Where is The Actual Value Provided?
Hey there, it’s Mark at Rokket Science. Today I want to talk about what is it that a real estate investor actually provides to the marketplace? What are we actually doing? I mean, are we actually doing good in the marketplace? Are we just getting properties really cheap?
Someone here on my team, Ben, actually suggested that we shoot a little more video around context and what it is that we’re actually trying to do. Why do we exist here? What is the service that we perform in the marketplace?
Rethink Your Approach
When I got started into real estate investing 20 years ago, in the late ’90s, I learned from some teachers that the whole game was to get as much equity as you can for as low a price as possible.
And the truth is that can kind of get carried away.
There are some shenanigans that happen in real estate investing and I think we’ve probably all gotten caught up in that little bit from time to time. And I really, I’m a pretty sensitive guy, and I really had to think about, “What am I adding to the marketplace?”
The Power of Liquidity
A friend of mine and I were talking one day and he said, “Well what we provide is liquidity.”
If you think about it, there are big companies that run into cash flow problems. I mean, even huge corporations that they maybe have got a great business model, things are working, but they don’t have the cash that they need when they need it. And they end up going bankrupt.
Surprise, Real Estate is Not Very Liquid
Now, real estate is not the most liquid of investments. It’s not like stocks and bonds that you can just go to the marketplace and sell.
And even stocks and bonds, if you go to the marketplace and sell them, and need to sell a lot of them quickly, you often have to sell them at a discount.
Well, equity in real estate is kind of an ethereal thing. It’s pretty abstract. And how much equity someone has is really a matter of opinion.
The amount of equity that I believe that they have, the amount that another investor believes they have, the amount that the MLS believes they have, and the amount that the owner feels they have can be four different answers.
The Good Underneath The Controversy
What we are doing when we go out and buy houses for a discount is we are offering to that seller liquidity. And they get the choice to determine if the price that we’re offering is fair or not. Of course, we’re not going out and stealing houses and there’s a lot of controversies that surround the real estate market and gentrification. But at the end of the day, my belief is that we are doing a good service.
We are offering the opportunity for someone to pick up and move across the country.
For someone to pay for some medical bills.
For someone to buy a new home quickly.
For someone to see an opportunity.
There’s a price to be paid for that speed. They typically take a lower amount of equity or a lower amount of sale price in exchange for a very quick sale price.
Convenience is King
Sometimes owners don’t want to have strangers in their house and so they want to just do one sale. Occasionally an owner doesn’t want the neighborhood to know that they’re selling the property. They want someone to just come in and buy it and they want to quietly move because that works for them.
A Lesson I Learned The Hard Way
The truth is, I’ve been in the situation myself where I had to sell a house very quickly.
And I wish that a real estate investor would have come along and talked to me.
That was back in 2008 when I actually had a lot of houses that I needed to sell very quickly. Some of them didn’t completely get sold. And they went back to the bank.
Convenience Through Liquidity
Real estate owners need liquidity. All kinds of investors need liquidity and what we’re offering to the market, in a quick sale, is that liquidity.
So I hope that helps. That’s what we’re doing in the marketplace. That’s the service that we provide.