Beginning Real Estate Investing - “Subject To…” Investing

This is another in a continuing series of articles on beginning real estate investing. Today, we?ll tackle the basics of ?subject to?? investing. There are a lot of questions those who are just beginning real estate investing often have about ?subject to?? investing, and this article should answer many of your fundamental questions.

First of all, it?s important for those who are beginning real estate investing to know what ?Subject To?? investing is. ?Subject to?? means that you buy a property ?subject to?? the existing financing staying in place in the seller?s name.

Say that you get a call from a motivated seller. He tells you he must sell his house immediately. He also says he owes around $100,000 on his mortgage, his payments are around $900 per month, including principal, interest, and taxes. Even though you are only just beginning real estate investing, you know the estimated market value of his home is about $130,000.

You head on over to his home. It doesn?t matter in the least that you are just beginning real estate investing. After all, he needs to sell now. You tell him that you will take over his mortgage payments, and keep on making them until you get the house sold. You don?t know how long it will take, but the mortgage will stay in his name until you get it sold.

He asks if you can give him some cash to help him move. Even someone who is beginning real estate investing can negotiate an item like this. After going back and forth a couple of times, the two of you agree on $3,000, which you will pay to him the day he moves out.

Now, what have you got? A house with an estimated value of $130,000 that you will wind up paying about $103,000 for, and a payment of $900 per month. Since you are just beginning real estate investing, there is something you must do right away? market for a tenant buyer.

So, you place an ad in your local paper, and put up a few signs in Mr. Seller?s neighborhood: ?Lease to Own ? Bruised Credit OK.? Your phone starts ringing and you find a young couple with good jobs and good income who went through a brief period of financial trouble a year or two ago. You explain to them that even though you are just beginning real estate investing, you think you can help them.

You offer to lease them the home with a 12 month option to buy it. Their monthly lease payment to you will be $1,200, and their purchase price will be $135,000. They will also give you a non-refundable option fee of $5,000. It doesn?t matter that you are only beginning real estate investing- you can certainly see what you have just accomplished.

You?ve got monthly positive cash flow of $300 - the difference between the $900 you are paying and the $1,200 the young couple is paying you. You have also put $2,000 cash into your pocket right now ? the difference between the $3,000 cash you gave the seller and the $5,000 cash the young couple gave you. When the young couple exercises their option to buy, you will also pocket $32,000 - the difference between your purchase price of $103,000 and the price they pay you, $135,000. Not too bad for someone beginning real estate investing!

We?ve barely scratched the surface of ?subject to?? investing, but I think you?ve got the idea. I?ve got more great ideas for you at Beginning Real Estate Investing.

Now, go make more offers!

Real Estate Investing By The Numbers

Just like most things real estate investing can be broken down into easy to learn step.

Just like most things real estate investing can be broken down into easy to learn step.

Step One - Learn the basics:

Ownership of real estate is evidenced by a valid deed. When you buy property the seller signs a deed that transfers his ownership interest to you. Most states use a Warranty Deed. With that deed the seller warrants that title to the property is as he has described. You would buy title insurance in case some defect in title was discovered after the transfer of ownership. Recording the deed is notice to the world that you are the new owner.

You must know how to correctly fill out such basic documents as purchase offers, deeds, options, leases and rental agreements. Many of those documents have been recorded in your county and you can see many expert examples by viewing your County Recorders files.

If you have borrowed money to buy the property the lender will record a mortgage or trust deed immediately after the Warranty deed has been recorded. This mortgage is a lien on the property and gives the lender power to foreclose if you violate terms of the loan, like stop making payments.

Step Two - Understand how to buy real estate:

Most sellers want to sell their property for full price and all cash. Investors generally want to buy at a discount and delay paying for as long as possible. To do that you must understand the many techniques an investor can use to satisfy the needs of the seller.

You only make good deals if the seller is urgently motivated to sell. Perhaps he has lost a job, been transferred, has a drug problem, is facing divorce, bought more house than he could afford… or a variety of other reasons why he/she must get out from under those mortgage payments.

You can control real estate with leases, options, subject to techniques and a host of other “creative ideas”. To be successful you must understand which technique to use in which situation. You just talk to the seller until you learn what he/she will accept.

