Latest / The Jon Sanchez Show / Fix It And Flip It: The Truth About Making Money With Real Estate Flips
Transcript
- Jon G. Sanchez: Good Thursday afternoon to you. Welcome to the John Sanchez Show on News Talk 780K, which it's a pleasure to be with you and a pleasure. Ladies and gentlemen, he is back full flesh. and Jimendrility. How you doing, Big C? Fantastic, man. It's great to see you. Great to be back with you. And ⁓ always, always miss you. Always miss ya. Dwight is under the weather, which Corey and I were chatting ⁓ before the show started. Quite quite unusual. Quite unusual. But ⁓ yeah, wish him, wish him a speedy recovery, whatever he may have. Cory Edge: I'm doing awesome, sir. How are you? You too. Absolutely. Good. Jon G. Sanchez: How you been, man? How you been? How's business? How's everything been? Real quick. Cory Edge: It's good. It's it's kinda maybe we'll get into it a little bit next week, but I've always said the peak of the market is July fourth, so we're right at that kind of time. Not yeah, not that it falls off dramatically after that, but things will start slowing down after that if they if they stay to the historical pattern. So yeah, it's busy, busy everywhere. I mean the the hundred degree weather doesn't help anybody that's outside, but I guess you just gotta get through it. ⁓ man, yes, absolutely. Jon G. Sanchez: You have. Yeah. You're at the apex, huh? Right, right. Yeah. That's what Aaron said. We feel for our construction workers and those that have to work outside. They they're earning every penny out there. Yeah, they really are earning every penny. right, my friend. Well good. ⁓ glad to have you back. And today's is obviously designed for you. Let me tell you everybody what we have after I give you the stock market recap. Not gonna spend a lot of time on the market today, kinda ⁓ Cory Edge: Yes. Jon G. Sanchez: Kinda, you know, unexciting to say the very least. It's like, man, when there's no war going on and oil prices, Corey, you know, moving five, ten bucks a direction. It's like, huh, okay. And think also, ⁓ you know, I I can't believe that next what Saturday is be the fourth of July, market is gonna be closed next Friday. And we all know how goes. Corey and I were chatting about this. You get into this holiday week and everyone's out of town and so on and so forth. So yeah, I am who knows, not a lot of activity next week and tomorrow, thank goodness is Friday, but Cory Edge: Mm-hmm. Yeah. Jon G. Sanchez: Anyways, all right, let me tell you what we have lined up. This is something we have not discussed in probably years, probably years. what we've titled the show today is Fix It and Flip It. The truth about making money in real estate, flipping properties. Now, you know, for of you that may have done this, or maybe it's something, you know, like like you always say, Corey, you know, that that that Saturday night which you don't see many of them anymore, or any of them, matter of fact. ⁓ ⁓ that that that 11, 12 o'clock, or three o'clock in the morning, infomercial about how easy it is to make money flipping homes and renovating and so on and so forth. I loved your stories over the years when that was, you know, very popular. But we're bring back this and back to my point. Flipping homes can one of the most well, one of the fastest, I guess. One of the fastest ways to build wealth. Or it can be one the quickest ways for you to lose money. Today we're gonna be discussing the best market conditions for flipping homes. how to finance a flip. So we'll do the best we can without Dwight. The biggest mistakes that Corey sees ⁓ making and whether today's housing market, the real million dollar question, whether today's housing market presents opportunities or So, I I've got to tell you, I've got a vested interest in this topic. It it is something that has always fascinated me. I know you you have made a lot of money over the years. Doing this professionally for clients and for your investment group and so on and so forth. to me, it's almost an art, right? What you have gone through over the years when we've had this topic, and like I said, it's been a long time since we discussed it. But the, the, I'll use the word the systems that you have in place to this, where the novice says, look at this house is, you know, 500,000. But man, last ⁓ sale in the neighborhood was ⁓ you know, 620,000. I'm gonna jump all over this thing. And the emotions get in place and they go, Yeah, I can get in there and put a little elbow grease in and flip this thing, make a couple hundred thousand dollars. You, on the other hand, as a professional, you go, Okay, wait a minute here. slow down a little bit. Let's have a list, let's have a process, let's have our team in place to get this done to