How to 'force' equity back into real estate...

I'm going to devote this blog to briefly discussing how to make $$ on a 'flip'.

By definition, a 'house flip' denotes buying a property at a certain price & then reselling, or 'flipping' it to a retail buyer at a premium price (profit)... So, just how do you do that exactly? 

Well, this may seem a little strange to some, but you actually make money in real estate when you BUY a property. That's right, the key to 'flipping' properties is not selling as much as it is BUYING. If you don't quite understand this concept, please keep reading...

Have you ever heard the saying, "You should want to buy the worst house on the best street"..? Well, this statement reigns true in the world of 'flipping'. In order to calculate leveraged risk on a property acquisition for profit, you must be able to identify a property that can be acquired at a discounted price of .50 to.60 cents on the dollar (or less=more profit), then you have to assume (actually calculate) rehab costs.... The rehabilitation costs of the property should not exceed .10 to .15 cents on the dollar... Therefore, you should only consider cosmetic to advanced cosmetic rehabilitations, & be weary of any structural or mechanical issues. ------> This is how you 'force' equity back into real estate. By using this formula correctly, you should reasonably expect to make a gross profit of .25 to .30 cents on the dollar, or 25-30% on a 'flip' sale. 

^ This is the formula I use.  

Here's the secret.... You can pretty much guarantee a certain return (profit) by doing thorough research & due diligence. Therefore, RESEARCH & DUE DILIGENCE are crucially important to a real estate investor. I'm talking about doing a full-fledged CMA (Comparative Market Analysis), running the demographics, looking at neighborhood trends, researching nearby schools/facilities/businesses, the full gamut. 

But, by far the most important piece of real estate research, as it pertains to 'flipping', is the CMA. You must know the recent nearby sales prices of similar properties (must have similar floor plan, be no more than 1-2 miles away from subject property, & a sale that happened less than 3 months ago).... This will mostly determine what you can expect to sale (flip) your  property for. <---- (VERY IMPORTANT)

So, to wrap this brief tutorial up, if after doing all my research & due diligence, I find a property that is discounted (distressed) by 40-50% because of an unfortunate situation that's not adversely effecting the nearby property values, I can expect to 'force' equity back into the home by making certain improvements to the property. But REMEMBER, this can only be determined through in-depth research & due diligence of the subject property, & most importantly the surrounding areas' recent similar sales. 

* As a side note --- In the future I will attach a link or file that will go to an excel spreadsheet breakdown of one of our 'flips'. This should give you an in-depth look at what I mean by 'cosmetic' rehab, and the actual tasks that 'force' equity back into properties.

Until next time ~ Take care, & happy house hunting! 

Feel free to leave any thoughts/questions/comments, & I will try to respond in a timely manner.

Rocky Moore

Member/Operating Manager

ROMO Group, LLC

Intuition vs. Logic (in life, & in business)

Although this blog was setup to primarily reflect upon the real estate business, from time-to-time I'd also like to write about tools that can transcend across any business situation (or life).

That being said, I had a discussion today about the power of a person's intuition, a.k.a 'gut feeling'. I argued that intuitive feelings are far more powerful than logic. In fact, I believe that logic is preceded by intuition, & not the reverse.

I argued this because intuition, or a person's 'gut feeling', is a culmination of all their life experiences, mistakes, & lessons picked up over the years. To put it in a metaphor, the inward persuasion is likened to a super-computer combing through files & data, then uploading the information in order to sway you one way or another.

To relate it to real estate; If I'm trying to determine whether or not a particular property is a great investment & will be profitable, 9 times out of 10 I will draw my conclusion based upon my initial intuitive feeling. Of course, I will use every tool available to further warrant that feeling. And, as you might assume, the evidence rendered through comparative market analysis, field studies, neighborhood demographics, etc. will 90% of the time validate that intuitive feeling.

To look at it from the opposite angle, if I ever find myself trying to 'logically' override an intuitive feeling, I'll immediately know that it is the wrong decision. Now, I'm not saying that the intuitive feeling is the most appropriate decision, or for that matter a decision at all.... but simply that there must be a better alternative that's not yet been discovered.



I'd love to know your "feelings" on this subject. Do you feel that intuition is a more powerful tool than logic? If so, to what extent? Or perhaps you don't put much emphasis on intuition at all... ?


Thanks to all, & please remember to 'like' us on our Facebook page (ROMO Group, LLC).

Type again soon,

Rocky Moore
Member/Operating Manager
ROMO Group, LLC

INTO THE WILDERNESS ---- (a dissection of an entreprenuer's modus operandi)

I hope the title doesn't sound too over-the-top cheesy... but as a first-time blogger, I hope that maybe you'll cut me some slack..... ;)


As you can see, I've decided to venture into the blogging world. Not for an egocentric conquest of narcissistic self-gratification, but rather to share some of my insight(s) as I continue through the wild west world of the entrepreneurial real estate business.

My hope is that this blog will one day become a reliable, informative, thought-provoking source for local real estate investors, developers, agents and enthusiasts alike. I would like to think of it as a "think tank" for local greater Atlanta real estate professionals.

That being said, I would like to devote this first blog to giving you some background information on my company, and why I decided to venture into this rough and tumble business:

I founded ROMO Group, LLC in May of this year (2013).

As many of you are probably aware, the national real estate market is currently in a rather unique situation.

From roughly 2008 to earlier this year, all new home construction virtually came to a screeching halt. Even now, new home construction is far off the pace of pre-recession numbers. During the recession (which I'll note as being between the years of 2008 to 2013) the housing bubble collapsed leaving many homeowners underwater on their mortgages and not seeing any other alternative than foreclosure. This unfortunate situation flooded the market with vastly discounted bank-owned properties that literally could by bought for pennies on the dollar... and investors quickly took notice. Not only did local small business investors get in on the action, but Wall Street did as well. Large institutional investors started gobbling up massive amounts of bank-owned homes and adding them to their hedge fund portfolios. The Street's strategy seemed simple enough (renovate them, then rent them out.... and hold for several years until the market improved and resell them for a substantial profit)..... If only we knew how much we could learn from playing 'Monopoly'.

But wait a minute.... could it be that things are starting to improve for the homeowners? Why yes, yes it could. In fact, just today I heard a statistic that home prices are .12% higher than one year ago, and only  .20% off their all-time-high pre-recession numbers. Now, many homeowners are seeing their investments rise above the surface, bringing them out from underwater on their home loans. This is great news.

Many first-time home buyers, and the folks that have been paying inflated rental payments are now beginning to once again desire the great American promise of home ownership. However, there is a problem. You'll recall that new home construction has been virtually nonexistent  since 2008, and is only seeming to trickle back at a snail's pace. This has created the unique situation I mentioned to you above. Remember the old demand & supply lesson in grade school economics? Well, it's just that simple. The demand for great homes is significantly higher than the available supply, and it's once again a seller's market.

I believe we have a window of opportunity greater than any other time in history to exploit this 'perfect storm' in the market, which was the catalyst behind my decision to found ROMO Group. At this point, we and our investors' strategy is primarily 'flipping' properties, thereby revitalizing once great properties suffering from the after-shock of the Great Recession, and turning them into the best & desirable homes.

So, now that you have an idea of what we do and where I'm coming from, I hope that you will engage on our Facebook page and social media outlets to give your thoughts, knowledge and opinions on the market. Again, my hope is to share my experiences and findings, and also hear some of yours so that hopefully this will become a 'think tank' for local greater Atlanta real estate.

Type again soon.

Rocky Moore
Member/Operating Manager
ROMO Group, LLC