hmm. Right. Cory Edge: Tri I mean, come on, John. They do some financial engineering to make their quarterlies look very good. Jon G. Sanchez: That's my point. I'm getting to the point where our listeners are not gonna feel sorry for them when they ask for fifty thousand dollars off and you're saying it's how much profit, but the quarterly numbers show they have profit. It's just right, Dwight, it's in the in the in the money markup, it's it's the upgrades of the of the appliances and all the you know, so on and so forth, right? So they're making money, but just not on the pure profit of the house, right, Corey? I guess that's the point I'm getting to. Okay, just want to make sure I'm clear on that. Yeah, fascinating, fascinating, fascinating. Dwight Millard: Mm-hmm. Mm-hmm. Yeah. Cory Edge: Yes. Correct. Yeah, yeah, yeah. Jon G. Sanchez: And you know, again, there's no there's really no no relief in sight at this point, right? So I think you're back to how this conversation started, Corey, back to the point where until something breaks, prices don't come down, right? F from an inflationary standpoint, they're going to continue to rise. Dwight from a rate standpoint, there's no sign that rates are coming down. So yeah. I mean, even if you got a quarter percent cut, even if you know, worse comes out in the next couple of meetings and gives us a quarter percent cut, big deal. Cory Edge: Mm-hmm. Sure. Dwight Millard: Mm mm. Yeah. Jon G. Sanchez: Not going to do anything. You to get on a sustainable path of rates coming down, but you also have to have weak economic conditions, right? To to to do that. So you do start to see suppliers, the builders deal with, etc., start to lower their input costs. That's where it all starts. You you look at the PPI number, guys. Remember it came out last week. I don't know if you guys saw it, ⁓ what was it? I think we're up 4.1 percent, you know, the wholesale level of inflation. That's just staggering, staggering. So just looking at an average of 4.1, not to mention. Dwight Millard: Yeah, yeah. Jon G. Sanchez: obviously different components of lumber and some of these other areas, I'm sure significantly higher than that PPI number. So Dwight Millard: But John, we had that, remember we had that conversation last week about affordability on the house, all the components that go into it. You're absolutely right. A quarter point's not gonna do anything to anybody. You've got homeowners insurance. I I mean, that is a big problem. And I'm not sure how they're gonna solve this one. They're not even talking about it. But well, yeah, that's like flood insurance. I don't know. I don't know if I agree. But yeah, I mean that I don't know how you mean, I I I saw a quote the other day for a mid 500 house, 250 a month, and it was basic coverage. Jon G. Sanchez: Yes. No, nothing. Yep. They need to nationalize it. It's the only way that I see. I hate to say that, but that's the only way. I know. Yeah. Yeah, yeah. I believe it. I believe it. Yeah. surprised there's not more. So yeah, know. It's a it's a tough situation. Yeah, I know. ⁓ Well, kind of ties in real quickly to our topic. Let me tell you what we're gonna be doing. ⁓ Corey and I began this topic on Thursday and then we only got ⁓ just to a couple of our points. So we're gonna continue this on and it's gonna be even better today because we have Dwight to talk about it. But you know, homes can be, of course, one of the fastest ways to build wealth or ⁓ one of the ways to lose wealth, also, right? There's lot of a lot of ifs and buts about it. Dwight Millard: A month. Well, be careful. It's coming. Yeah. Yeah. Jon G. Sanchez: But with the boys today, what we're going to do, we're going continue this discussion on again, what kind of market conditions do we need to to maximize our odds of making money and flipping homes? How do we finance the flip? What are some of the biggest mistakes the guys see that investors make when they're getting into this area of the real estate market? And importantly, is ⁓ today's housing market an opportunity or is it a danger? So it's really gonna be enlightening. I'll come back. I want to give you the ⁓ what happened in the market. Of course, we'll wrap up the month, the quarterly numbers, and then we'll get right into our topic. Welcome back to the John Sanchez Show on New Stock seven eighty KO which with Dwight Millard of On Q Home Loans and Corey Edge of Edge