assure the best odds that are there, correct? Cory Edge: Cor correct. And you know, a lot of it goes into I guess just history, experience. If in your example, if you have the opportunity to buy a five hundred thousand dollar house that's worth six fifty or seven hundred, there's a reason for it. And if you don't know what that reason is, then you need to tread very lightly because in most instances most people aren't gonna do that unless there's a problem. and sometimes I think I don't think it's greed, John, but I think it's just human nature. Jump on I mean, everybody sees Jon G. Sanchez: Yeah. Yes. Sure. It's a deal, deal of a lifetime. Cory Edge: Everybody sees the dollars, but they don't you know, what I always did when we were really deep into it was try to look at the downside, like what is the worst thing that can happen? And if we can live with that, then let's do it. And and we'll get out if we have to. And then Jon G. Sanchez: There you go. And see, folks, that's a professional attitude right there. That's how the professionals do it. Yep. Cory Edge: Yeah, and whatever the upside is. And we've done, I'd say over the last twelve, thirteen years, hundred houses, four hundred and fifty houses somewhere in there. and so and some of them we've made very little money. Luckily we haven't lost money on too many, but most of the time the profit like the profits you see on T V, at least in my experience, like we've had a couple massive home runs, but by and large, they're ten percent returns, twelve percent returns, fifteen percent. You know, it's it's ⁓ Jon G. Sanchez: No kidding. That's amazing. Interesting. Right. Cory Edge: Turning the money over versus hitting the home run. ⁓ the other interesting thing though I tell people, and if you think about it, there's a lot of risk, a ton of risk, all this stuff. But if we would have bought maybe twenty percent of those homes or even less, them up, you know, twelve, thirteen years ago, never touched them and opened them up this year and sold them, we would have made just as much money with no risk. ⁓ ⁓ Jon G. Sanchez: Yes, yes. Or ten. Mm-hmm. Yeah, but the time value of the investment money tied up into there though, right? ⁓ Cory Edge: That's true, but it's also the I think a lot of people gravitate to the f the flipping part 'cause it's exciting. It's it's you know what I mean? It's the thrill of the hunt and th there is a value to that, but Jon G. Sanchez: Yes. Yeah. ⁓ I I have as you know, I've never done a flip in my life. obviously you've studied it and watched it a lot and w between clients and, you know, again, I victim of watching the shows and so on and so forth. But it to me, and th I hope you go into this today, it seems to me the pressure that you are under, right? You a lot of times you're you're borrowing, a lot of times it's hard money. So you have, you know, three months, six months or something like that to pay it back. ⁓ You've paid Points up front to to borrow that money. Usually a bank is not going to lend it to you. You're going to go again private. but you're under these extreme deadlines, right? To to get that house fixed, to get it marketed, to get it sold, to get that capital back, scrape off a little profit, pay back your investor on the hopes of doing it again and again and again. Cory Edge: It's it's is a pressure cooker. I'll tell you the most pressure filled time we had, we start my partner and I started doing this back, if you remember, after the Great Recession, when the market was still going down. So we would go in, try to find these deals, go in and buy it. And so we didn't have the luxury of the market being stagnant or going up. So the pressure was from both sides. We're trying to keep costs down. Plus, I mean, at that point the market was going down one percent a month, two percent, like it's everything crushing you. ⁓ Jon G. Sanchez: Yeah. Yep. Yep, I remember that. Yes. Y catching a falling knife as we call it. Yeah. Cory Edge: And and so it was very important to know what you were doing and be able to get in and get out quickly. Otherwise you'd be upside down before you knew it. I mean, there was no way around it. Yep. Jon G. Sanchez: Yeah, yeah, exactly. And you never could recover. Phenomenal. Again, I want you to go into more details about that. The other thing I want to make sure that you touch on I I think that 0809 time period you're referring to, I think that was a great learning lesson because we know I remember the phone calls we used to get on this show. people that got caught, right? They they were they were getting involved in the flipping because things were going great in the market and so on and so forth. And then they got caught with their pants down to use an analogy, right? It wasn't their fault. It