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On this episode of The Real Estate Report with Chris Williams you will be left in the know with a market overview. You'll also learn how you can make big profits off of the market reset that is happening.
Hello and welcome. I am Tony Minieri, your moderator for today's program. We have an engaging and insightful show plan for you as we discuss what's happening in real estate today and why real estate is a great place for you to put your money. We will also be separating fact from fiction in the real estate market and we will close our show by telling some great stories about what people are seeing in real estate, what they are experiencing, and what they are doing about it. Let me start off like introducing you to Chris Williams, the CEO of Blue Sky Capital in San Diego.
Hi, Tony. It's great to be with you.
You know, Chris is an expert in real estate investment, finance and syndication as he has managed more than 300 real estate transactions and spent 13 years managing real estate teams. He is the proud recipient of the Prudential Presidential award and won that award nine years in a row. Chris, there is a lot of happening in real estate today, short sales, foreclosures, strategic default, a continued decline in home values. I thought we are supposed to be turning the corner at this point. What's going on?
Tony, it's a great question, one that I get often. You know, it depends on what you're listening to. There are certain news clips you'll hear where we're trying to corner the certain news clips you'll hear where people will say we are not. I can tell you that me and my team, we are on the court. We're in the market day in and day out and we are definitely not turning a corner. [Crosstalk]
For not turning the corner, then just where we at. Well, I'll tell you where we're at. There is still an enormous amount of distress in the market. We got homeowners that are not paying their mortgage. When we're out looking their properties, we can see when the last time the mortgage was paid and there are people that haven't paid. They are in their home, but they haven't paid for three years. You know, if you go to realty track or the Wall Street Journal online and do a research, you'll find that 28% of all the mortgages in our country are underwater. Meaning that they owe more on the house than the actual houses' worth. There are short sales that are in process, which means millions and millions of short sales that are in process with the banks that are not short at all in time and they are just lingering. You got banks that need to foreclose on properties and are not on foreclosing on properties because they are waiting for the big settlement to happen with the government. And then on the demand side of things, you've got buyers that want to buy home, but can't get the financing. You know, I have worked with buyers that had cycle scores in a high as 700. But for various reasons, they couldn't get a home. I know a person that is worth $100 million and can't get a loan on his house because of the new underwriting guidelines. So you put all that together Tony and we are far from recovery in the real estate market.
Wow. This is part of the situation that resulting you forming Blue Sky Capital 18 months ago.
Indeed, it is. You know Tony, I have been in real estate for 14 years coming up here in August, a third of my life, and that whole career of mine, I built it around in training people to be investors in residential real estate. So I've done over 300 real estate transactions as you mentioned at the beginning of the show. The bulk of those were, in fact, almost half of them just under 150 were some sort of a flip for a residential investment deal. So when the real estate market collapsed in 2008, those investor buyers just faded into the background. What I'm saying, it started to recover in late 2009 and early 2010, particularly driven by the home buyer tax credit. Those investors clients of mine were calling me saying, "Chris, let's do some deal." So I went to look at the deals and Tony, I couldn't find any deals that made sense. The short sales weren't working. The bank going foreclosures weren't working. It just wasn't enough of a discount available for a savvy investor to buy it. There certainly weren't any equity deals to be had so I went on the hunt to find where is the steepest discount available when buying residential properties. Well, very quickly, I landed at the foreclosure auctions here in San Diego and after spending time learning how that business work, a few things became evident. One is the steepest discount available at the foreclosure auction when you actually get it in front of the bank getting at. The second thing that became clear is that buying properties at a foreclosure auction is risky, it's demanding, it's highly tactical and frankly not designed for the everyday average investor. You got to have millions of dollars and a team of people like we put together at Blue Sky Capital.
Right. I would think so. So tell me a little bit more about the Blue Sky Capital process, you know, the details about your process.
Oh, sure. Well, I put together literally a team of experts and my teams of experts are licensed realtors that worked for us and for us only, and they spent all day everyday assessing properties for us to buy. I also have a team that is organized around buying the properties at the auctions. We do, by the way, buy some deals off the multiple listing service, which is the open market. We even go and knock on doors and talk to homeowners that are behind down their mortgage to see if we can buy their house. So with this team, we go out and look at hundreds and thousands actually of properties every month so we created a custom proprietary tracking software to keep track of all these properties and then we used that also to assess all those properties and then, the day of the auction, we have teams that are down there with cash in hand to buy the properties. We also have all of our own teams to remodel the properties. We stage every property and then we resell it. In fact Tony, you and the listeners on the show can see the deals that we've done on our website at blueskycapital.com. If you will take a look at the real life case study section, you will actually see the deals that we have currently underway.
Great. And as you're saying, you're going and you're getting the distressed property, you are rehabbing it. But this is really more than just and then reselling at a course. But this is more than really just flipping houses. Isn't it about rebuilding neighborhood and helping to reset the housing market?