Reality. Hey guys, breaking news. You ready for this? LeBron is gone. Did you? Okay. I I just Yeah, he's leaving the Lakers. I didn't I just saw the the news headline a second ago when and in our last segment. Yeah, he's leaving the Lakers. So Cory Edge: I heard that. That well Dwight Millard: LeBron is gone. Where'd he go? Cory Edge: I saw the headline that he was leaving, yeah, but I didn't see where he was going. Doesn't his kid play there too? Jon G. Sanchez: Yeah. Yeah. Yeah. Yeah. Yeah. ⁓ well that's gonna be a big one. Have to look that one up after the show. ⁓ yeah, yeah, he is. Yeah, he's he's still amazing. Still amazing. Worth worth over a billion dollars. It's net worth. Dwight Millard: Yeah, I'm sure as cut Ronnie, yeah. I'm sure he'll go too. Cory Edge: Interesting. Is he still good? I don't watch basketball, but he's he's been around a long time. Okay. Think I'll end up in New York. I can make another run for it. Jon G. Sanchez: Ooh, that could be. Wouldn't that be something? ⁓ there you go. There you go. Cory Edge: San Antonio? Put him with Wimby? Yeah. Dwight Millard: Yeah. Probably a c he d definitely gotta get with somebody that can compete, right? Because otherwise he's running out of time. Cory Edge: Back to Cleveland? Jon G. Sanchez: Yeah. ⁓ yeah, yeah, that yeah. Another another year or so probably, one, two years and he's he's done. Yeah. Cory Edge: God, you know, and now you made me feel real old because we used to watch him in high school on ESPN when they would break into his games. Like, ⁓ man, that's so cr. ⁓ wow. That's amazing. Jon G. Sanchez: Uh-huh. Uh-huh. Yeah. Who's this kid that didn't even go to college or know ⁓ can go back to those days. Yeah, you're making us really feel old. It really is. So yeah, we'll follow up on that one. All let's tell you how this market did. Then we're gonna get to our topic. Fix it and flip it. All right. So here's how we finished up on the day. ⁓ Finished a nice solid gain of one thirty six on the Dow, point two six percent to a record close of fifty two thousand three hundred and nineteen. Dwight Millard: Yeah. Jon G. Sanchez: NASDAQ up 394 points, 1.52%, closing at 26,213. SP rose 59 points, 0.79%, finishing at 7,500. the Russell 2000 up ⁓ almost a half a percent, 0.46. That was about a 14-point gain. Okay, get to the ⁓ the numbers, right? Everyone's holding their breath to get to the end of the quarter. Well, it turned out to be pretty decent after today's gain. And again, some these quarterly numbers, and you think back what we went through the first half of this year with the war breaking out on February 28th and so on and so forth. Dwight Millard: Okay. Jon G. Sanchez: ⁓ today we did see back on today, we did see some good strength in the semiconductors. It's been a while since we've said that. Nvidia 2.6% today, AMD up about 7.7%, Intel up six percent. All right, for six first six months of this year, the Dow Jones Industrial Average posted a gain of 8.9%. That is the best first quarter performance dating back to 2021 when it was up 12.7%. For the first six months, the SP climbed 9.6%, and the NASDAQ has outperformed those two with a gain of 12%. But if you think that's good, as I've been hinting all of you ⁓ for now, I hope you heeded my advice. The Russell 2000, the small caps gained almost 22%. Almost 22% the best first half dating all the way back to when Dwight was born 1991. ⁓ All right. the Dwight Millard: Yeah, perfect. Jon G. Sanchez: For the ⁓ the rest of it, it w go to let's go to ⁓ Q two, obviously, since we wrapped up the second quarter. SP fourteen point nine percent for the second quarter, Nasdaq up twenty-one point four percent ⁓ for biggest quarterly gains dating back to twenty twenty, the Dow for the quarter gained twelve point nine percent, marking its strongest quarter dating back to Q four of twenty twenty two. So yeah, is this is gonna go down. And guys, you know, I wish we had a dollar for every time we had to talk about oil and You know, all the all the headlines and Fed decisions and so on and so forth. But, you know, when it all said and was all said and done, like the saying goes, you focus on earnings and that in the long run, that always tends to be what the what what drives the stock price. You can have all these existential events like the war and ⁓ high oil prices, low oil prices, all that. And ⁓ it's all said and done, it just all comes back to the basic