Step Three - You must uncover a steady stream of motivated sellers:

They are always plenty of people who must sell their homes and sell them in a hurry. The trick is to find them. Since most people will so “no” to any offer but all cash, you need to be constantly on the search those motivated home owners.

My experience is that most new investors don’t fail at investing… they fail at marketing. Marketing is how you sell you skill as an investor and find enough motivated sellers to keep the cash rolling in.

You can use billboards, flyers, telephone calls, door to door canvassing, bandit signs, newspaper ads, Web sites, direct mail… or any combination. If you don’t use good marketing every week of the year your chances of becoming a successful investors are minimal.

Good marketing is the secret. You can be expert at every creative buying technique in the book. If you can’t locate motivated sellers every week you just won’t be able to buy houses.

Time and again we’ve seen people with just basic knowledge of one or two buying techniques become very successful, because they are unrelenting in their search for motivated sellers. Perseverance and stamina can work wonders.

My choice is to mail postcards, because they are inexpensive to prepare and send. You can read more about my postcard system at http://digbig.com/4cjxp

Step four - Always have an exit strategy before you buy:

Before buying an investment property you must carefully evaluate the potential for profit. One of the keys to your evaluation will be to determine what you will do with the property if you buy it.

Included in the many way to profit are:

1. Place it in your “buy & hold” inventory if it will produce profitable rental income.
2. Place it in your “buy & hold” inventory if it will produce break-even cash flow and you expect it to increase in value by 8% to 15% or more per year.
3. You can assign the purchase contract to another investor for a one time cash payment.
4. You can buy the property and immediately sell it to a retail buyer and cash-out.
5. You can exchange it for a more desirable property.
6. Refinance cash out and use the money for the down payment on another property.
7. Etc…

Finally

Now you can visualize the four basic steps in real estate investing. You’ll never know all there is to know about every step. Just get started and add to your knowledge as you go along. Remember, all it takes to be successful is perseverance and stamina!

ABOUT THE AUTHOR

Real Estate Investing By The Numbers

Just like most things real estate investing can be broken down into easy to learn step.

Just like most things real estate investing can be broken down into easy to learn step.

Step One - Learn the basics:

Ownership of real estate is evidenced by a valid deed. When you buy property the seller signs a deed that transfers his ownership interest to you. Most states use a Warranty Deed. With that deed the seller warrants that title to the property is as he has described. You would buy title insurance in case some defect in title was discovered after the transfer of ownership. Recording the deed is notice to the world that you are the new owner.

You must know how to correctly fill out such basic documents as purchase offers, deeds, options, leases and rental agreements. Many of those documents have been recorded in your county and you can see many expert examples by viewing your County Recorders files.

If you have borrowed money to buy the property the lender will record a mortgage or trust deed immediately after the Warranty deed has been recorded. This mortgage is a lien on the property and gives the lender power to foreclose if you violate terms of the loan, like stop making payments.

Step Two - Understand how to buy real estate:

Most sellers want to sell their property for full price and all cash. Investors generally want to buy at a discount and delay paying for as long as possible. To do that you must understand the many techniques an investor can use to satisfy the needs of the seller.

You only make good deals if the seller is urgently motivated to sell. Perhaps he has lost a job, been transferred, has a drug problem, is facing divorce, bought more house than he could afford… or a variety of other reasons why he/she must get out from under those mortgage payments.

You can control real estate with leases, options, subject to techniques and a host of other “creative ideas”. To be successful you must understand which technique to use in which situation. You just talk to the seller until you learn what he/she will accept.

Step Three - You must uncover a steady stream of motivated sellers:

They are always plenty of people who must sell their homes and sell them in a hurry. The trick is to find them. Since most people will so “no” to any offer but all cash, you need to be constantly on the search those motivated home owners.

My experience is that most new investors don’t fail at investing… they fail at marketing. Marketing is how you sell you skill as an investor and find enough motivated sellers to keep the cash rolling in.

You can use billboards, flyers, telephone calls, door to door canvassing, bandit signs, newspaper ads, Web sites, direct mail… or any combination. If you don’t use good marketing every week of the year your chances of becoming a successful investors are minimal.

Good marketing is the secret. You can be expert at every creative buying technique in the book. If you can’t locate motivated sellers every week you just won’t be able to buy houses.

