If you’re thinking about investing in real estate to make money, you need to first determine your financial goals. Do you need to make money quickly, invest for your children’s college fund, or build wealth for your retirement? Once you determine your financial goals, you need to decide which type of investing strategy works for you.
Make Money in Real Estate - Fast Cash Strategy
If you’re low on cash, get started by finding a bargain house and selling the contract to another real estate investor. Join a real estate investing club to find investors willing to pay you for finding good deals.
Make Money in Real Estate - Income Property Strategy
If you want to increase your monthly income, look for income property that returns a positive net income from month to month. Start with single family house. Look for a bargain below market value. Fix up the house to generate top rental income. Find houses that will rent for more than your mortgage payment. You may need to go out from your home area to a location that supports this type of return on your money. You can’t pay $300,000 for a home with a mortgage of $1,500 that only rents for $1,000. You might start with a home for around $300,000 that rents for $1,750. You will need good credit to get a loan with good interest rates. In a few years, your rental income should go up. Many real estate investors enjoy thousands of dollars each month generated by income property.
However, some investors don’t like dealing with tenants and prefer to make money in other real estate ventures.
Make Money in Real Estate - Investment Property Strategy
If you want to make money focusing on profits, investment property offers a different strategy. Instead of worrying about rental income, look for property that you can transform and sell or property that will appreciate significantly over time. Besides fixing a house up, you can transform a property by changing it. For instance, some investors buy apartment buildings and turn them into condominiums. Many investors speculate in land and make money by holding the land until new development in the area increases the value.
Examine your financial situation along with your long term goals. You can get started by flipping properties, move onto income properties, and then make larger profits with investment properties. You might end up using a combination of all three strategies to make money investing in real estate.
Copyright ? Jeanette J. Fisher
About the Author: Jeanette Fisher teaches how to find, finance, fix and sell. Free ebooks “Credit Tips” http://worryfreecredit.com “Flipping Houses” at http://doghousetodollhousefordollars.com
Tags: Bargain Market, Financial Goals, Good Deals, Interest Rates, Investing In Real Estate, Investing Money, Mortgage Payment, Net Income, Profits, Property Strategy, Real Estate Investment, Real Estate Investment Property, Real Estate Investor, Real Estate Investors, Rents, Retirement, S College, Single Family, Strategy Works, Thousands Of Dollars
Knowing what a Good Deal is Is the Key to Success in Real Estate.
Knowing what a Good Deal is Is the Key to Success in Real Estate.
Knowing and being able to negotiate good real estate deals every time is the key to real estate investing success. What to look for, and how to calculate your profit, cashflow and risk exactly and then evaluate the deal is revealed. These techniques apply to all real estate investments including foreclosures, short sales, rehabs, flips, muliti-family, lease option and owner financing.
Dear Investor,
Take this little survey: The most important key to Real Estate Success is:
1. Finding Motivated Sellers
2. Funding Your Deals
3. Negotiating
4. Knowing a Good Deal when you see one.
Yes all of them are important. And if you answered #4 you’re right on the money. Why, because if your deal is a not good one, all your other skills and marketing and power will not make you money, and may even lead to disaster.
On the other hand, if you can unfailingly target good deals, you will always be successful and all the other skills and your marketing methods will serve to increase your success.
It’s a lot easier to state the question than give the answer. Why?
SO… WHAT IS A GOOD DEAL?
It’s a lot easier to state the question than give the answer. Why?
Because it depends on many factors like:
> Market value and purchase price
> Expenses, carrying costs, repairs
> Cashflow and profit
> Holding time
> Loan terms
> Risk factors
> And more . . .
And most importantly, it depends on the type of deal you’re doing. For example, if you have a loan on a property that you intend to rent or sell on a lease option, the terms of the mortgage, future tax increases, and current area rents are critical to consider in insuring a positive cashflow. However, if you are planning to do a short rehab job, and sell or just flip to another investor, rental income is irrelevant as are future tax increases.
IT’S WHAT YOU DON’T THINK ABOUT THAT CAN GET YOU
The thing that trips up many investors, is that in our enthusiasm to do a deal that we’ve found, we don’t take into consideration “hidden” costs.
For example, if you’re doing a renovation and you’ve done your due diligence on contractor costs, have you also considered your carrying costs such as mortgage payments, utilities, etc. not only during the renovation, but also the time it will take to sell and close with a new buyer?
Or if you’re using a realtor to sell the property, have you calculated the effect of a 6-7% commission and the closing costs the seller will pay on your bottom line. A 10% profit margin can shrink pretty quickly to zero under those circumstances.
READ THOSE LOAN TERMS CAREFULLY
Or have you taken into account, not just your loan to value ratio on the property, but your investment to value ratio (e.g., the total of all outstanding loan balances plus the additional funds you’ve put in from your own cash or borrowed from your home equity line or friends and family)?