fundamental, kinda like in real estate, Corey, location, location, location, stock market, it's earnings, earnings, earnings. That's that's the driver there. ⁓ Finish the date on a book thirty on oil. We broke 70 bucks again, 6952 a barrel, $41.70 rise on gold, four thousand forty. And Miss Millard, I have I have you're gonna be proud of me. I have put together a list of data for you to make your life really easy. Cause I know you're having a tough day. List of these bond yields. You ready for this? First, I want to get your take. Let's talk about today. Four basis point increase, four forty two. How do we do on the thirty year? Dwight Millard: Mm-hmm. Mm-hmm. Well, so so according to Mortgage Nays News Daily, and this is just John, this isn't the whole story. You're up two basis points to six point five four. There were companies that had multiple reprices today. When you get into the mortgage back security pit, remember we moved up our barometer from five to five and a half. That's never a good thing, right? As a better indicator of what the market's doing. ⁓ We were forty one Jon G. Sanchez: Explain that real quickly. You went to the next contract, yeah. Dwight Millard: Yeah. So so when when you start to see trading and rates are going down, the trading at a higher rate than what's really happening, you're not getting a true picture, so they'll drop the what they're b they're ⁓ measuring off of. And for a long time this year we were at just the five percent coupon. Well, rates went up and it wasn't it wasn't a clear picture at the five, so we moved to a five and a half, which means rates are up over overall. But the problem is is even at that five and a half, we were off forty one basis points today is how we finished off. John, we get we get another ⁓ we get yeah, the bond we get another daylight I I mean we'll be back in the six point six ⁓ plus yield, which is just that this is where people are frustrated. And you know, they're taking that their frustration out on, you know, multiple yeah, y ⁓ I'm a good one. I'm a good target, you know, but it's getting it's this is getting labor. Jon G. Sanchez: Mm. The bond yield or bond principle. Cory Edge: Mm-hmm. Jon G. Sanchez: Yeah. The mortgage professionals, yeah. Realtors, everybody in the yeah, yeah. Dwight Millard: You know, this is g this is b this it's it's wearing on everybody right now. Mm-hmm. Yeah. And and so I think I think hopefully was I don't know what caused this today. I I saw that Warsh said something or indicated something. I don't know if you saw the headline there. I don't know what he said, but Jon G. Sanchez: Yeah. Yeah. It wears on you. It it's like in my profession when the stock market goes down day after day and yeah, you get blamed for it. Yep, that's exactly right. We we had good consumer confidence number. That was about it. You know, we had a case Schiller home price. Who cares about that? It's April's data. But yeah, economic wise, all we have is a consumer confidence number. Ninety one point two was a reading, a little bit harder than the prelim number a couple weeks ago. But beyond that, I didn't see anything, ⁓ know, other than than than the president owning five over five hundred million dollars of cryptocurrency. That came across the headlines right before this show. So okay. Dwight Millard: Yeah. Yeah. Right, right. Cory Edge: Sure. Jon G. Sanchez: Now, so here let's recap. You know, I gave you a recap for the quarter and for the month and the for the year on the ⁓ on the ⁓ the stock market. Let's kind of recap this. So gonna focus on the 10-year treasury. For the month of June, 10-year treasury was down, if you can believe it, three basis points. After all of that, for the month of June, down three basis points. For the quarter, up 11 basis points. Okay. Now I dug a little bit deeper for you, my friend. Because I want to see really where the movement was. And as I anticipated, ⁓ Dwight Millard: Okay. Jon G. Sanchez: It wasn't the 10 year, it wasn't the 30 year, it was the shorter end of the curve. Remember, that's the the most interest rate sensitive, right? That's kind of follows with the Fed. Listen to these numbers. two year for the month of June was up 13 basis points, up 34 basis points for the quarter. Just for the quarter, up 34 basis points, over a quarter percent. ⁓ three-year up eight basis points for June, up 32 basis points for the quarter, and the five year was up four basis