A short talk on shifting mindset in a real-estate business toward treating deals like manufactured products: analyze budgets, expenses, and per-deal required profit to derive target sale price. The speaker describes moving from doing every deal to a math-driven model that back-calculates the average price needed per property to cover staffing, materials, and other costs.
So the first thing that we had to do is we had to kind of take a little different mindset and we had to, we had to start looking at ourselves a little differently. Rather than just a traditional real estate company where you're going to do every deal that comes your way, anything comes across your desk, you know, your brother in law wants you to sell his 10k lot in the middle of nowhere kind of thing. And it then forced us to start doing the math and looking at our budget and our expenses and all of the pieces of the puzzle that, that really, you know, in a, in a manufacturing world you would know, like it costs us this much money for staffing, materials and all these things. And so therefore we have to sell all these widgets at a certain price in order to either break even or make a profit. And so we started doing that in our world and knowing that we had a certain amount of expenses to cover, then we started figuring out, okay, well, on every deal, if we're going to do X number of deals, we think on every deal, we need to make some certain amount of money. And then from there it allowed us to back into a price point that we knew, okay, we need to start selling properties on average, at least at this, in order to make sure we're covering our expenses every time. And so that was the first step is we definitely needed to make sure we understood the math of everything and the budget and economics of our model.
