How I plan to compete with wall street

[Huggy Baird]

As you all know, wall street is moving in on our turf. Thought I'd share my plan to stay alive:

1. Convert multi-family to single family dwellings. In my particular region there exists a large double (up/down) housing stock where the same sq ft would sell for significantly more as a single family. I take on these tough rehabs that most others would be afraid of. My expectation is the typical hedge fund/REIT would shy away from the headaches leaving me a sweet spot

2. Expand outside of the MLS/Auction avenues. Historically I've had too many fish in the MLS/Auction sea. Moving forward I think i need to establish relationships with Wholesalers (or possibly become one)

3. Compliment wall street by adding value. My company is also a licensed/insured contractor. I may need to do rehabs for the hedge funds. Or, i plan to keep a close eye on whether their using the 1% or 1.5% rule and find homes that would add value to their portfolio post rehab

4. Kiss my historical margins goodbye. Gone are the years when I had a 19% net profit margin. I'm ratcheting down my expectations to a 10% net profit margin on flips. This will change my return on equity from 37% down to 29% using Dupont's ROE. Nothing to complain about at all. I'm very fortunate to have 10% margins and will compete hard to maintain them.

5. More passive income Over the past few years I have NOT grown my rental portfolio because it was too easy to make abnormal returns on the flipping route. In the comping year I'll expand my rental portfolio reflecting my expectation there will be fewer opportunities for flips. I'll still expect a 14.5% return on equity with the passive income route. Plus, it offers more certainty given how unclear it is what the residential real estate market will look like in 24 months and whether flipping will even have the 10% margins in the future

What does everyone think about my plans?