points for June. Dwight Millard: Right. Yeah, ⁓ yeah. Jon G. Sanchez: Up 24 basis points for the quarter. So the 30 year, again, going far out, it was only up one basis point for the quarter. So you see where that pressure is, it's on that shorter end of the curve. That's the most interest rate sensitive. And that right there, all you have to do is look at that. Do I and go, and you know this, I'm just being facetious with you. All you got to do is look at that and say, where's the pressure? It's the shorter end of the curve. And that the curve, the lower end of the curve, is what is saying the Fed is on an interest rate increasing path, not a decreasing path. That's what that tells you right there. Dwight Millard: Yeah. Yeah. Well John, if I look at Mortgage News Daily and went back one year, exact June thirtieth of twenty twenty five, thirty year fixed rate six point seven one. Jon G. Sanchez: She was so just smidge sm yeah. Yeah. Dwight Millard: So six point five four, so you're a little yeah, you're a little bit better, but it's been a rough it's been a rough year. All that gyration for tw twelve basis points, I mean, you know, people are losing their mind. I mean, it's just it's it's really it's it's it's tough. Jon G. Sanchez: Yes. For what? Yeah, that's what Yeah, I know. That's what you look at. Real quick, I I gotta ask you guys this. I want both your opinions real quick before we go to break. What I find ironic, and I was gonna say this at the beginning of the show, Dwight, when you're talking about your frustration, don't you guys find it ironic that the consumer is this frustrated, but yet the other part of their life, their 401k, their investment accounts, they're doing amazing, right? And as you just heard the data, incredible. I can't recall a time where people were frustrated with mortgage rates when they Portfolio that they own is doing well. Usually it's portfolio goes down, they're frustrated no matter what the rates are. Do you do I any sense of that? Dwight Millard: John, I think it yeah, it's just coming back to pure affordability. It's all the components that we talk about. So yeah, this little piece is doing good, but the whole the whole picture, the whole pie is affordability crisis. Yes. Yes, yep, yep, yeah. Jon G. Sanchez: Okay. Okay. My personal cost of living's gone up, everything. Yeah, maybe doing good in my four ⁓ one K or whatever, but okay. Corey, you echo that? Cory Edge: Yeah, no, I I I totally agree with that. And most people think, probably rightly so, they can't touch their four ⁓ one K on a daily basis when they gotta go buy bread and milk or make their mortgage payment or any of those things. So mean it's good to have there as a as a little safety feature, I guess, so you can sleep good at night, but most people can't use them in their normal lives anyway, as far as the cash without a huge penalty. So it it gets f frustrating. Jon G. Sanchez: Right. Core Corey, did you see that story this morning? I forget what news service it was on, down Los Angeles, how that the luxury home market is just beginning to boom and they're expecting incredible things because of all the people. SpaceX has large operation down on Hawthorne. Dwight knows where Hawthorne is. ⁓ and of they're, you know, obviously significant multi multimillionaires after the IPO. And these the high realtors are like, we're getting calls left and right. P I mean Cory Edge: Mm, sure. Yep. Jon G. Sanchez: We're we're talking ten, fifteen, twenty million dollar homes that these were people that just kind of lived either rented or in a normal home. Now they they want to live on the beach in Malibu, they want to do this, they want to do that. They're saying it's gonna completely change the demographics of the the luxury real estate market in Southern California. And then of course you take that to right, Dwight? ⁓ right, ⁓ SpaceX like ⁓ Yeah, exactly. But yeah, ⁓ of the some of the money they said all the way down to cafeteria workers are ⁓ multi, multi-millionaires now. Dwight Millard: Yep. Brownsville, where they doing big sp yeah, SpaceX down there, just blowing everything up. Cory Edge: Wow, good for them. Jon G. Sanchez: So so yeah, just thought that was that was interesting. right, we come back, fix it or flip it. Let's see if we can make you some money doing that in the real estate sector with Coring Dwight. Welcome back to the John Sanchez Show on News Talk 780KOS