Time and again we’ve seen people with just basic knowledge of one or two buying techniques become very successful, because they are unrelenting in their search for motivated sellers. Perseverance and stamina can work wonders.

My choice is to mail postcards, because they are inexpensive to prepare and send. You can read more about my postcard system at http://digbig.com/4cjxp

Step four - Always have an exit strategy before you buy:

Before buying an investment property you must carefully evaluate the potential for profit. One of the keys to your evaluation will be to determine what you will do with the property if you buy it.

Included in the many way to profit are:

1. Place it in your “buy & hold” inventory if it will produce profitable rental income.
2. Place it in your “buy & hold” inventory if it will produce break-even cash flow and you expect it to increase in value by 8% to 15% or more per year.
3. You can assign the purchase contract to another investor for a one time cash payment.
4. You can buy the property and immediately sell it to a retail buyer and cash-out.
5. You can exchange it for a more desirable property.
6. Refinance cash out and use the money for the down payment on another property.
7. Etc…

Finally

Now you can visualize the four basic steps in real estate investing. You’ll never know all there is to know about every step. Just get started and add to your knowledge as you go along. Remember, all it takes to be successful is perseverance and stamina!

ABOUT THE AUTHOR

Real Estate Investing By The Numbers

Just like most things real estate investing can be broken down into easy to learn step.

Just like most things real estate investing can be broken down into easy to learn step.

Step One - Learn the basics:

Ownership of real estate is evidenced by a valid deed. When you buy property the seller signs a deed that transfers his ownership interest to you. Most states use a Warranty Deed. With that deed the seller warrants that title to the property is as he has described. You would buy title insurance in case some defect in title was discovered after the transfer of ownership. Recording the deed is notice to the world that you are the new owner.

You must know how to correctly fill out such basic documents as purchase offers, deeds, options, leases and rental agreements. Many of those documents have been recorded in your county and you can see many expert examples by viewing your County Recorders files.

If you have borrowed money to buy the property the lender will record a mortgage or trust deed immediately after the Warranty deed has been recorded. This mortgage is a lien on the property and gives the lender power to foreclose if you violate terms of the loan, like stop making payments.

Step Two - Understand how to buy real estate:

Most sellers want to sell their property for full price and all cash. Investors generally want to buy at a discount and delay paying for as long as possible. To do that you must understand the many techniques an investor can use to satisfy the needs of the seller.

You only make good deals if the seller is urgently motivated to sell. Perhaps he has lost a job, been transferred, has a drug problem, is facing divorce, bought more house than he could afford… or a variety of other reasons why he/she must get out from under those mortgage payments.

You can control real estate with leases, options, subject to techniques and a host of other “creative ideas”. To be successful you must understand which technique to use in which situation. You just talk to the seller until you learn what he/she will accept.

Step Three - You must uncover a steady stream of motivated sellers:

They are always plenty of people who must sell their homes and sell them in a hurry. The trick is to find them. Since most people will so “no” to any offer but all cash, you need to be constantly on the search those motivated home owners.

My experience is that most new investors don’t fail at investing… they fail at marketing. Marketing is how you sell you skill as an investor and find enough motivated sellers to keep the cash rolling in.

You can use billboards, flyers, telephone calls, door to door canvassing, bandit signs, newspaper ads, Web sites, direct mail… or any combination. If you don’t use good marketing every week of the year your chances of becoming a successful investors are minimal.

Good marketing is the secret. You can be expert at every creative buying technique in the book. If you can’t locate motivated sellers every week you just won’t be able to buy houses.

Time and again we’ve seen people with just basic knowledge of one or two buying techniques become very successful, because they are unrelenting in their search for motivated sellers. Perseverance and stamina can work wonders.

My choice is to mail postcards, because they are inexpensive to prepare and send. You can read more about my postcard system at http://digbig.com/4cjxp

Step four - Always have an exit strategy before you buy:

Before buying an investment property you must carefully evaluate the potential for profit. One of the keys to your evaluation will be to determine what you will do with the property if you buy it.