was just market conditions changed abruptly. they'd already bought the house. They've already maybe invested money into you know the various improvements. So they're into it for whatever fifty, hundred thousand dollars. Then the market conditions change. And we saw a lot of foreclosures. I remember some of those phone calls we got, people literally in tears saying, you know what? I I I borrowed against my primary home to do this flip. I thought it was gonna be great. Corey, John, Dwight. what can I do to get out of this thing? And a lot of times our answer was unfortunately, there's not much you can do. You know, like you said, do the short sale, Mr. List, Mr. Caller, do this, do that, and You'll recover from it. But, you know, in those conditions the way it was, there wasn't much people could do. Cory Edge: No, and it just it's kinda kind of equated to your world too, where sometimes you've got this great stock investment, but then something happens with the company or the story changes, the CEO isn't around or then you've got to change, you know, you can't just stick with the same plan of, well, that doesn't matter because I'm still gonna make a hundred thousand. And I had a quick funny story. I had a gal that worked for me forever, and she had been in the business a long time. and she came to me when all this was happening back in 2008, nine, somewhere in there. Jon G. Sanchez: Yes. Yep. Market change. Yeah. No. No. Cory Edge: And she was in tears. I'm like, what's going on? She's like, my house is worth less than what I owe. And I go, Yeah, it's happening a lot. And she goes, I didn't know real estate prices went down. I'm like, well, unfortunately, like we're not old enough to have really lived through it that much. But yeah, they they go up and they go down. ⁓ and she survived and it was great, but it w it just was an eye-opener. I'm like, Yeah, a lot of people thought this could never ever happen. Jon G. Sanchez: Mm-hmm. ⁓ good God Yeah Yeah what do you know? W wh would was she was she licensed? Cory Edge: She had been licensed with me for a long time and she's she still is today and she's a great gal and she knows what she's doing. But it was I think there's probably a lot of younger people that are in the market now own homes that have the same thought process because all they've ever seen is prices up. Yep. Jon G. Sanchez: ⁓ my goodness. Yeah. Yeah. ⁓ sure. I sit in the stock market every day, Corey. I sit the stock market. Yeah. Sit in the stock market every day. it and ⁓ was I ⁓ you bring that story up. I was having this discussion with a client earlier today, and you know, she's about my age in her early 60s, and and ⁓ was about again, we went to the dot com era and and and how again the market when the market fell in 2001, you take that to 2010, and the SP didn't gain it like a fraction of one percent, right, for 10 years. And the younger generation does not remember that, right? probably, I would say, maybe younger than 50 years right now. They think this is what you're like, you you said the market always goes up. And if we do get into problems, ⁓ the Fed's gonna be the the knight in shining armor, the Fed's gonna come rescue us. ⁓ So long-term downturns never happen. Well, you know, I don't have these gray hairs on my head for no reason. They do happen, and you always to be. Prepared for it. You always have to be prepared. And just like you're going to enlighten us on you get into these flips, again, great opportunity, but I love what you just said a moment ago. And I I'm gonna make sure when when when the show goes out on YouTube and Spotify today, we're gonna highlight that clip that what you just said, Corey, and that is go into it. What is the worst case scenario? If you can live with it, do it. But if you can't live with it, don't do the deal. No matter what the upside is, if you can't handle financially that downside, because Corey and I, and I'm sure many of you have your own stories, whether you're yourself or friends, family that you saw go through this, you can lose everything. really can, because so many people, right, Corey, so many people borrowed from 401k, like I said, from the home equity lines, whatever they did, they borrowed the money and that money had to be paid back. So not only did they lose with, you know, just on the value of the home, but they lost with the capital that they invested to do those improvements. Home improvement is not cheap, right? And and Corey, I I'm sure hopefully you're gonna sh share some stories like you did in the past where get in there and you go, ⁓ yeah, okay, ⁓ we're gonna put some new drywall in, right? We we all have this this this ⁓ saying in the ⁓ in the industry called, you know, put some lipstick on the pig. But you go in there