with Corey Edge Vidge, really data to white Millard of OnQ Home Loans. All right, before we get to our topic again, fix it or flip it, I want to give you a quick reminder. Tomorrow's the big night, folks. That's right. Gonna be hosting my webinar, my educational webinar, the estate planning topic. It is gonna be absolutely amazing. The seven mistakes that people make in estate planning. And again, I designed this webinar for those of you that have an existing living trust in the state plan, and for those of you that don't. How do you get involved? Real simple. Once again, it's going to be at 6 p.m. tomorrow evening. just send me an email. Again, we're doing it the old-fashioned way, John J O N at specialized trust.com. And will turn around and get you that invite for that event tomorrow evening. You don't want to miss it. There's going to be great amount of educational knowledge you're going to walk away from. Again, whether you have an existing trust or a brand new one, or don't have one, me. this event will be for you. 6 p.m. tomorrow. Again, we're going to have the webinar. Send me an email, John J O N at specialized trust.com. All right, let's get to our show title, Fix It or Flip It, The Risk Rewards, and the Secrets to Making Money Flipping Home. So, real quickly, I want to do a recap, Corey, that you and I touched on ⁓ on Thursday, and then get get down to news some data. So we know, of course, we've joked about it so many times on this show, you know, television has made house flipping so simple, right? You buy a course or you just do it on your own, right? Everybody can make money at it. You buy an outdated house, you spend a few weekends renovating it, sell it for a huge so on and so forth. But we all know reality is so much different. The ones that are successful that can do it, you know, time and time again, of planning, lots of accurate budgeting, market knowledge, financing, great team, ⁓ by the way, a little bit of luck. Well, we're going to separate the facts from the fiction as we discuss how to successfully fix and flip. ⁓ So do we flip homes? Again, we build wealth through real estate. We create additional income. We learn investment business. We learn about full-time versus part-time investing, and you know, on and so forth. what are the best market conditions? Okay, this is where we left off, Corey. I want to start with you on this one. Give your your your your ideal market condition before Corey Edge and the team and your clients, et cetera, are ⁓ starting to look at flipping as a as another way of investing in real estate, making money. Cory Edge: Now I the the ideal market conditions obviously are a rising market and no competition. I mean that would be the best way to go. But of those, you can you can this form, you can make money, you can invest in these flips and do these things in any market. You just gotta be a little more careful, right? Obviously, when the market is going up and working in your favor, you have a little bit more time to breathe. And if your project goes overdue. ⁓ Theoretically the market will have been going up the whole time and and save you to an extent. When the market's flat, as it is now in my opinion, or going down, then you have to be very careful because if your project gets delayed or the money's more expensive than you thought it was going to be, or it takes you longer to sell the house, then you have both sides closing in on you because the theoretical value of that property is either holding steady and not keeping up with your expenses, worse than that. going down as you're trying to finish this flip, and you hit that point of equilibrium where you're underwater. And that can happen very fast depending on ⁓ on where you're at. So ideal market is anal competition, which isn't real life, but at least if the market's going ⁓ that is helpful if you run into issues. Jon G. Sanchez: Very fast, yes, very fast. Who's your typical competition in in in the flipping environment? Cory Edge: So when we first started doing it, it was just, you know, myself and a couple of guys that were local and nobody really knew what was going on. Now if you get in there to try to do it, there's a lot of they claim to be local, but they're national. They have national money. ⁓ and so they sit in this market. A lot of them came to our market and other markets. Jon G. Sanchez: Mm. Cory Edge: During the O eight crisis when we were all