Included in the many way to profit are:

1. Place it in your “buy & hold” inventory if it will produce profitable rental income.
2. Place it in your “buy & hold” inventory if it will produce break-even cash flow and you expect it to increase in value by 8% to 15% or more per year.
3. You can assign the purchase contract to another investor for a one time cash payment.
4. You can buy the property and immediately sell it to a retail buyer and cash-out.
5. You can exchange it for a more desirable property.
6. Refinance cash out and use the money for the down payment on another property.
7. Etc…

Finally

Now you can visualize the four basic steps in real estate investing. You’ll never know all there is to know about every step. Just get started and add to your knowledge as you go along. Remember, all it takes to be successful is perseverance and stamina!

ABOUT THE AUTHOR

When to Back Out of a Real Estate Investing Deal

Yes, it is true; many people are making a very comfortable living through real estate investing. But while the majority of people have a great investing experience, there are those that get taken in by scam artists and end up purchasing a property that has been misrepresented. To save yourself the expense and hassle of making this mistake, you should look for obvious signs and know when to back out of a deal no matter how good it may seem.

The first and most obvious sign that an offer is too good to be true is that it just seems too good to be true. If you are approached with a deal that seems a little too generous, there is a good chance that you are going to get burned. Be sure to examine the offer thoroughly and find out why the owner of the property would sell it so cheaply. In some cases, there will be a plausible reason why the homeowner wants rid of the property. Maybe he is on the verge of bankruptcy or there is an illness in the family which makes in necessary to move quickly. In the absence of any logical reasoning, though, there are likely hidden problems with the property, problems that you do not want to make your own.

There are many overhead costs associated with real estate investing. These costs normally fall into the categories of repairs and advertising, but there are some costs that can follow you for a lifetime. These costs should be completely avoided and come in the form of financial liabilities and fines levied toward the owner of contaminated properties or properties that represent a health hazard. Even after you sell such a property, you can still be held liable for any ground water contamination or illness associated with the property. For this reason, never buy a property if there are health concerns of any kind involved.

Debts can become attached to a property and follow that property from owner to owner. If you purchase a property for real estate investing purposes that has several liens on it, you could lose all of your profit paying off someone else?s bills. To avoid this, never purchase a property if you cannot have the title searched or if there seems to be some amount of obscurity about legal issues surrounding the property.

The key to building residual income in any real estate investing venture is to know which deals to make and which ones to leave alone. Be sure to do plenty of research on any investment property before you purchase it. If something seems odd at any point during the transaction, back out of it. There are plenty of investment opportunities out there that are worth your time and money. Do not throw all of your hard work away on questionable properties.

Beginning Real Estate Investing - “Subject To…” Investing

This is another in a continuing series of articles on beginning real estate investing. Today, we?ll tackle the basics of ?subject to?? investing. There are a lot of questions those who are just beginning real estate investing often have about ?subject to?? investing, and this article should answer many of your fundamental questions.

First of all, it?s important for those who are beginning real estate investing to know what ?Subject To?? investing is. ?Subject to?? means that you buy a property ?subject to?? the existing financing staying in place in the seller?s name.

Say that you get a call from a motivated seller. He tells you he must sell his house immediately. He also says he owes around $100,000 on his mortgage, his payments are around $900 per month, including principal, interest, and taxes. Even though you are only just beginning real estate investing, you know the estimated market value of his home is about $130,000.

You head on over to his home. It doesn?t matter in the least that you are just beginning real estate investing. After all, he needs to sell now. You tell him that you will take over his mortgage payments, and keep on making them until you get the house sold. You don?t know how long it will take, but the mortgage will stay in his name until you get it sold.

He asks if you can give him some cash to help him move. Even someone who is beginning real estate investing can negotiate an item like this. After going back and forth a couple of times, the two of you agree on $3,000, which you will pay to him the day he moves out.

Now, what have you got? A house with an estimated value of $130,000 that you will wind up paying about $103,000 for, and a payment of $900 per month. Since you are just beginning real estate investing, there is something you must do right away? market for a tenant buyer.

So, you place an ad in your local paper, and put up a few signs in Mr. Seller?s neighborhood: ?Lease to Own ? Bruised Credit OK.? Your phone starts ringing and you find a young couple with good jobs and good income who went through a brief period of financial trouble a year or two ago. You explain to them that even though you are just beginning real estate investing, you think you can help them.

You offer to lease them the home with a 12 month option to buy it. Their monthly lease payment to you will be $1,200, and their purchase price will be $135,000. They will also give you a non-refundable option fee of $5,000. It doesn?t matter that you are only beginning real estate investing- you can certainly see what you have just accomplished.