and you start ripping out the drywall and you, hey, this is a DYI project. I can put up some drywall. And you get in there and no, we've got termite problems. Well, there goes a delay there, and then it expands. And one thing leads to the other. It's the the electrical's not up to code or ⁓ that great garage that they turned into a you know a a living room. ⁓ they never pulled a permit on that one. The meaning the you know, the previous I mean, the story score, you could probably write a book on on what you want. So I hope you share some of the 'cause those are the best learning lessons. They really are. Cory Edge: Well, I think that goes yeah and I think that goes back to the point. If you're getting a fantastic deal, that's great, but just know why you're getting the deal because there's always a reason and make sure you can live with it. Yeah. Jon G. Sanchez: Yeah, yeah. There's always a reason. Yeah, that's a great point. right. We come back. I'm gonna give you the stock market recap and then we're gonna get into our topic fix it and flip it, the truth about making money in real estate, doing the flips with Corey Edge of Edge Reality. Welcome back to the John Sanchez show on Newstock 780 KOH with Corey Edge of Edrew Lady again Dwight a little bit under the weather day, not joining us. right, we're gonna get back to our topic fix it and flip it. But first, let's tell you about the market. We finished up just modestly on the Dow with 71 point gain, closing at 51,920. NASDAQ lost 118.46% in the SP lower by one to close it, 7,357. But I'll tell you, these closing numbers, Corey, they they don't even tell the story. We one my updates this morning, I think it was like, I think it was my 553 report. NASDAQ features were up almost 800 points. Like, ⁓ my god, you saw that? Yeah. ⁓ was just amazing. Dows were only up a couple hundred, but it looked like it was just going to be one of these outstanding days. And you know, hour or two into the trading session, here comes the sellers. They start pounding it, ⁓ we end up losing 118. That's the volatility that we live in these days. That's why this market is so very, very hard to predict. Cory Edge: Yeah, I saw that. Yeah. Jon G. Sanchez: Remember yesterday on the show I told you that we had the ⁓ the the earnings release of ⁓ micron after the after the close yesterday and again the cover off the bulb. Stock held up pretty well today, finished up $165.05, 15.74% gained at $1,213.56. but we had some weaknesses in some big names. And I'll tell you that the one of the major problems of the, I don't know if you saw this, Corey, with Apple. ⁓ Apple kind of the tech sell-off. ⁓ Apple came out and said, look it, we cannot absorb this. Cory Edge: Yes. Jon G. Sanchez: There's a shortage of semiconductors. we can't absorb the price increases that we as the company are paying. ⁓ finally we we have been absorbing them, but finally we've got to pass these on. And they came out with a list, and I don't have it in front of me, of the increases for MacBooks, MacBook Pros, the desktop models, obviously laptops, et cetera. Significant price increases. as soon as that story came out, Apple, which is a Dow component, headed south on us. Stock finished down $17.93, 6.12% loss to $275.15. Worst performance in over a year for the stock. created a cascading effect. We saw Microsoft, which obviously is involved in in computers from the software side of things. Logic was: hey, if you know, sales are going to slow because of higher prices, then guess what? It's gonna happen on the PC side, like Dells and everybody else. So therefore, Microsoft went down twelve dollars and sixty-three cents, about a three and a half percent loss. Google was down almost three dollars and it just kind of started the whole cascading effect. The bright side was a big, huge move on Caterpillar. Corey and I love this this ⁓ this product. Sixty-two and thirty-eight cent gain up to a price now of a thousand fifty-six dollars and eighty-three cents, six point two seven percent gain ⁓ at the all-time high for the company, and ⁓ by far the best performing stock ⁓ within the Dow. So that was that was it. was really the highlight of the day. And then we just kind of drifted. We had a lot of economic reports that I'm not going to bug you with, except for Corey. I know you and I, ⁓ we always have some great discussions about inflation. So let's touch on this very quickly before break. So had the Fed's favorite measure of inflation, the the ⁓ consumption expenditure, what we call the PCE. And Corey, I to be honest with you, when this report came out at 530, I'm sure you probably thought the same thing. This is gonna tank the market because this was a nasty inflationary report. ⁓ Up four tenths of a percent month over month, year