buying trustee sales at the courthouse, and they have just teams around to now delve into those sales if they're available, or any other kind of market sales that pop up. John, when I put on any property, whether it's an estate, a divorce, or any kind of distressed property, the first five or six offers I get are from the exact same people every single time. Every time. Jon G. Sanchez: Are they really? Interesting. Cory Edge: And there's a couple, you know, don't want anybody to yell at me, but there's a couple smart ones that will say, I know what you're asking, but here's what I think the market is. So we're going to give you X based on what it is. And then there's some really dumb ones. Unfortunately, there's more of them that will come in and say, Hey, I know you've already got it listed at a smoking deal, but we want it for another fifty percent off. And then we all just waste a bunch of time with paperwork signing rejections. Like it makes no sense. But but it's the same people every time. Jon G. Sanchez: Yeah, exactly. Right. Right. Right. Right. ⁓ how do they know it's a distressed sale? That same five or six? How how do they know? Do they do research and go, ⁓ this is going through probate or Okay. Cory Edge: ⁓ so ⁓ yeah. So they'll they'll have little keys in there. if that's a probate sale or you can look at the pictures and see the condition or you can tell by pricing, right? Like a they may have computers that do it now. I I I log on and I can tell you right away, because I know most of the streets if something's underpriced by gut feeling, you and then we'll go in and and verify it. but they know where it's at. Jon G. Sanchez: Right. Dwight Millard: But but but Corey, let me ask a question. I mean, tipi I mean, not not always is it a distressed market sale, right? They'll prey on suspecting people that have homes in bad shape. They go in and buy ⁓ and flip ⁓ right? Jon G. Sanchez: Right. Okay. Cory Edge: Yes. So there's a there's two different sides of the market. There's the market that gets put out to the MLS, the multiple listing service, which is 95%. if you're trying to buy a good deal, that's not where you want to find a house because now everybody's competing against you. And then the other side of the market is the stuff that's off the market. And that's where you have to be very careful because as a property owner, you don't have all the information, even though you think you do. And these people will come in ⁓ give you what sounds like a fair deal when it's really not. Jon G. Sanchez: Yes. Cory Edge: and they will take advantage of you. They have no duty to take advantage of you. and I see it a lot of times, and unfortunately, by the time I see it, it's been too late. Although I do get calls every once in a while from attorneys that are working on lawsuits, and so I'll I'll jump in and help them because they'll have questions about the process and what was said and what shouldn't been said. And and a of these people aren't realtors. For the most part, they're not realtors taking advantage. They're Jon G. Sanchez: That was gonna be my question. So they don't have the same regulations like you do. Cory Edge: No, a lot of them aren't realtors that are taking advantage. There's a couple in town that will. You gotta be very careful with them. but for the most part, they're not realtors. They're just they're individual kind of they're inve I mean, I don't even call them investors. I mean, I and I don't want to use the word savvy because you're taking advantage of somebody. and not every time, right? If somebody's desperate for the money, they have to have it and they're willing to give you the deal, then you're helping out all sides. But when when you give the person the wrong information and you haven't told them everything and Jon G. Sanchez: They're investors. Yeah, they're quote quote investors. Yeah. Yep, exactly. let's squeeze this in real quick before we go to break. Let let's talk about the financing side of things because there's a lot of misconception. ⁓ Corey's us over the years, of course, and we've discussed this. A lot of times it is private money or you know, non-traditional sources. But as a you have some pretty strict criteria to lend to somebody that wants to do a float. Cory Edge: And unfortunately there's a lot of that. Dwight Millard: So, so John, let's let's just talk real. I I I if you're buying a house to flip, number one, I