And on the income side, have you calculated how long you should hold the property to receive a significant profit from the pay down of the mortgage. With a new 30 yr loan, you may have to wait 5-10yrs to get the same pay down you’d get after a few years from a 30yr loan that’s been seasoned for 10 years.
And did you carefully read the note contracts to take account of adjustable rates and pre-payment penalties?
CHECKLISTS AREN’T ENOUGH
A number of courses and real estate gurus will give you checklists. That’s helpful in not forgetting something, but it doesn’t help you with the laborious and complex task of putting all the numbers together.
There’s just something about working with the actual real numbers, that brings the reality of the deal into actual focus. Our hopes and wishes dissolve before the actual profit and loss calculations.
Moreover, the numbers can pinpoint the weaknesses in a deal, and point the way to a solution. No mere checklist can do that.
WHAT ABOUT RISK?
I think you’ll also agree that a Good Deal, is not just High Profit, but also, most importantly Low Risk. Many a dream of a golden future has come crashing down because some little thing went wrong.
Many a would-be mogul, is now working at a 9 to 5 because their killer deal was wrecked by an unforseen glitch. This is what we mean by high risk.
The successful investors do deals with low risk. Deals that are so robust that even if almost everything went wrong they’d still come out with a profit.
BUILD IN A SAFETY MARGIN
For example, suppose you have a rental with a positive cashflow. Is your cashflow high enough or your option payment big enough, that even if you had to evict your tenant for non-payment and it took you 2 months to fill it with another cash-paying customer, you’d still come out ahead?
Or, is your investment to value so low that even if you had to offer your buyer a big discount for a quick sale, you’d still walk away from the closing table with a fat check?
In real estate things can and usually do go wrong. It’s Normal. So, wouldn’t you like all your deals to have these kinds of safety margins?
FIXING THE PROBLEMS WITH YOUR DEAL
Now, if you knew in advance that your risk was too high, or your cashflow was too low, or your profit over the life of the deal wasn’t enough, you’d want to think of solutions.
This is what is meant by being a “transaction engineer”. Find the solution, fix the problem, test it on the numbers, and then negotiate it into the deal.
And if you can’t find a solution (but there always is one) or the seller won’t accept itNEXT!
A RISKY DEAL IS NEVER WORTH DOING!
I can tell you from real experience, a bad or risky deal is NEVER WORTH DOINGno matter how enticing the vision. The personal stress, heartache, and loss of confidence can be even more harmless than the potential financial loss. In the words of an ex-president’s wife, if you are faced with doing a bad dealJust say No!
WHAT’S THE ANSWER?
Some experienced investors have a feel for good deals, and can avoid trouble most of the time. Others only do a particular type of deal and use a rough “rule of thumb” to evaluate their risk and profit.
However, what’s really needed is a “calculator” or computer program that will take in all the variables and
> Calculate the exact profit and cashflow for all kinds of deals.
> Measure and Evaluate the financial risk in the deal
> Use standard and safe criteria for what constitutes a good deal
> Suggests alternatives to fix what is wrong
A DEAL EVALUATION TOOL
We’ve taken tons of real estate courses and looked at all kinds of real estate software, and nothing has come close to what we as investors need. So we decided to create our own Deal Evaluation Tool.
Well after several months of testing and improvement, we now use it for all our dealsshort sales, subject to, lease option, rehab, wholesaling, and even some commercial.
Since we can try out different “what-if” scenarios, it’s kept us away from some real pitfalls, and helped us negotiate better profit margins. We wouldn’t “leave home without it”.
CONSTANTLY MEETING THE NEEDS OF INVESTORS
Well, some other investors wanted to try it, so we put it on our website. Much to our delight we now have a community of users and a users group that shares their insights about doing deals and creative ways to use the Deal Evaluation Tool.
Their suggestions, are leading to a rapid improvement of already incredibly useful tool. There is just nothing out there like it. We’ve also put a demo up for those investors who would like to get a feel for using it. And we hold classes for new users.
Knowing all the numbers, and having evaluated our risks with the Deal Evaluation Tool gives us more confidence in negotiating deals with sellers and more consistent high profit real estate deals.
And that’s what we all want, isn’t it.
Best of Success,
Richard Odessey
This article may be reproduced in its entirety only if unaltered and the resource box is included.