over year, up four point one percent. That's the highest level we've seen going back to November of 2023. You strip out food and energy, get to what we call the court, up three tenths of a percent month over month, year over year up 3.4%. Corey, here we are sitting, we'll just average it, say 3.5% inflation on the Fed's favorite measure. Definitely, know, a point and a half, if not more, away from their mandate of 2%. Brother, these odds are getting slimmer and slimmer that we're gonna get any type of rate cut. And again, ⁓ the street odds right now, next move of the Fed's gonna be an interest rate increase. And after we got this report, I'm I'm even more convinced of that. Cory Edge: Yeah, and I think it's everything is my opinion dependent on oil. If oil hadn't fallen where it is now and you would have got that report, the market would have cratered. But I think everybody's looking past it because they're assuming that the oil price probably caused a lot of it. Because even the tenure's been down the last couple of days. So the the market's not really thinking that the Fed's gonna do much. I personally don't think they'll do anything. I I don't think they'll raise, but Jon G. Sanchez: Yes. Different story. Yep. Yes, yes. Cory Edge: Who knows? I guess we'll just have to watch the numbers and see. Cause he was pretty adamant that he's getting the two percent. that happens. So good luck. He's not gonna have a job. ⁓ Jon G. Sanchez: Yeah. Whatever the cost is gonna be to do that. Yeah. I I keep com I yeah, I I keep coming back to you. It's like, you know what, boys, you guys have have and g boys and girls, you've had this two percent inflationary mandate for as long as I can remember. Maybe it's time you adjust that a little bit. I know w was it it it wasn't ⁓ It was like a couple of Fed members ago, maybe even like Janet Yellen or Bernanke or one of them, way, way back. They had touched on that. Like maybe, maybe it's time that we kind of look at this. again, 2%, because yeah, about it, 2% ⁓ inflation. If want a thriving economy, which the problem, Corey, is in and I know you agree with me on this. We got this great thing called AI and this technology boom right now. It is, yeah, are job losses, but it is creating so many millionaires and billionaires and so on and so forth. Cory Edge: Mm-hmm. Jon G. Sanchez: There's a lot of money sloshing around in this economy because of the strength of the stock market and specifically in that sector. I don't know how they'll ever get to two percent, right? That was great when we didn't have AI and we didn't have this technology boom, but this technology boom is here to stay. It's not going anywhere. We'll have ups and downs, but long term it is here to stay. So I I don't know to your point. I don't know how they're ever gonna get to two percent in our lifetime. Cory Edge: Well, and I think too, but I mean their their blunt force tool of raising interest rates hurts people that are not spending the money. Does that make sense? Like ⁓ everybody not almost everybody you just described, yeah, nobody wants higher interest rates, but it doesn't really affect their life too much. ⁓ but the people it does affect aren't the ones that are I don't want to say the problem, but they're not the ones spurring the economy. Jon G. Sanchez: That's right, that's right, that's right. Right. Yeah, that can change our lives. Yeah, exactly. Yeah. That's right. That's right. Yep. Cory Edge: you know, to these crazy numbers. So who knows, may they're gonna have like what, nine, ten committees now that are gonna make decisions. So maybe one of the new committees will will come up with some plan. We'll find out. Jon G. Sanchez: Yeah. I don't know. It's gonna be interesting. Yeah. Absolutely. Hey, real quick, if ⁓ you know what? I I'm gonna throw a question at you and and I want you to hit this when we come back. I've been waiting for you to get on the show to talk to you about what's going up in Tahoe, specifically the North Shore. Speaking of the billionaires of the world, ⁓ is something you and I have discussed for so many years that Tahoe had really had been a a hidden gym, but it is not anymore. It has been uncovered because of the ⁓ billionaire tax and ⁓ Cory Edge: Yeah. Jon G. Sanchez: So many of these guys, they're not just coming in buying quote a vacation home like they used to. They're coming in, they're making, you know, the Tahoe on the Nevada side is now they're a resident. So I'd love get your perspective what's on there. and then could we see some of that money, you know, trickling down the hill? Let's call it that. And then we'll get into our topic, fix it, and flip it. Cory Edge: Sure. Yep. Jon G. Sanchez: Welcome back to the John Sanchez show on New Stock 780 KO which Corey