really don't want it because I'm gonna get hit. If that's not on the books for six months, I'm gonna get hit with early payoff ⁓ charges. gonna get back. I I don't wanna know you're flipping. I really just don't. If I'm gonna come in, if you a house that you want to rehab, you go, I'm gonna buy this house, I'm gonna buy it as an I you know, you already own a home, so I'm gonna buy it as an investment. I'm gonna in good faith make that loan to you. But if I have an idea, you're gonna flip that. Any lender, if they have an idea, you're gonna flip it, we're gonna step away. So therefore, that's why that ⁓ private money becomes so critical and so important because of y ⁓ get down to the end, all of a sudden you'll slip and say, Hey, I'm I'm flipping it. ⁓ I I mean, it doesn't do me any good. They backcharge my commissions. They I mean it's it's a nightmare. It's just it's worse for me. So Jon G. Sanchez: Mm-hmm. Mm-hmm. Right. ⁓ Dwight Millard: Hard money is going to be your best. The other one, John, that we've talked about over and over years ago or or for years is if you have equity built up in your house, you can tap into a HELOC. Maybe you can, you know, put a good size amount of money down or all of it or put enough down that you might get a little seller carry for a little bit there. But it's it's gonna be off the books type of stuff. I now the other part to it is you say, okay, now I have the loan and I'm gonna flip it. You know, I actually did I bought the house, private money. Fixed it up. Now I want to resell it. Conventional doesn't have too many real guidelines on that. VA doesn't have any real guidelines on it, but FHA, remember you can't write the contract till the 91st day after you acquired the property. And then if you get into a appreciation over 20%, ⁓ might ask for another appraisal. There's just all sorts of things you've got to be aware of for the takeout loan after you've finished it and you're ready to market it. Jon G. Sanchez: Mm-hmm. Mm-hmm. And to take out to in other words, to cash out. You're not not which is a strategy Dwight Millard: Yeah, you're gonna you're gonna sell it to yeah, you're gonna sell it and you're gonna you better make sure your buyers have enough know, loan products. And FHA is probably one of the biggest John on flippers, so you sell it till after the ninety first day. Yeah. Yeah. Yeah. Jon G. Sanchez: Okay, we we gotta let let's expand on this when we come back. So I want to make sure everybody's clear. This is a very important point. Welcome back to the John Sanchez show on News Talk seven eighty KOH with Corey's Veg reality, Dwight Millard of On Q Home Loans. Mr. Millard, your phone number, sir. Dwight Millard: Yes, sir. Two four zero two zero two two. Jon G. Sanchez: Mr. Edge? Cory Edge: Six seven three six seven zero zero. Jon G. Sanchez: Thank you, folks. right, fix it and flip it. That's what we're talking about. And well once again, we're not going to get through all of our points here. It's just this just keeps going because there's so many things to talk about. Dwight, I'm going to turn it back to you. I want you to clarify a moment ago. You said about the 91st day. So let's lay out a s an an example of what you're talking about, because that was a little confusing there. Cory Edge: Mm-hmm. Dwight Millard: Yeah, so so let's just say you buy a distressed house to fix up to flip, John. You're gonna typically go to a a a hard money source or you've got some sourcing somewhere that allows you to do it. Now, you bought it you know, whatever, June first, you get fixed up and you wanna sell it to Corey. Okay, if Corey's using FHA financing because that's all he's got, you cannot write a new contract. Jon G. Sanchez: Mm-hmm. Dwight Millard: Until the ninety-first day, FHA does not do a flip inside of 90 days. They just won't do it. When you bought it, correct. So if you bought it June first, then to it 90 days, what is that? June, July, August, September 1st, or whatever, ⁓ then you could you can actually sell at FHA, which is probably I'm gonna guess, John, maybe a little less than that, of people use, especially with distressed properties. Jon G. Sanchez: From when I as the investor bought it. Okay. There you go. That's what I'm gonna get first. Sept September. Yep. Yep. Dwight Millard: Now, when you do a conventional, if Corey can go conventional or if he's a veteran, there is no time constraint. But you have to be