You?ve got monthly positive cash flow of $300 - the difference between the $900 you are paying and the $1,200 the young couple is paying you. You have also put $2,000 cash into your pocket right now ? the difference between the $3,000 cash you gave the seller and the $5,000 cash the young couple gave you. When the young couple exercises their option to buy, you will also pocket $32,000 - the difference between your purchase price of $103,000 and the price they pay you, $135,000. Not too bad for someone beginning real estate investing!

We?ve barely scratched the surface of ?subject to?? investing, but I think you?ve got the idea. I?ve got more great ideas for you at Beginning Real Estate Investing.

Now, go make more offers!

Beginning Real Estate Investing - “Subject To…” Investing

This is another in a continuing series of articles on beginning real estate investing. Today, we?ll tackle the basics of ?subject to?? investing. There are a lot of questions those who are just beginning real estate investing often have about ?subject to?? investing, and this article should answer many of your fundamental questions.

First of all, it?s important for those who are beginning real estate investing to know what ?Subject To?? investing is. ?Subject to?? means that you buy a property ?subject to?? the existing financing staying in place in the seller?s name.

Say that you get a call from a motivated seller. He tells you he must sell his house immediately. He also says he owes around $100,000 on his mortgage, his payments are around $900 per month, including principal, interest, and taxes. Even though you are only just beginning real estate investing, you know the estimated market value of his home is about $130,000.

You head on over to his home. It doesn?t matter in the least that you are just beginning real estate investing. After all, he needs to sell now. You tell him that you will take over his mortgage payments, and keep on making them until you get the house sold. You don?t know how long it will take, but the mortgage will stay in his name until you get it sold.

He asks if you can give him some cash to help him move. Even someone who is beginning real estate investing can negotiate an item like this. After going back and forth a couple of times, the two of you agree on $3,000, which you will pay to him the day he moves out.

Now, what have you got? A house with an estimated value of $130,000 that you will wind up paying about $103,000 for, and a payment of $900 per month. Since you are just beginning real estate investing, there is something you must do right away? market for a tenant buyer.

So, you place an ad in your local paper, and put up a few signs in Mr. Seller?s neighborhood: ?Lease to Own ? Bruised Credit OK.? Your phone starts ringing and you find a young couple with good jobs and good income who went through a brief period of financial trouble a year or two ago. You explain to them that even though you are just beginning real estate investing, you think you can help them.

You offer to lease them the home with a 12 month option to buy it. Their monthly lease payment to you will be $1,200, and their purchase price will be $135,000. They will also give you a non-refundable option fee of $5,000. It doesn?t matter that you are only beginning real estate investing- you can certainly see what you have just accomplished.

You?ve got monthly positive cash flow of $300 - the difference between the $900 you are paying and the $1,200 the young couple is paying you. You have also put $2,000 cash into your pocket right now ? the difference between the $3,000 cash you gave the seller and the $5,000 cash the young couple gave you. When the young couple exercises their option to buy, you will also pocket $32,000 - the difference between your purchase price of $103,000 and the price they pay you, $135,000. Not too bad for someone beginning real estate investing!

We?ve barely scratched the surface of ?subject to?? investing, but I think you?ve got the idea. I?ve got more great ideas for you at Beginning Real Estate Investing.

Now, go make more offers!

Real Estate Investing: Bird Dogging

For those who are interested in making money in the real estate investment business only sky is the limit. Does not matter if you do not have money to invest in the business or rent a space to begin the operations. There are business solutions that allow you to spin money without any establishment cost. If you are wondering how ? read this article about Bird-Dogging.

What Is Bird-Dogging; ?Bird-Dogging? refers to a business, which involves identification of a real estate property by the businessman. Upon identification, the businessman hands over such a property to a person under a contract to repair and resell in exchange of certain fees. The fees can vary depending on how experienced is the person in the business and what is the condition of the property

Understand Bird-Dogging; In other words, bird-dogging gets you income with no risks involved. It is an easy way of making money in the real estate market, of course for those with strong conviction. People who bird-dog are in constant search for abandoned properties or those lying unused over a period. After identifying such properties, bird-dogs locate their owners and find out if they are willing to sell their properties. In which case, the owners are willing to sell such properties. The bird dog shows them to the potential investors. If the investor likes the real estate property, he will pay certain fees to the finder of the property or the bird dog.