About the Author: Richard & Michelle are experienced investors & founders of the premier site on the internet - http://www.InvestorWealth.com: training real estate investors to do high profit deals. Offering Free Teleseminars by the top real estate investors, how-to tools and kits and hands-on training with personal advice from experts from the comfort of your home
Tags: Carrying Costs, Disaster, Estate Success, Finding Motivated Sellers, Flips, Foreclosures, Good Deals, Holding Time, Lease Option, Loan Terms, Marketing Methods, Owner Financing, Positive Cashflow, Real Estate Investments, Rehab Job, Rents, Risk Factors, Tax Increases, Time Is The Key, Time Loan
For the uninitiated, investing in real estate can seem like a big, mysterious activity that you pretty much have to be born with a special gene to do. They don’t know that you can break it up into several smaller steps, and that it is only a matter of learning how to get through each one.
The following are seven steps you can follow in order to go from being an Average Joe or Josephine to being Joe Cool, real estate mogul. They will at least get you closer to the latter.
1. Realize that it is not outside of your grasp. As one step leads into another, you first have to begin thinking like a real estate investor. And real estate investors think about finding good deals. However, you may not know a good deal if it jumps up and bites you on the nose.
2. That’s why you have to learn some basic accounting. You don’t have to spend 10 years studying under ancient Chinese accounting master, but you should learn how to read financial statements. You should learn about cash flow. You should learn the difference between an asset and a liability, not just take your banker’s word for it.
3. Once you know how to read the language if investment, you will be in a position to learn how to recognize a good deal when you see one. This is a bit trickier. Although you should do plenty of reading on the subject, the best way to learn is through doing. Get out there and look for deals.
4. Learn about the markets you want to play in. If you are thinking about buying a specific kind of property, learn about the markets in the area you are interested in. The market should actually determine where you make your purchase. Look for a community that is progressive, for one thing. A place with a good quality of life. A place with a good economy.
5. Set goals. Determine what you want to accomplish and when you want to accomplish it. Make sure it is within your reach and then take the steps to actually make it happen.
6. Develop your team. You will need to hire professionals to help you with things like accounting and legal issues. You will want people who know more than you do about how buildings are put together to appraise property for you. According to Ken McElroy, author of ?The ABCs of Investing,? the worst thing you could do is skimp on this step and try to be a ?real estate do-it-yourselfer.? That may appear to save you money in the beginning but you will pay dearly in the end.
7. Make your first purchase. When the numbers add up, McElroy says, then it is a good deal. Don’t leap without looking, but if you’ve looked and the numbers add up, then it’s time to jump.
Of course, this is a simplified version of the process, but it is a good way to get an overview. Each one of these steps could be further mapped out. The trick is to do your research and take it at your own pace. Don’t rush. Learn the process. The first purchase will be the most difficult. After that, the real learning starts.
Tags: 10 Years, Average Joe, Basic Accounting, Cash Flow, Economy, Financial Statements, Good Deals, Grasp, Investing In Real Estate, Joe Cool, Josephine, Mysterious Activity, Quality Of Life, Real Estate Investor, Real Estate Investors, Real Estate Mogul, Set Goals, Seven Steps, Smaller Steps
For the uninitiated, investing in real estate can seem like a big, mysterious activity that you pretty much have to be born with a special gene to do. They don’t know that you can break it up into several smaller steps, and that it is only a matter of learning how to get through each one.
The following are seven steps you can follow in order to go from being an Average Joe or Josephine to being Joe Cool, real estate mogul. They will at least get you closer to the latter.
1. Realize that it is not outside of your grasp. As one step leads into another, you first have to begin thinking like a real estate investor. And real estate investors think about finding good deals. However, you may not know a good deal if it jumps up and bites you on the nose.
2. That’s why you have to learn some basic accounting. You don’t have to spend 10 years studying under ancient Chinese accounting master, but you should learn how to read financial statements. You should learn about cash flow. You should learn the difference between an asset and a liability, not just take your banker’s word for it.
3. Once you know how to read the language if investment, you will be in a position to learn how to recognize a good deal when you see one. This is a bit trickier. Although you should do plenty of reading on the subject, the best way to learn is through doing. Get out there and look for deals.
4. Learn about the markets you want to play in. If you are thinking about buying a specific kind of property, learn about the markets in the area you are interested in. The market should actually determine where you make your purchase. Look for a community that is progressive, for one thing. A place with a good quality of life. A place with a good economy.
5. Set goals. Determine what you want to accomplish and when you want to accomplish it. Make sure it is within your reach and then take the steps to actually make it happen.
6. Develop your team. You will need to hire professionals to help you with things like accounting and legal issues. You will want people who know more than you do about how buildings are put together to appraise property for you. According to Ken McElroy, author of ?The ABCs of Investing,? the worst thing you could do is skimp on this step and try to be a ?real estate do-it-yourselfer.? That may appear to save you money in the beginning but you will pay dearly in the end.
7. Make your first purchase. When the numbers add up, McElroy says, then it is a good deal. Don’t leap without looking, but if you’ve looked and the numbers add up, then it’s time to jump.