careful about the equity. So if you bought it for a hundred grand and in ninety-two days you want to sell it for two hundred grand, yeah, there's gonna be there and and mortgage companies can create anti flipping policies which would shut that down. You wouldn't be able to use a certain company just because of this kind of problems. Yeah. Jon G. Sanchez: Okay. Yeah, right. Corey, what's the reality of that? As a as a flipper, would I need to be aware of who my potential buyer is and and factor in that, hey, I may be done with the the rehab in sixty days, but I've got to sit on it for another, you know, thirty one days so I can open up my market, my potential buyers to an FHA loan? Does that happen in real life? It does. Cory Edge: Yeah. Yeah. ⁓ yeah. Yeah. I mean you not only do you have to understand that and know that, but if you're not the person that's gonna be selling, if you're gonna hire a realtor, then you need the realtor that understands that. And these are things that somebody in this market that's been doing it a while should know. So if you buy in certain parts of North Reno, predominantly you're gonna have an FHA buyer. You should know that before you buy the flip so that you can have your holding period. If you find a nice fixer up in Montreau and you buy it and you're gonna flip that, well, that guy's not gonna have FHA financing, so you don't have to worry about it. So these are all things that you should know before you pull the trigger on buying it. And I'm not saying it's the death knell, but you can just factor in, okay, I got ninety I have a minimum of ninety-one days holding period. But as Dwight said, that's when the contract's signed. So I got thirty days after that before I can close. So I've got a minimum, probably four and four and a half months. Jon G. Sanchez: Mm-hmm. Mm-hmm. Right. Hundred and twenty altogether. Cory Edge: of owning this, so I need to make sure my numbers account for that. Jon G. Sanchez: Right. Right. Corey, you and I had have a lot of experience doing this. We touched on this a few weeks ago and we're gonna be bringing this back, ⁓ that is the self directed IRA. How would this flipping strategy work in with a self directed IRA? Cory Edge: You would have to have a phenomenal team because you are not allowed to go add any equity, is what they call it, to that property. Meaning you can't change the locks, you can't swing hammers, you can't go lay the side, you can't do any of that stuff that would improve your retirement account, let's put it that way. Which means you're relying 100% third-party contractors, which isn't the worst thing in the world, but you better trust them because. Jon G. Sanchez: Mm-hmm. Cory Edge: If the plumber calls in sick one day and the deal's supposed to close tomorrow and the toilet's not in, you can go fix it if you want. But like we said, the chances of the IRS finding out are slim to none. But if you want to walk the that's not a line I walk. So if you wanna walk that line, that's up to you. So you have to be you just have to have a phenomenal team. Jon G. Sanchez: Mm-hmm. No, no one. Yeah. Right. But the advantage is, of course, is back to your point, Dwight, if you have a half a million dollar IRA, ⁓ the ⁓ gotta contact Corey and I to get details about it because I I don't have time to go through the details. ⁓ if you had a, you a liquid five hundred thousand dollar IRA and you go buy a house for three hundred thousand, the IRA is gonna own it. ⁓ Again, lot of rules you have to follow, which is why you need to contact us. but if sell that three hundred thousand dollar house for a hundred thousand profit, zero tax because it's all sheltered in the IRA. Right. And you're essentially borrowing the money from yourself and there's a lot of advantages. Last question, Corey. Unfortunately, we're all just about out of time. Good market or bad market right now to consider flipping? Where we sit right now? Cory Edge: It's a good market if you can get a good enough deal because to me the market is stagnant. It's not going up enough for in my opinion. So that means whatever retail is right now, you need to buy at whatever percentage underneath retail and then expect to sell it at today's price versus buy it today's price and expect it to be thirty percent higher. Jon G. Sanchez: Right. Perfect. Great job, fellas. We will do it again tomorrow on the John Sanchez show. God bless. Have a great afternoon.