How Do You Define a Good Real Estate Investment Deal?
Published | Written by Jennifer Jacobs
While a great deal can make you a million bucks right now but the fact is that a bad deal could also make you bankrupt. Have a look at the commonalities:
Motivation is the key.
There has to be a higher level of motivation from the owner. Whether you are working with an individual property owner or a company like the bank, courts or city entity, they should all be motivated to offer.
That does not necessarily mean desperate, but whenever they have no need or want, your likelihood of having a good price is significantly lower. You ought to look closely at the motivation; if you don’t know what it truly is, then you should discover it. Ask the owner why they are selling and see if you possibly could help them solve problems. The banks motivation will be to get a negative asset off his or her books, but whenever they have multiple offers then their determination level changes and they get back around the drivers’ seat.
Figures are vital.
You ought to be able to purchase the house or building in a discount of some kind. Determining the economy value quickly, understanding repair costs after which it formulating the price you are able to pay is a process that you have to understand and get proficient at.
The old MAO (maximum allowable offer) formula is surely an investors quick general guideline. ARV (after repair value) X 70% – Maintenance = MAO.
There are many ways to invest. You’ll find short sales where you can create your unique equity. You can get property with owner financing and no money coming out of your pocket. You can assign contracts and you don’t need to own the residence. In all cases you need to look at the particular numbers. If you don’t buy in a discount, you are a retail buyer acting as an investor.
Problems change into profit.
Usually the problems with the owner or property will be directly proportionate towards profit. The more problems you can find, the greater the particular profit (usually). If the house has been around a major flame, you are into troubles. Therefore you must be able to buy at deeper discount. When the REO has fallen away from contract 4 periods, the bank has problems and is also motivated to sell quickly and for just a lower price. Presently there are exceptions to this particular, of course, but in many instances, more problems mean more money.
Education puts you prior to the curve.
Fear is the result of lack of education. The more educated you might be, the better you are able to evaluate leads in addition to determine deals. Also, look at the benefits. If you are educated about it more than others, they will check you out for answers and assistance with their deals. You become the authority inside your circle and for that reason; more deals come your path. Education will help you know what a deal is, but it could also bring more deals to your account.
While there are many points that make a good deal, these are the particular big ones that you ought to keep on your radar.