00:00:00:01 - 00:00:26:22
Unknown
Welcome back to the seven Figure Flipping Podcast. I'm your host, Adam Whitney, and I'm excited today to talk to you about how to read your local market like a pro. In today's market, you cannot read it like a worried investor or concerned about a crash, because every market has an inefficiency and that's where the money is made. Now, most investors are making decision based on feelings and that data, and that's their primary problem.
00:00:26:23 - 00:00:50:04
Unknown
They list a house on a Monday, and by Friday they're panicking that it hasn't sold their drop in the price. Calling the agent twice a day. And they frankly are a nuisance. And honestly nine times out of ten the market's not the problem. The problem is they don't actually know what the market is doing. They don't have the data to support their feelings or their decisions.
00:00:50:05 - 00:00:55:01
Unknown
Today I'm going to give you three numbers to watch in your local market.
00:00:55:01 - 00:01:02:16
Unknown
Three numbers that will change how you buy, how you underwrite, and how you stay calm when everyone else is spiraling.
00:01:02:16 - 00:01:11:11
Unknown
Let's get into
00:01:11:13 - 00:01:36:20
Unknown
I'm going to start with something that might sting just a little bit for you. Most investors you included. Thank you. Note your market. You're in it every day. You're seeing the different properties, maybe from wholesalers or direct to seller calls. You're talking to agents. You got Zillow all the time. You're looking at houses. But here's what I see constantly happening.
00:01:36:22 - 00:02:06:21
Unknown
Somebody buys a house, they get excited. They finish the rehab, they list it, and then they wait. That's the game. Day seven. No offer. You're getting nervous. Day 14. Still nothing. And now you're calling your agent, right? By day 21, you've dropped your price, started second guessing, and maybe even panicking a little bit about whether this deal even works.
00:02:06:23 - 00:02:35:22
Unknown
But here's the thing if the median days on market in your area is 57 days, like you're not behind, you're right on target. But you're not paying attention. You're not looking deeply enough, you're not looking at the days on market in the zip code and even in the subdivision. So this is a self-inflicted wound, and you're shooting yourself in the foot with the price drops, creating psychological race to the bottom with the buyers.
00:02:36:00 - 00:03:03:16
Unknown
And this is why, really, the data isn't about making smarter buys. It's about staying sane and understanding what the market is doing. So you have the appropriate expectations. Now look, you don't need some Bloomberg terminal. You don't need some data science degree. You really only need three data points. And you can pull them from Redfin data for free cost you absolutely nothing.
00:03:03:16 - 00:03:26:09
Unknown
And the first thing I want you guys to look at in your marketplace is the active inventory. This is a number of homes that is actively listed for sale in your market right now. And you want to track this month over month like one month doesn't tell you anything. But seeing the trend, seeing the trend and identifying the pattern is what your goal is.
00:03:26:13 - 00:03:54:14
Unknown
The direction matters way more than the number itself and what you want. The questions you want to answer are really is the inventory climbing? If the inventory is increasing, the days on market will then also increase. So that means you've got more competition of other properties to sell your house. So you need to be smarter on the front end on your buys.
00:03:54:14 - 00:04:29:01
Unknown
If you're seeing that trend again, all about pattern recognition. Now if the inventory is dropping, sellers have more leverage. Your flip is going to move faster. It's pretty simple. It's a supply and demand game. If it's flat, then you've got to figure out what's normal for your area historically and compare. And then you want to get a level deeper and go, okay, well, what what particular properties of this inventory are moving in a meaningful way and is a property that I'm buying and listing going to be able to compete with that?
00:04:29:02 - 00:04:53:02
Unknown
Okay. So the last piece of the inventory that I would tell you is to look at the different price bands like 100 to 200, 200 to 300, 300 to 4 or 500 that that price band. Each one of those price bands is going to operate a little bit differently depending on your market. Now, if you're in like the Midwest, you're like 50 to 100, 100 to 150.
00:04:53:04 - 00:05:18:21
Unknown
You know, your price bands are going to be different. But those price bands also tell a really important story. So if things are moving between 100 and 200 K, then you may want to adjust your buys for that. So I want you to think and go that deep when you look at this active inventory and see what is on the market, what's competitive on the market, and what the days on market and percentage of sale price are.
