Massive Real Estate SHUTDOWN *JUST* Announced | WARNING.

other massive company with mass layoffs

and canceling yet another failed

business in real estate Redfin is the

failure we're going to talk about today

and boy oh boy

this is going to be a lesson called

lesson number 101 how not to make money

in real estate

that doesn't sound as sexy as use the

coupon code down below and join the zero

to millionaire course to learn how to

actually build wealth in real estate

and what's great is in that course I for

years have dissuaded becoming a home

Flipper the reason and then I'm going to

give you the news the reason why home

flipping is so challenging is generally

you pay substantial fees and holding

costs to sell property when you buy it

this makes using real estate as a

volatile commodity to trade very

expensive let me give you an example

people like to think oh well I could

just sell my home with a discount real

estate agent for one percent and the you

know cost to sell aren't that high

unfortunately that's not how the game

works typically closing costs are going

to cost you anywhere between six to

seven percent that's because not only do

you have to pay your realtor but you pay

the buyer's agent so maybe you save on

your representation by getting somebody

who's willing to work for a discount uh

and then you still pay the buyer's agent

and usually a normal market rate so you

to track buyers but then you have to pay

your escrow fees your title fees and

sure you can get binder policies and

titles or title to sort of reduce some

of those costs but you've got to pay for

holding costs costs of capital that are

deployed on that property and the fact

that you got to keep the lights on while

the property is sitting there and paying

property taxes as you're trying to sell

it and transact it people have to pay

for houses that are open houses right

this makes logical sense but beyond that

you have to maintain the property and as

buyers beat you up in inspections you

generally get complaints that you won't

get from a tenant now that is very

important to contrast because you want

to do great work for a tenant but let me

put you put it this way if the roof is

old but it's not leaking the tenant

doesn't care if however the roof is old

and you're selling it the buyer might

want you to pay for a new roof or at

least like 70 percent of it very very

typical so home flipping exposes you to

expenses that are usually get a knock on

the door of seven to ten percent let's

just take ten percent to be simple

considering all the repairs that you

might have to throw at a buyer just to

get them to close a deal so let's give

you an example and then give you the

breaking news so if you buy a house for

five hundred thousand dollars you put

fifty thousand dollars in to fix it up

you're probably looking at somewhere

around a six hundred and five thousand

dollar break even when you factor in

those holding costs and selling costs

and concessions to the buyer that's

challenging that extra fifty five

thousand dollars means you basically

blew an entire one hundred and five

thousand dollars the difference between

what the property might sell for 605 and

500 000 you blew that on fix up and

selling expenses not to mention you've

got buying expenses as well and what a

lot of people have been doing in the

flipping Market lately is they've been

speculating so hardcore that they've

been getting into flips where the after

repair value is like six hundred and

five thousand dollars and then they go

in and they say you know what the market

will just appreciate during the three

months we're in this process and guess

what we'll be able to profit off that

market appreciation and if we can now

sell the house for 6.25 now we walk away

with about a twenty thousand dollar gain

that's great if the Market's

appreciating and going in your direction

but what if Jay Powell comes around and

raises interest rates for mortgages four

to five percent and all of a sudden

buyers purchasing power is quickly

eroded and instead of seeing that after

repair value go from 620 or 605 to 625

you actually see it go to 580 and you

take it on the chin

yeah oops not so great and that's why

it's actually really smart for companies

to get out of the flipping business

right now Zillow saw this coming really

smart they got out of this the flipping

business at the end of 2021 and even

though they had to sell thousands of

their homes for a discount in early 2022

they ended up selling those sure at a

slight discount but still when the

market was near highs early 2022 was the

time to sell that's also when I sold 85

percent of my real estate now what's

next well Open Door is still stuck

flipping homes but they're offering

sellers way less money because they're

realizing they're getting smoked they're

losing so much money on deals that they

bought in q1 and Q2 because they didn't

pay attention to the housing market I

think there were plenty of people like

me screaming the housing market was

about to grind to a halt and you should

stop flipping homes yet Open Door didn't

listen and now they're getting burned

pretty substantially and laying off 18

of their staff but the other buyer known

as an eye buyer just like open door

which is basically a website that's

willing to buy your home from you and

then they can either resell it and take

some commissions and fees or they could

try to resell it for a profit and make

money that way either way Redfin was

another big eye buyer Redfin wanted to

give you multiple options and this is

actually smart it was very similar to

what I used to do as a real estate agent

back in like 2013 and 14 when I had the

means to do all these things I used to

say hey I'll sit down with the seller

and here are three options for you I'll

help you list the house for sale I'll

help you fix up the house so we could

sell it for more if you want or we'll

buy it from you all cash but the all