It is, indeed, Tony. You know, I've been in San Diego for over 20 years. I love San Diego and to watch what's happened to our real estate market here, it's really been distressing for me and for my team. So, we take a look out there and we realized that the one thing that media has right is that the economic recovery for our country is going to be driven by the residential real estate market and so we take it on and we haven't say so and how that turns out and we have put ourselves as the solution so one house at a time. We are rebuilding San Diego neighborhood by taking a distressed home where they are not watering the yard, where the home owners not paying the mortgage and we did a work that we do. We set that house back to market value. We have a good qualified borrower in the house making payments. Our target market is to sell to a family. So, not only do we stabilize markets in San Diego, we actually helped increase the values. We did that significantly on a home that we did in an area of San Diego called North Park.
North Park is the San Diego neighborhood. Tell us -- the listeners about that story.
Sure. So, this was a deal that we didn't buy it foreclosure, it was brought to me by an outside realtor that's always looking for deals for us and he give me a call and says, "Chris, come look at this property." So, I say, "alright." I drive up to the property and I put the car in park and I looked over it where the house is suppose to be, but Tony all I see the big bush. This house is literally overgrown by plants, trees, etc. You can't see the house. So, as the realtor and I start to walk around the property, we go to the exit and we go to the front door first but the door won't open, so we walked around the side and we're tracing through a property that has not been landscaped literally in years.
And we get around to the back to open the back door but there was no back door. It's wide open and has been open to the elements for years, rain, wind everything. So, all the elements from the outside are inside the house and so as we are walking in to this kitchen it is a bit eerie because this house has not been lived in for years. It's completely abandoned and has been open to the elements and as we walked to this house, I realized that this 1923 craftsman has not been touched for years. So, probably it has been remodel in decades and for years it's been seating empty. We bought that house Tony, we were one of 21 or 22 offers and through our expert negotiations we got selected to buy that house and we did buy it. We did an unbelievable rehab on it and we put in on the market and we've had multiple offers on and since sold that house to a new buyer it is in escrow will close here soon and Tony we now have, not only turned that ugly house in to a pretty house, but we put a very qualified happy home owner in that home and we hit the high water mark for the price per square foot on the full values, so what I'm saying is we raise the values of the neighborhood by that.
Yeah. That's awesome. You know, it would be great, I would assume you have before and after pictures of what you did.
Indeed. And tell you and the listeners can go to our website at blueskycapital.com if you go to the real life case study section on the home page look for the Villa Terrace house and that Villa Terrace house has a virtual tour they goes before, after, before, after and all of the photos it is shocking and frankly some of our finest work.
You know that's awesome. We'll take a look there and I urge everyone to view the before and after pictures on the Blue Sky Capital website. Now, as you said the North Park home was when you secured you're realtor but you purchase many others to foreclosures and how to separate, what's really happening we talked about in the beginning but about the supply of onset still out there?
Yeah, you know if you talk to the realtors on the street here in San Diego and I suspect around the country and say, "Wow, the market went from a buyers market to a sellers market overnight." In fact, I had realtor tell me that just last week. I would say it's false, there is a second and massive wave of foreclosures coming our way and in fact I will talk about that on our next show.
That's awesome. What's your recommendation on several different levels here for what home owners should do underwater home owners, buyers, investors about opportunities so, give us your thoughts.
I will. Well, if you're a home owner listening to the show and you're underwater and you're in distressed, I have great compassion for you. I frankly short fulfill my own personal properties in 2008 when the market collapse, so I know what that's like. First and foremost you must be talking to the bank and see if you can get a loan modification done then if it looks like you can I invite the listeners to call us. We buy houses and we will actually do all the short fail work for you and negotiate with your bank. You can get contact us by going to the contact section of our website at blueskycapital.com, but if you are an investor, if you're on a different pair of shoes there and you got some capital that you would like to make grow and if you believe in real estate, if you understand the real estate market then we might be a good fit for you and I invite investors to contact us to our website and we would be happy to really show you more about business model and talk about how we can work together.
Awesome. And you know as we said, Blue Sky Capital is located in San Diego. Your long time San Diego resident, you know this market well. It's what's happening in San Diego a precursor of what is yet to come another parts of the country, another communities, another cities every locations is a little different but give us your sense of what we can, what can see in other parts of the country?
Well, sure. You know Tony, you're right. Every location is different and real estate is a localized bricks-and-mortar phenomenon. However, there was some fundamentals that happen between 2000 and 2008. In financing that drove the unbelievable increase in values and very same fundamental also drove the collapsed, which is financing. The way the financing went down from 2000 to 2008 drove the biggest boom we've seen and the biggest collapse we've seen and that happened in most major metropolitan markets all throughout the country. So, if you look at the top 20 markets of our country they're just like San Diego, where you got upside down homeowners you got an over supplied inventory and you got banks that need to take home and back in foreclosures and haven't. So, this is our model I think we could work in many parts of the country and we think that we're not near the bottom and we have a second wave coming across the land.
Right and the thing may be that even if your community everything might seem okay there could be something around the corner, right?
Indeed. Indeed. So, we're -- this thing is far from over, Tony.
Right. Great. Well, thanks for all that insight, Chris. We really, really appreciate it and of course thanks to our listening audience. Thanks for joining us today on the real estate report with Chris Williams. You can join us again for our next show as Chris mentioned when will be discussing the second wave of foreclosures that is about to happen. Again, thanks for joining us today and have a great real estate day.
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