00:05:18:22 - 00:05:45:16
Unknown
Now, the number two thing, just generally in your market that you want to look at is your days on market. It's the one thing that saves you your sanity. Okay. Medium days on market tells you how long homes in your area are typically sitting before they go under contract. That means if I list it today and then 30 days from now, I'm going under contract like clockwork.
00:05:45:17 - 00:06:09:11
Unknown
I shouldn't expect to get a contract till 30 days, so it really sets your expectations to be appropriate. And when you have appropriate expectations, you're not panicking. Okay, if the median days is 57 and you're on day seven, you're not in trouble. You're not even close to trouble. The median is 22 days and you're on day 40. Now you got a problem.
00:06:09:11 - 00:06:28:19
Unknown
There's a reason for that. And then we have something that we can actually dissect that is concrete. So you make these decisions at the by not when you're listing. So it's important that you're not waiting until you have a deal and listing it on the market to start looking at this data. This is data that you look at once a month.
00:06:28:19 - 00:06:45:22
Unknown
You put it on your calendar to look at these specific data points. You look at it once a month and you track it over time. Now, if you've never tracked data before and you're just pulling it for the first time today, and you start to look at historic, you start to develop the pattern, but you don't have a great sense for the pattern just yet.
00:06:45:22 - 00:07:12:13
Unknown
So the most important thing is starting today and starting to build that callus on understanding the pattern. The third thing that I want you guys to look at is list to sell price ratio. This one is underused, but it's incredibly powerful. The list to sell price ratio tells you what percentage of the list price sellers are actually getting at close.
00:07:12:13 - 00:07:36:14
Unknown
So that means if I list for 100,000 and I'm selling at 96,000, my list to sell price ratio is 96%, which means whoever's selling in your market, if it's 96, 94, 89, it means the expectation from the seller is higher than what the market value is for the property, which is the case in a lot of markets today.
00:07:36:18 - 00:07:54:11
Unknown
The beauty of that data is I can plan for it on the on looking at Redfin, I can plan for on the purchase of the properties as I buy these to rehab them and sell them or whatever it may be. Now Redfin shows us by market and if the ratio is 96%, like I said, it's like a 4% difference.
00:07:54:11 - 00:08:16:12
Unknown
So you need to start adjusting your pricing when you're looking at these comps. Now, it also tells you that people in your market psychologically like where are they psychologically? And I kind of mentioned this, but they are overpricing their property because they've been looking at Zillow or estimates or whatever it may be. And that also helps you for your direct to seller conversations.
00:08:16:14 - 00:08:36:13
Unknown
So you win when you buy and then you can't. You can even if you get a good deal and you win when you buy. But you you it's a debacle on the back end sale because you get greedy and you don't list appropriately, and you don't do a correct pricing strategy. Like you could really punt this whole thing.
00:08:36:13 - 00:09:00:19
Unknown
So you win and you buy, but your pricing strategy on the back end, understanding that list to sell ratio is going to be critical. You don't want to over price on the market. You want to come in just under price and drive as much attention as possible. So here's why and what where most investors are getting this kind of backwards.
00:09:00:19 - 00:09:21:04
Unknown
They look at the data when they're listing, when you're already nervous, when you're already like, I've got money coming out of my bank for payments and all this other stuff and the deals already in motion, you can't be trying to figure out what you want to do at that point. That's too late. So these three numbers need to be a part of your big decision.
00:09:21:05 - 00:09:41:05
Unknown
Before you ever put a house under contract, you should already know what's the active inventory trend in this price band? What is the median days on market and have I under it my holding cost around that number. And then lastly, what's the list to sell ratio? And is my ARB based on what houses are actually selling for, not what they're listed at.
00:09:41:08 - 00:10:00:23
Unknown
So if you answer these three questions before you buy, you will almost never have a panic when you list because you already know what to expect. You're going in and powered by real data, real knowledge, real information. And the market does what the market does. We have no control over it. All we do is focus on the controllable.
00:10:01:01 - 00:10:23:00
Unknown
It's always got to be data over drama. Just remember that. So your job is to understand this data well enough that nothing surprises you. And here's what it looks like in practice. I get calls like this all the time. Someone calls me freaking out. Adam in my house isn't selling. What do I do? I'm like, okay, well, how long have you been on market there?