Of course, this is a simplified version of the process, but it is a good way to get an overview. Each one of these steps could be further mapped out. The trick is to do your research and take it at your own pace. Don’t rush. Learn the process. The first purchase will be the most difficult. After that, the real learning starts.
Tags: 10 Years, Average Joe, Basic Accounting, Cash Flow, Economy, Financial Statements, Good Deals, Grasp, Investing In Real Estate, Joe Cool, Josephine, Mysterious Activity, Quality Of Life, Real Estate Investor, Real Estate Investors, Real Estate Mogul, Set Goals, Seven Steps, Smaller Steps
If you’re thinking about investing in real estate to make money, you need to first determine your financial goals. Do you need to make money quickly, invest for your children’s college fund, or build wealth for your retirement? Once you determine your financial goals, you need to decide which type of investing strategy works for you.
Make Money in Real Estate - Fast Cash Strategy
If you’re low on cash, get started by finding a bargain house and selling the contract to another real estate investor. Join a real estate investing club to find investors willing to pay you for finding good deals.
Make Money in Real Estate - Income Property Strategy
If you want to increase your monthly income, look for income property that returns a positive net income from month to month. Start with single family house. Look for a bargain below market value. Fix up the house to generate top rental income. Find houses that will rent for more than your mortgage payment. You may need to go out from your home area to a location that supports this type of return on your money. You can’t pay $300,000 for a home with a mortgage of $1,500 that only rents for $1,000. You might start with a home for around $300,000 that rents for $1,750. You will need good credit to get a loan with good interest rates. In a few years, your rental income should go up. Many real estate investors enjoy thousands of dollars each month generated by income property.
However, some investors don’t like dealing with tenants and prefer to make money in other real estate ventures.
Make Money in Real Estate - Investment Property Strategy
If you want to make money focusing on profits, investment property offers a different strategy. Instead of worrying about rental income, look for property that you can transform and sell or property that will appreciate significantly over time. Besides fixing a house up, you can transform a property by changing it. For instance, some investors buy apartment buildings and turn them into condominiums. Many investors speculate in land and make money by holding the land until new development in the area increases the value.
Examine your financial situation along with your long term goals. You can get started by flipping properties, move onto income properties, and then make larger profits with investment properties. You might end up using a combination of all three strategies to make money investing in real estate.
Copyright ? Jeanette J. Fisher
About the Author: Jeanette Fisher teaches how to find, finance, fix and sell. Free ebooks “Credit Tips” http://worryfreecredit.com “Flipping Houses” at http://doghousetodollhousefordollars.com
Tags: Bargain Market, Financial Goals, Good Deals, Interest Rates, Investing In Real Estate, Investing Money, Mortgage Payment, Net Income, Profits, Property Strategy, Real Estate Investment, Real Estate Investment Property, Real Estate Investor, Real Estate Investors, Rents, Retirement, S College, Single Family, Strategy Works, Thousands Of Dollars
Knowing what a Good Deal is Is the Key to Success in Real Estate.
Knowing what a Good Deal is Is the Key to Success in Real Estate.
Knowing and being able to negotiate good real estate deals every time is the key to real estate investing success. What to look for, and how to calculate your profit, cashflow and risk exactly and then evaluate the deal is revealed. These techniques apply to all real estate investments including foreclosures, short sales, rehabs, flips, muliti-family, lease option and owner financing.
Dear Investor,
Take this little survey: The most important key to Real Estate Success is:
1. Finding Motivated Sellers
2. Funding Your Deals
3. Negotiating
4. Knowing a Good Deal when you see one.
Yes all of them are important. And if you answered #4 you’re right on the money. Why, because if your deal is a not good one, all your other skills and marketing and power will not make you money, and may even lead to disaster.
On the other hand, if you can unfailingly target good deals, you will always be successful and all the other skills and your marketing methods will serve to increase your success.
It’s a lot easier to state the question than give the answer. Why?
SO… WHAT IS A GOOD DEAL?
It’s a lot easier to state the question than give the answer. Why?
Because it depends on many factors like:
> Market value and purchase price
> Expenses, carrying costs, repairs
> Cashflow and profit
> Holding time
> Loan terms
> Risk factors
> And more . . .
And most importantly, it depends on the type of deal you’re doing. For example, if you have a loan on a property that you intend to rent or sell on a lease option, the terms of the mortgage, future tax increases, and current area rents are critical to consider in insuring a positive cashflow. However, if you are planning to do a short rehab job, and sell or just flip to another investor, rental income is irrelevant as are future tax increases.
IT’S WHAT YOU DON’T THINK ABOUT THAT CAN GET YOU
The thing that trips up many investors, is that in our enthusiasm to do a deal that we’ve found, we don’t take into consideration “hidden” costs.