Become a Bird-Dog; The first step towards becoming a bird dog is to find a company that is engaged in the business of buying houses. You can find plenty of such companies in the yellow pages or in the newspaper advertisements. It is however advisable to approach an investor who enjoys a reputation in the market.

After locating such companies, you can ask them to assign you a specific area, so that you can concentrate properties only in that particular area. Then you need to visit the assigned area regularly to look out for ?For Sale? signs. Check for both rental and ownership accommodations.

Patience will fetch you Money; Do not be disappointed if your first few findings are turned down. The skill of bird-dogging is acquired gradually. Hence, remain motivated and with time, you will get a feel of what the investors look out for in a property. Once you master the skill, your success will know no boundaries.

After gaining grounds in the business, as a bird dog, you can earn from $500 to $5000. Your earning potential will depend on how established the investor is and what is the cost of the deal. You can also look at doing business with new investors in exchange for a standard fee. Such a business initiative will diversify your revenue profile.

Real Estate Investing: Bird Dogging

For those who are interested in making money in the real estate investment business only sky is the limit. Does not matter if you do not have money to invest in the business or rent a space to begin the operations. There are business solutions that allow you to spin money without any establishment cost. If you are wondering how ? read this article about Bird-Dogging.

What Is Bird-Dogging; ?Bird-Dogging? refers to a business, which involves identification of a real estate property by the businessman. Upon identification, the businessman hands over such a property to a person under a contract to repair and resell in exchange of certain fees. The fees can vary depending on how experienced is the person in the business and what is the condition of the property

Understand Bird-Dogging; In other words, bird-dogging gets you income with no risks involved. It is an easy way of making money in the real estate market, of course for those with strong conviction. People who bird-dog are in constant search for abandoned properties or those lying unused over a period. After identifying such properties, bird-dogs locate their owners and find out if they are willing to sell their properties. In which case, the owners are willing to sell such properties. The bird dog shows them to the potential investors. If the investor likes the real estate property, he will pay certain fees to the finder of the property or the bird dog.

Become a Bird-Dog; The first step towards becoming a bird dog is to find a company that is engaged in the business of buying houses. You can find plenty of such companies in the yellow pages or in the newspaper advertisements. It is however advisable to approach an investor who enjoys a reputation in the market.

After locating such companies, you can ask them to assign you a specific area, so that you can concentrate properties only in that particular area. Then you need to visit the assigned area regularly to look out for ?For Sale? signs. Check for both rental and ownership accommodations.

Patience will fetch you Money; Do not be disappointed if your first few findings are turned down. The skill of bird-dogging is acquired gradually. Hence, remain motivated and with time, you will get a feel of what the investors look out for in a property. Once you master the skill, your success will know no boundaries.

After gaining grounds in the business, as a bird dog, you can earn from $500 to $5000. Your earning potential will depend on how established the investor is and what is the cost of the deal. You can also look at doing business with new investors in exchange for a standard fee. Such a business initiative will diversify your revenue profile.

Real Estate Investing - Become The Market Value Expert

In the world of buying and selling residential properties for profit, all investors make mistakes. Some mistakes are more easily overcome than others. A few are potentially devastating. One of the most common investor mistakes, and one that can be devastating, is failing to know and understand property values in your target neighborhood.

Fortunately, with just a little bit of effort, you can become THE local expert on neighborhood property values in no time. Here’s how.

Get To Know The Neighborhood

First, there is no substitute for looking at lots and lots of property. Start with your local newspaper. The real estate section is a treasure trove of free information and market research. Each week, every decent local paper has a special insert or pull-out section with local real estate listings, recent sales by neighborhood, for sale by owner (FSBO) listings, and much more. If you’re not reading this section each week, you probably aren’t serious about real estate investing.

Look especially for those houses that have sold recently in your target neighborhoods. Write down the sale price, sale date, and address. Then go look at the houses and make notes about what you see. Keep a "neighborhood notebook" for each of your target neighborhoods. In it, record the list prices, selling prices, and your observations about the condition of the properties, how long they took to sell, and any improvements that helped them sell more quickly.