00:10:23:01 - 00:10:54:19
Unknown
Like seven days. I'm like, okay, cool. How long are the median days on market? They're like 60 days. I'm like, cool, call me in 53 days and then we'll have a conversation because right now nothing is wrong. The market's doing what the market's doing. You just don't have the appropriate expectations. And I'm not being dismissive of them. I'm trying to help reinforce kind of professional industry standards and understanding to make them real professionals, real real estate investors.
00:10:54:19 - 00:11:17:09
Unknown
Now here's the other thing. The investors who are dropping their price on day seven aren't responding to the market like they are making emotional decisions. And they have all this and they're actually just shooting themselves in the foot. They're costing themselves money. So you should know what the median days on market is before you ever list, before you buy.
00:11:17:11 - 00:11:36:02
Unknown
That number should be baked into your plan. It's all data driven. So a day seven, you're going yeah, that makes sense. We're day seven. We'll hold tight. We'll get the offers we're getting. We're priced right. We're getting the right amount of eyeballs on it. The right amount of showings, the right amount of offers are coming in all that's really important.
00:11:36:06 - 00:11:56:12
Unknown
So how do you actually do this without it becoming like a full time job? It's really honestly simpler than than you think. Very simple. Go to Redfin, pull up your target zip code and check three numbers. It shows it right on there. Active listings. Is the inventory going up or down when you compare timeframes? Medium days on market?
00:11:56:13 - 00:12:14:19
Unknown
What's the current average list to sell ratio? What are homes actually closing? That is a percentage of their asking price. Write them down in a notebook. Note it on your phone. Do it in an Excel sheet, whatever you're going to use the most, and you're going to be able to keep that habit up with and then just track it month over month.
00:12:14:19 - 00:12:42:05
Unknown
And then you start to build the pattern. Your pattern recognition becomes a leap, which makes you an incredibly powerful investor. Now, when the active inventory crosses, about three months of supply is when you really want to start tightening up your underwriting. And we're between in my market, 3 to 4 months of supply. Right now. They say average supply at six months is a balanced market.
00:12:42:05 - 00:13:04:11
Unknown
It doesn't feel balanced at six. It feels like it's painful because we're at 3 to 4 right now. And everybody thinks this is a terrible market. It's because we've been you know, we've been given this like 2020 to 2022 time frame where we had these we set completely unrealistic expectations based on the history of the market, of what it should be doing.
00:13:04:12 - 00:13:24:02
Unknown
Now. The market always is going to tell you what it's doing. It's your job to be listening. So here's what I want you to do this week. Go pull the three numbers for your market right now active inventory medium days on market list to sell ratio. Write them down. Compare them to last month just due last month. It's not a big project.
00:13:24:02 - 00:13:46:04
Unknown
Find it and then start tracking it from today. The investors who know what their market is doing are making different decisions than the ones who are guessing. And I see this all the time. I've literally am a part of all these like, places where we can buy deals from wholesalers, from all this stuff, right? And I watch the investors go in and bid on houses.
00:13:46:05 - 00:14:05:17
Unknown
I watch the pros go bid confidently. They see a deal, they go, yeah, I'll take it. The people who are not confident because they don't, they're not watching the market. They're not watching the data. They're like fumbling over it, their wedding days. And we all know in real estate, speed is everything. Speed of decision making, speed of money.
00:14:05:22 - 00:14:27:03
Unknown
The faster you can move with prudent stewardship type decisions, the more successful you're going to be. The more velocity, the more growth you're going to get in your business. So I want you guys to drop a comment below and tell me what your what market you're in and what your market is currently doing. Like what are you seeing when you go look at that data.
00:14:27:03 - 00:14:49:11
Unknown
And if you're on Apple or Spotify, do me a favor set more people can be professional investors and get information like this. Leave me a five star review. That's all I ask when you listen to this podcast. Takes like two minutes. Jump on there. Type in what you thought about the episode, leave us a five star review and help more investors find us.
00:14:49:13 - 00:14:52:19
Unknown
Appreciate you guys tuning in today and I'll see you on the next one.
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