For example, if you’re doing a renovation and you’ve done your due diligence on contractor costs, have you also considered your carrying costs such as mortgage payments, utilities, etc. not only during the renovation, but also the time it will take to sell and close with a new buyer?
Or if you’re using a realtor to sell the property, have you calculated the effect of a 6-7% commission and the closing costs the seller will pay on your bottom line. A 10% profit margin can shrink pretty quickly to zero under those circumstances.
READ THOSE LOAN TERMS CAREFULLY
Or have you taken into account, not just your loan to value ratio on the property, but your investment to value ratio (e.g., the total of all outstanding loan balances plus the additional funds you’ve put in from your own cash or borrowed from your home equity line or friends and family)?
And on the income side, have you calculated how long you should hold the property to receive a significant profit from the pay down of the mortgage. With a new 30 yr loan, you may have to wait 5-10yrs to get the same pay down you’d get after a few years from a 30yr loan that’s been seasoned for 10 years.
And did you carefully read the note contracts to take account of adjustable rates and pre-payment penalties?
CHECKLISTS AREN’T ENOUGH
A number of courses and real estate gurus will give you checklists. That’s helpful in not forgetting something, but it doesn’t help you with the laborious and complex task of putting all the numbers together.
There’s just something about working with the actual real numbers, that brings the reality of the deal into actual focus. Our hopes and wishes dissolve before the actual profit and loss calculations.
Moreover, the numbers can pinpoint the weaknesses in a deal, and point the way to a solution. No mere checklist can do that.
WHAT ABOUT RISK?
I think you’ll also agree that a Good Deal, is not just High Profit, but also, most importantly Low Risk. Many a dream of a golden future has come crashing down because some little thing went wrong.
Many a would-be mogul, is now working at a 9 to 5 because their killer deal was wrecked by an unforseen glitch. This is what we mean by high risk.
The successful investors do deals with low risk. Deals that are so robust that even if almost everything went wrong they’d still come out with a profit.
BUILD IN A SAFETY MARGIN
For example, suppose you have a rental with a positive cashflow. Is your cashflow high enough or your option payment big enough, that even if you had to evict your tenant for non-payment and it took you 2 months to fill it with another cash-paying customer, you’d still come out ahead?
Or, is your investment to value so low that even if you had to offer your buyer a big discount for a quick sale, you’d still walk away from the closing table with a fat check?
In real estate things can and usually do go wrong. It’s Normal. So, wouldn’t you like all your deals to have these kinds of safety margins?
FIXING THE PROBLEMS WITH YOUR DEAL
Now, if you knew in advance that your risk was too high, or your cashflow was too low, or your profit over the life of the deal wasn’t enough, you’d want to think of solutions.
This is what is meant by being a “transaction engineer”. Find the solution, fix the problem, test it on the numbers, and then negotiate it into the deal.
And if you can’t find a solution (but there always is one) or the seller won’t accept itNEXT!
A RISKY DEAL IS NEVER WORTH DOING!
I can tell you from real experience, a bad or risky deal is NEVER WORTH DOINGno matter how enticing the vision. The personal stress, heartache, and loss of confidence can be even more harmless than the potential financial loss. In the words of an ex-president’s wife, if you are faced with doing a bad dealJust say No!
WHAT’S THE ANSWER?
Some experienced investors have a feel for good deals, and can avoid trouble most of the time. Others only do a particular type of deal and use a rough “rule of thumb” to evaluate their risk and profit.
However, what’s really needed is a “calculator” or computer program that will take in all the variables and
> Calculate the exact profit and cashflow for all kinds of deals.
> Measure and Evaluate the financial risk in the deal
> Use standard and safe criteria for what constitutes a good deal
> Suggests alternatives to fix what is wrong
A DEAL EVALUATION TOOL
We’ve taken tons of real estate courses and looked at all kinds of real estate software, and nothing has come close to what we as investors need. So we decided to create our own Deal Evaluation Tool.
Well after several months of testing and improvement, we now use it for all our dealsshort sales, subject to, lease option, rehab, wholesaling, and even some commercial.
Since we can try out different “what-if” scenarios, it’s kept us away from some real pitfalls, and helped us negotiate better profit margins. We wouldn’t “leave home without it”.
CONSTANTLY MEETING THE NEEDS OF INVESTORS
Well, some other investors wanted to try it, so we put it on our website. Much to our delight we now have a community of users and a users group that shares their insights about doing deals and creative ways to use the Deal Evaluation Tool.
Their suggestions, are leading to a rapid improvement of already incredibly useful tool. There is just nothing out there like it. We’ve also put a demo up for those investors who would like to get a feel for using it. And we hold classes for new users.