cash offer would obviously be less

Redfin tried taking that model which by

the way let me quickly give you a

spoiler on what I did what I ended up

doing is realizing lending my clients

money because I got my lending license

to help them fix up their homes was a

bad idea because clients and

construction don't really mix well

together construction is fun when you're

Your Own Boss not when you have clients

trying to tell you what to do when

you're the professional whatever that

was not a great model and buying homes

cash

kind of have to almost insult the

clients you're trying to list the home

for so didn't work out very well either

unless of course you wanted to overpay

to give them a good experience but then

by overpaying you'd also take it on the

chin and you don't want to do that you

don't want to be in a business that

loses money and that's folks what Redfin

just announced they're laying off 13 of

their staff and shutting down their home

flipping business here it is on November

7th we decided to wind down Redfin now

and reduce our number of employees by

862 which represents 13 percent of our

total employees of these 264 job

eliminations are directly related to

Redfin now wow so 264 are related to

Redfin now getting shut down which is

their home flipping business but that

means another nearly 600 jobs are

getting fired because well ultimately

here you go since June mortgage rates

have continued to climb and expectations

for home sales have continued to come

down remember these are businesses that

make money off of volume the more

transactions there are the more people

can pay for ads on let's say Zillow the

more transactions there are the more

Revenue Redfin can get from Redfin

agents or Redfin partner agents but when

transactions go down even if prices

don't necessarily come down although

they've already come down about eight to

ten percent across the country on

average we expect them to probably come

down somewhere between 15 to 25 percent

during 2023 uh we'll see but anyway they

say the remaining Workforce reductions

are primarily among our Real Estate

Services and headquarters employees in

response to macro economic conditions

and we're seeing layoffs everywhere

today's Workforce reduction assumes a

housing downturn that lasts at least

through 2023 wow I didn't actually

pre-read this section right here that's

incredible they're now predicting that

all of 2023 is going to be a housing

downturn and that's Redfin they provide

some pretty good insights to the market

too I actually respect their blog I

respect their CEO even though he he kind

of never comes on my channel for an

interview even though we've asked many

times but you know what fine don't come

since April 2022 through inventory

involuntary reductions and attrition

we've reduced total headcount of

employees by 27 wow regarding Redfin now

we expect to complete the purchase of

all homes were contractually obligated

to purchase and renovate and sell

properties quickly as of October 31st

the so this is another big buyer leaving

the market so open door is like yeah

we're just not going to buy much at all

anymore zillow's out redfins out you

know the Pension funds and REITs are

stopping buying the home builders are

stopping by you've got a lot of buyers

dipping out of this market so I know

people are like oh but inventory is

still low that's true but a lot of

buyers are just like no thanks bye and

that's how you start building up

inventory just wait I think probably by

q1 of next year we're gonna see big

surge in inventory relative to where we

sit now

as of October 31st the invent the

inventory value of homes was

approximately 265 million with another

92 million under contract by the end of

January we expect to own less than 85

million in homes and expect to complete

the liquidation oh that always sounds so

bad of our Redfin now inventory in the

second quarter of 2023 that's actually

when I think we we might and I'm not

sure yet okay I will know when we're

closer and that's okay I don't have to

make a decision until we're closer but

that's actually when I think I want to

start considering shopping for uh house

hack which remember if you're an

accredited investor go to househack.com

read the PPM there that's your

solicitation we've got some really good

news coming out to investors uh probably

today actually for for house hack which

is great and if you're not accredited

yet don't worry we've got the

non-accredited round probably coming in

January February while the bulk of the

workforce reduction is occurring today

we expect to complete this Workforce

reduction in wind down Redfin now

promptly after selling the remaining

properties currently in inventory into

2023 in connection with the preparation

of financial statements we recorded an

18 million write down of inventory oh

that's about that's nearly what eight

percent or so that makes sense uh and uh

let's see here right for now current

estimates of values uh if they were to

sell the homes as of September 30th

2022. okay well so you're gonna have

more write Downs basically yikes as a

result of the decision to wind down

Redfin now we plan to report Redfin now

as a discontinued operation wow so there

you have it folks don't flip homes learn

how to actually make money Building

Wealth in real estate as serious this is

probably before I came out with the

stocks course this was always the most

popular course zero to million at real

estate investing I know a thing or two

about real estate I'm starting a real

estate startup that is absolutely going

to crush it we're we're gonna

in my lifetime this will have a

multi-billion dollar valuation

I can't make that guarantee that's my

hope I just want to be very clear I

don't want to make promises but

expectations

um I am so excited for the opportunities

that lay ahead and I want you to learn

with me so check out the zero to

millionaire course and folks we'll see

you soon thanks bye