had to duck out. He's got a ⁓ family event. told him to get out of here and go get ready for that. So ⁓ I'll things up. So, again, were discussing fix it and flip it. what Corey and I to do is we're gonna we're gonna really pick this topic up next week, on Tuesday when he's back with us. ⁓ because there is so much to it and it it's it's it's a fun, fun topic to discuss. really is. It's ⁓ ⁓ like I said, we've seen a lot of people make money. I again I have never done it, so I'm not gonna claim that I have. you know, next Tuesday we'll talk about what are the best market conditions, right? Did do you have to be in an ⁓ eight, ⁓ nine time period to do that? Absolutely not. There's ⁓ always opportunity. ⁓ we'll get into that. We'll get into how do you find the right property, right? You're looking at completely different things ⁓ you're gonna do a fix it and flip it versus if you're gonna rent the property out. definitely if you're gonna live in it, so on and so forth. Hopefully Dwight will be back with us on Tuesday, which is great. get into the pardon we'll get into the financing side of things on that also. there's a real art to this, and you're you're really gonna want to learn about that. and then yeah, are the biggest risks? You know, that's really like Corey said at the beginning. Understand what your downside is before the whole thing starts. And if you know what your downside is and you can handle that downside, great. Take a look at it, minimize the risk and ⁓ go for it, right? All right. With that said, I want to get into something else. I told you yesterday I with you I announced my next webinar for our estate planning business, specialized trust ⁓ in estate plans. So I want to have you put this on your calendar. I want you to join me. And I yeah, I'll be honest with you, I screwed up, I completely forgot that next week is 4th of July and ⁓ I'm sure of you are gonna be out of town. But if you're gonna be around, or even if you're out of town, Right, that's a great thing about the internet. All you need is internet connection, and you can join us. anyways, what's the title of the webinar? Do have an estate planning problem? So, what I've designed here is a really to educate, all they're always about education, but to educate you and say, A, ⁓ do I need an estate plan? And B, if I do, what are some of the most common problems that are out there? And for those that have an existing estate plan, this webinar is also designed for you ⁓ because again, I'm so many mistakes, so many people. That think I spent the time, I spent the money creating my estate plan, my trust, et cetera, years ago. Everything is fine. And after we do our evaluation, because we do offer a a trust review, we're just finding so many things and they're shocked. They're absolutely shocked. So again, we want to make sure that you fully understand that. So I'm gonna discussing the estate planning self-assessment. Again, do you need an estate plan? What are some of the common mistakes that families make? Probate reality check, right? Even if you have an existing trust, you could still be subjected to probate if things are not set up correctly. to tell if your trust is outdated, right? It's not just about the date. That's another common misk misconception I'm going to break. It's not just about, ⁓ yeah, I wrote the trust you five years ago, everything's fine. No, there's much more to it than the date. There really is to tell if your trust is outdated. I'm gonna into one of my favorite areas, which is the asset titling review. So many people are holding assets, think they have the trust, they have the trust. But assets are not handled properly or titled properly. So we're going to go through that. beneficiary side of things, yep. I'm going to show you some ways that people are making mistakes so that you don't, ⁓ in to naming the right beneficiaries and how to name those beneficiaries. I'll wrap things up with the documents that every family should have. And then we'll kind of conclude with some of the next steps. And of course, I always, my favorite, very part of every webinar is the QA where I get to answer your questions one-on-one. So I invite to join me next. Wednesday, 6 p.m., the first. Just me an email. We don't have the automation set up yet. Just send me an email, ⁓ John at specialized trust dot com, and that's J-O-N. ⁓ And will ⁓ personally send back a webinar link for that. And ⁓ again, educational. We're gonna have a lot of fun. We always have great time on these webinars, and I promise you will walk away with a significant amount of estate planning knowledge. So John at specialized trust.com, send the ⁓ zoom invite. God bless, have a great afternoon. That was a lot of fun. We'll see you tomorrow on the John Sanchez show.