Knowing all the numbers, and having evaluated our risks with the Deal Evaluation Tool gives us more confidence in negotiating deals with sellers and more consistent high profit real estate deals.
And that’s what we all want, isn’t it.
Best of Success,
Richard Odessey
This article may be reproduced in its entirety only if unaltered and the resource box is included.
About the Author: Richard & Michelle are experienced investors & founders of the premier site on the internet - http://www.InvestorWealth.com: training real estate investors to do high profit deals. Offering Free Teleseminars by the top real estate investors, how-to tools and kits and hands-on training with personal advice from experts from the comfort of your home
Tags: Carrying Costs, Disaster, Estate Success, Finding Motivated Sellers, Flips, Foreclosures, Good Deals, Holding Time, Lease Option, Loan Terms, Marketing Methods, Owner Financing, Positive Cashflow, Real Estate Investments, Rehab Job, Rents, Risk Factors, Tax Increases, Time Is The Key, Time Loan
One of the problems faced by many newbies (new investors) in the real estate business is lack of confidence. Confidence cannot be built without doing the activity that you are trying to build confidence in. This presents a problem with most people because real estate is not something that you can just practice, you cannot practice buying a house, or practice selling it. You could pretend to buy houses I guess, or pretend to sell houses, but pretending is for kids. This is where real estate bird-dogging comes into play. It gives you a reason to practice, you get paid. Now if money won’t make you practice then nothing will.
Instead of not getting paid for all those hours spent learning the market, you could be making thousands. I cannot think of a better way to learn real estate than getting out and looking for good deals, then finding good deals and showing them to buyers, who pay you for your services. Then after the buyers close you can follow the progress of the home and see if you made a good decision or not. The best part is that during your practice, even if you made a not so great decision you still get paid, and you do not lose a penny.
I started out my investment career as a Realtor. I built my confidence through selling investment properties to other people and watching them make money. After selling 9 homes to other investors and seeing them profit tremendously, I knew it was time for me to start making myself some money.
Eric Medemar is a realtor and real estate investor with 30+properties. He specializes in wholesaling, assigning, and flipping real estate. In 2007 He has already made close to $100,000 flipping properties. His goal is to help at least 170 people skyrocket their investment careers in 2007. http://www.BirdDogBiz.com http://www.TheMillionairesBlog.com
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Tags: Buying A House, Dogging, Eric, Estate Business, Flipping Properties, Flipping Real Estate, Good Deals, Guess, Investing, Investment Career, Investment Properties, Investors, Lack Of Confidence, Money, People, Presents, Real Estate Investor, Real Play, Realtor, Reason
Knowing what a Good Deal is Is the Key to Success in Real Estate.
Knowing what a Good Deal is Is the Key to Success in Real Estate.
Knowing and being able to negotiate good real estate deals every time is the key to real estate investing success. What to look for, and how to calculate your profit, cashflow and risk exactly and then evaluate the deal is revealed. These techniques apply to all real estate investments including foreclosures, short sales, rehabs, flips, muliti-family, lease option and owner financing.
Dear Investor,
Take this little survey: The most important key to Real Estate Success is:
1. Finding Motivated Sellers
2. Funding Your Deals
3. Negotiating
4. Knowing a Good Deal when you see one.
Yes all of them are important. And if you answered #4 you’re right on the money. Why, because if your deal is a not good one, all your other skills and marketing and power will not make you money, and may even lead to disaster.
On the other hand, if you can unfailingly target good deals, you will always be successful and all the other skills and your marketing methods will serve to increase your success.
It’s a lot easier to state the question than give the answer. Why?
SO… WHAT IS A GOOD DEAL?
It’s a lot easier to state the question than give the answer. Why?
Because it depends on many factors like:
> Market value and purchase price
> Expenses, carrying costs, repairs
> Cashflow and profit
> Holding time
> Loan terms
> Risk factors
> And more . . .
And most importantly, it depends on the type of deal you’re doing. For example, if you have a loan on a property that you intend to rent or sell on a lease option, the terms of the mortgage, future tax increases, and current area rents are critical to consider in insuring a positive cashflow. However, if you are planning to do a short rehab job, and sell or just flip to another investor, rental income is irrelevant as are future tax increases.
IT’S WHAT YOU DON’T THINK ABOUT THAT CAN GET YOU
The thing that trips up many investors, is that in our enthusiasm to do a deal that we’ve found, we don’t take into consideration “hidden” costs.
For example, if you’re doing a renovation and you’ve done your due diligence on contractor costs, have you also considered your carrying costs such as mortgage payments, utilities, etc. not only during the renovation, but also the time it will take to sell and close with a new buyer?
Or if you’re using a realtor to sell the property, have you calculated the effect of a 6-7% commission and the closing costs the seller will pay on your bottom line. A 10% profit margin can shrink pretty quickly to zero under those circumstances.
