In this episode, I am going to encourage you to become a spy. What kind of spy? A real estate spy! The only way to know if you match up to your competition is to find out what your competition is. I encourage you to do this in real estate.
Every business keeps itself educated on what their competitors are doing and how it’s affecting you. If a competitor does something that dramatically increases sales, you better believe every company in their niche is going to do something very similar to try to capitalize on it. So why should it be any different in real estate? If Nike comes out with a cool new feature for their shoes, you better believe that Adidas is going to try and do it too. If Redbull has a promotion that’s wildly successful, I’m sure that Monster is going to also come up with a similar promotion.
One way to find out what your competition is doing in real estate and make sure you’re doing similar or better things is to go to open houses. Going to open houses for properties in your target market will let you know what the houses that you will be competing with look like. This is especially important and valuable for flippers. If you buy a house, you know that you will be trying to sell it in the next 3 to 6 months. That means that during that time, you should be out looking at other houses for sale in the neighborhood, so that you can make sure your house looks better than the other houses that will be for sale at the same time. There is certainly nothing unethical about this. It is just good, common sense market analysis.
Another method of “spying” on your competition is to visit websites like realtor.com and look at houses for sale in your market. Normally, on websites like these, there are several pictures of the inside of the house. This will allow you to look at several houses in your market very quickly. Without having to drive from house to house, you can do a lot of research in a very short amount of time. This is very useful if you have a day job and don’t have a lot of time to drive around. It is still important to get out and physically look at houses that you competing with, but going online and looking at pictures of them is also very valuable.
You need to make sure that the house that you are renovating does not have Formica countertops if all the other houses for sale around it have granite. Additionally, you don’t want to put $15,000 kitchen cabinets in your home if all the other homes that you are competing with have kitchens from the 1950s. There is a risk of “under-rehabbing,” which means not bringing your house up to a nice enough level. There is also something called “over-rehabbing,” which means doing way too much to your house and never being able to recoup the money because the neighborhood simply doesn’t support the money that you spent on materials. In other words, if you are flipping a house that has an ARV of $100,000, no amount of high-end finishes will make it worth $150,000. So don’t put finishes in a house that the market doesn’t support, much less need or want!
Take this week to get out there and work on your spy skills!