Watch for "For Sale" signs and open houses. If you truly want to become the market value expert, you won’t miss going through every house that comes on the market in that neighborhood. Again, record all the details in your notebook.

Get To Know The Experts

Second, talk to local Realtors. You’ll meet them as you are out and about looking at properties, attending open houses, and calling on listings. Ask them what market values are doing, what types of houses people are looking for, which features sell and which don’t, any question you can think of that will improve your MVIQ (Market Value Intelligence Quotient). Be sure you write down what you learn in your neighborhood notebook.

Build a relationship with one Realtor whom you trust, and who is willing and experienced enough to help you. Let them know that you plan to be an active investor, and that you won’t waste their time. You won’t need them to take you around by the hand to every listing, but you will ask them to provide you with the listings so you can go yourself. You are looking for a Realtor who understands how to work with investors, and who is willing be a little flexible with you regarding getting you access to properties on your own. Most of the houses you’ll be looking at will be vacant anyway, so keep looking until you find a Realtor who will work with you.

Building a team, including finding a Realtor who will work with you, is the subject of another article I have written. Look for it here: Find The Right Realtor. Get To Know The Values

Third, when you’ve found specific properties you are interested in, ask the Realtor to provide you with suitable "comps". These are listings of properties that are "comparable" to your target property. In other words, houses that have sold recently in the same neighborhood as your target property, along with how much they sold for. These will tell you more about value than any other single source. Once you have a list of comps, don’t just take the Realtor’s word that they are truly comparable. Drive around to each one yourself and verify that the size, style, and condition are at least close to the property you are considering. Throw out any that don’t fit.

Once you have a minimum of three that are indeed comparable, using a little common sense, you should be able to assign an ARMV (After Repair Market Value) to your subject property. This represents your estimate of what the property should sell for after any needed repairs and upgrades. Be somewhat conservative. Rehabs and flips often sell for 3-5 % less than comparable open market homes, so subtract at least that much from your estimate.

Here’s an example, using a 4 bedroom, 2 bath raised ranch built in 1962, 1910 square feet, asking price $138,000.

Comparable A is a 5 bedroom, 2 bath colonial, built in 1902, 2380 square feet, selling price $249,500 in April of 2005.

Comparable B is a 4 bedroom, 1.5 bath raised ranch built in 1960, 1850 square feet selling price $168,700 in January of 2006.

Comparable C is a 4 bedroom, 2 bath, cape cod built in 1968, 1870 square feet, selling price $152,100 in May of 2006.

Comparable D is a 3 bedroom, 2 bath ranch built in 1965, 1900 square feet, selling price $172,900 in December of 2005.

Of these four comps, which is not really comparable? If you answered A, you’re right. This property is not even close to our target property, is it? Even if this house is right next door, it is too different in age, style and size to have any value as a comp. Throw it out.

Now, after visiting the other three and looking at them from the street, suppose we judge that properties B and D are closest to our target property in condition and character. Assume that property C is still close, but due to condition, problems with neighboring properties, or some other factors B and D are just a little more like the house we’re considering.

What conclusions can we draw? Well, if we’ve used good judgment in choosing our comps, and gotten some input from experienced Realtors in the area, we can use an average of the closest comps and arrive at an estimated ARMV of $170,000. Using our "3% rule" would leave us with a conservative ARMV of about $165,000. As you can see a little rounding is fine, but don’t go overboard.

If I were just starting out, or if I didn’t have a lot of experience in the neighborhood, I would ask a few other realtors to confirm my findings.

Get To Know Yourself

Finally, to test your market knowledge and build your confidence, choose three properties that you would be interested in investing in. Using the methods outlined above, estimate an After Repair Market Value for each of them. When you are finished, wait until they sell and see how close you came. If you have been diligent in applying these principles, I’ll bet you came very close indeed. If not, try to determine why.

Maybe your "comps" weren’t really comparable. Perhaps there was something about the property you couldn’t see or didn’t know. Ask the selling Realtor why they think the house sold for the price it did. Be sure to write everything down in your neighborhood notebook. It will soon become an extremely valuable resource- keep it safe!.

Learn to apply the above principles, and within two to six months (depending on how much time you can devote) you’ll know more about market values in your target neighborhood than anyone else in town. That knowledge means confidence, and that confidence translates into investing POWER!

Now, go make more offers!

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