READ THOSE LOAN TERMS CAREFULLY
Or have you taken into account, not just your loan to value ratio on the property, but your investment to value ratio (e.g., the total of all outstanding loan balances plus the additional funds you’ve put in from your own cash or borrowed from your home equity line or friends and family)?
And on the income side, have you calculated how long you should hold the property to receive a significant profit from the pay down of the mortgage. With a new 30 yr loan, you may have to wait 5-10yrs to get the same pay down you’d get after a few years from a 30yr loan that’s been seasoned for 10 years.
And did you carefully read the note contracts to take account of adjustable rates and pre-payment penalties?
CHECKLISTS AREN’T ENOUGH
A number of courses and real estate gurus will give you checklists. That’s helpful in not forgetting something, but it doesn’t help you with the laborious and complex task of putting all the numbers together.
There’s just something about working with the actual real numbers, that brings the reality of the deal into actual focus. Our hopes and wishes dissolve before the actual profit and loss calculations.
Moreover, the numbers can pinpoint the weaknesses in a deal, and point the way to a solution. No mere checklist can do that.
WHAT ABOUT RISK?
I think you’ll also agree that a Good Deal, is not just High Profit, but also, most importantly Low Risk. Many a dream of a golden future has come crashing down because some little thing went wrong.
Many a would-be mogul, is now working at a 9 to 5 because their killer deal was wrecked by an unforseen glitch. This is what we mean by high risk.
The successful investors do deals with low risk. Deals that are so robust that even if almost everything went wrong they’d still come out with a profit.
BUILD IN A SAFETY MARGIN
For example, suppose you have a rental with a positive cashflow. Is your cashflow high enough or your option payment big enough, that even if you had to evict your tenant for non-payment and it took you 2 months to fill it with another cash-paying customer, you’d still come out ahead?
Or, is your investment to value so low that even if you had to offer your buyer a big discount for a quick sale, you’d still walk away from the closing table with a fat check?
In real estate things can and usually do go wrong. It’s Normal. So, wouldn’t you like all your deals to have these kinds of safety margins?
FIXING THE PROBLEMS WITH YOUR DEAL
Now, if you knew in advance that your risk was too high, or your cashflow was too low, or your profit over the life of the deal wasn’t enough, you’d want to think of solutions.
This is what is meant by being a “transaction engineer”. Find the solution, fix the problem, test it on the numbers, and then negotiate it into the deal.
And if you can’t find a solution (but there always is one) or the seller won’t accept itNEXT!
A RISKY DEAL IS NEVER WORTH DOING!
I can tell you from real experience, a bad or risky deal is NEVER WORTH DOINGno matter how enticing the vision. The personal stress, heartache, and loss of confidence can be even more harmless than the potential financial loss. In the words of an ex-president’s wife, if you are faced with doing a bad dealJust say No!
WHAT’S THE ANSWER?
Some experienced investors have a feel for good deals, and can avoid trouble most of the time. Others only do a particular type of deal and use a rough “rule of thumb” to evaluate their risk and profit.
However, what’s really needed is a “calculator” or computer program that will take in all the variables and
> Calculate the exact profit and cashflow for all kinds of deals.
> Measure and Evaluate the financial risk in the deal
> Use standard and safe criteria for what constitutes a good deal
> Suggests alternatives to fix what is wrong
A DEAL EVALUATION TOOL
We’ve taken tons of real estate courses and looked at all kinds of real estate software, and nothing has come close to what we as investors need. So we decided to create our own Deal Evaluation Tool.
Well after several months of testing and improvement, we now use it for all our dealsshort sales, subject to, lease option, rehab, wholesaling, and even some commercial.
Since we can try out different “what-if” scenarios, it’s kept us away from some real pitfalls, and helped us negotiate better profit margins. We wouldn’t “leave home without it”.
CONSTANTLY MEETING THE NEEDS OF INVESTORS
Well, some other investors wanted to try it, so we put it on our website. Much to our delight we now have a community of users and a users group that shares their insights about doing deals and creative ways to use the Deal Evaluation Tool.
Their suggestions, are leading to a rapid improvement of already incredibly useful tool. There is just nothing out there like it. We’ve also put a demo up for those investors who would like to get a feel for using it. And we hold classes for new users.
Knowing all the numbers, and having evaluated our risks with the Deal Evaluation Tool gives us more confidence in negotiating deals with sellers and more consistent high profit real estate deals.
And that’s what we all want, isn’t it.
Best of Success,
Richard Odessey
This article may be reproduced in its entirety only if unaltered and the resource box is included.
About the Author: Richard & Michelle are experienced investors & founders of the premier site on the internet - http://www.InvestorWealth.com: training real estate investors to do high profit deals. Offering Free Teleseminars by the top real estate investors, how-to tools and kits and hands-on training with personal advice from experts from the comfort of your home
Tags: Carrying Costs, Disaster, Estate Success, Finding Motivated Sellers, Flips, Foreclosures, Good Deals, Holding Time, Lease Option, Loan Terms, Marketing Methods, Owner Financing, Positive Cashflow, Real Estate Investments, Rehab Job, Rents, Risk Factors, Tax Increases, Time Is The Key, Time Loan
For the uninitiated, investing in real estate can seem like a big, mysterious activity that you pretty much have to be born with a special gene to do. They don’t know that you can break it up into several smaller steps, and that it is only a matter of learning how to get through each one.
The following are seven steps you can follow in order to go from being an Average Joe or Josephine to being Joe Cool, real estate mogul. They will at least get you closer to the latter.
1. Realize that it is not outside of your grasp. As one step leads into another, you first have to begin thinking like a real estate investor. And real estate investors think about finding good deals. However, you may not know a good deal if it jumps up and bites you on the nose.
2. That’s why you have to learn some basic accounting. You don’t have to spend 10 years studying under ancient Chinese accounting master, but you should learn how to read financial statements. You should learn about cash flow. You should learn the difference between an asset and a liability, not just take your banker’s word for it.
3. Once you know how to read the language if investment, you will be in a position to learn how to recognize a good deal when you see one. This is a bit trickier. Although you should do plenty of reading on the subject, the best way to learn is through doing. Get out there and look for deals.
4. Learn about the markets you want to play in. If you are thinking about buying a specific kind of property, learn about the markets in the area you are interested in. The market should actually determine where you make your purchase. Look for a community that is progressive, for one thing. A place with a good quality of life. A place with a good economy.
5. Set goals. Determine what you want to accomplish and when you want to accomplish it. Make sure it is within your reach and then take the steps to actually make it happen.
6. Develop your team. You will need to hire professionals to help you with things like accounting and legal issues. You will want people who know more than you do about how buildings are put together to appraise property for you. According to Ken McElroy, author of ?The ABCs of Investing,? the worst thing you could do is skimp on this step and try to be a ?real estate do-it-yourselfer.? That may appear to save you money in the beginning but you will pay dearly in the end.
7. Make your first purchase. When the numbers add up, McElroy says, then it is a good deal. Don’t leap without looking, but if you’ve looked and the numbers add up, then it’s time to jump.
Of course, this is a simplified version of the process, but it is a good way to get an overview. Each one of these steps could be further mapped out. The trick is to do your research and take it at your own pace. Don’t rush. Learn the process. The first purchase will be the most difficult. After that, the real learning starts.
Tags: 10 Years, Average Joe, Basic Accounting, Cash Flow, Economy, Financial Statements, Good Deals, Grasp, Investing In Real Estate, Joe Cool, Josephine, Mysterious Activity, Quality Of Life, Real Estate Investor, Real Estate Investors, Real Estate Mogul, Set Goals, Seven Steps, Smaller Steps
One of the problems faced by many newbies (new investors) in the real estate business is lack of confidence. Confidence cannot be built without doing the activity that you are trying to build confidence in. This presents a problem with most people because real estate is not something that you can just practice, you cannot practice buying a house, or practice selling it. You could pretend to buy houses I guess, or pretend to sell houses, but pretending is for kids. This is where real estate bird-dogging comes into play. It gives you a reason to practice, you get paid. Now if money won’t make you practice then nothing will.
Instead of not getting paid for all those hours spent learning the market, you could be making thousands. I cannot think of a better way to learn real estate than getting out and looking for good deals, then finding good deals and showing them to buyers, who pay you for your services. Then after the buyers close you can follow the progress of the home and see if you made a good decision or not. The best part is that during your practice, even if you made a not so great decision you still get paid, and you do not lose a penny.
I started out my investment career as a Realtor. I built my confidence through selling investment properties to other people and watching them make money. After selling 9 homes to other investors and seeing them profit tremendously, I knew it was time for me to start making myself some money.
Eric Medemar is a realtor and real estate investor with 30+properties. He specializes in wholesaling, assigning, and flipping real estate. In 2007 He has already made close to $100,000 flipping properties. His goal is to help at least 170 people skyrocket their investment careers in 2007. http://www.BirdDogBiz.com http://www.TheMillionairesBlog.com
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Tags: Buying A House, Dogging, Eric, Estate Business, Flipping Properties, Flipping Real Estate, Good Deals, Guess, Investing, Investment Career, Investment Properties, Investors, Lack Of Confidence, Money, People, Presents, Real Estate Investor, Real Play, Realtor, Reason
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