Real Estate Investing Blog

When you are looking into real estate investing, one of the things that you’re going to want to focus on is evaluating deals. Simply put, evaluating deals is essential for a number of reasons, however one of the biggest reasons is summed up below:

This sector has reached a level of typical saturation, ala FMCG. The prices will not see much growth, unless they are differentiated products – like a “Healthy Living” township or “Build Tomorrows leaders” township. Smaller players will have to go niche, and larger players will have to go volume. If you are invested in a vanilla small player, please exit the counter. The home prices will remain more or less stable in tier 1 cities, may be 5-10% drop in suburbs. Tier 2 and tier 3 cities will crumble up to 20%, esp since the developers here are typically local builders, who can undercut larger players with their cost efficiencies.

The above is talking about the real estate investment market as just that - an investment market - and it offers up a few great points:

1. Real estate investors are going to want to look into different sorts of communities. When you look into niche communities - or even into buying homes that are more energy efficient - you’ll find that you’re in a better position to be able to turn around and sell the properties.
2. Real estate investors are going to need to evaluate deals based on the location of the property.
3. Real estate investors are going to want to be sure that they are aware, if they are looking into new constructions of the nature of the company.

Evaluating deals is about knowing what your goals are and about what you can do to reach them. Evaluating deals is also about whether or not you are going to be in a position to buy properties that are going to be effective for helping you to reach those goals - as is often said about real estate, it’s all about location.

In other words, focus on your goals, learn more about real estate markets and learn to more effectively evaluate deals and you will be on your way to reaching your goals.

When you get right down to it, real estate investment is all about the deal. Because of this, it should be clear that evaluating deals is an important part of your success as a real estate investor; however, it doesn’t always seem as though evaluating deals is something that people take as seriously as they should.

While looking for details that are out there and considering others’ opinions about real estate investing, this was something that caught my eye:

Ask your buyers agent to prepare a comparative market analysis of the short sale home you are preparing to make an offer on. Depending on how long the owner has owned the home or how long it has been in default they could owe the lender more money on the mortgage than what the house is worth. This could actually bring the list price up to current market value rather than below it.

When it comes right down to it, the CMA of a property is a vital step - especially when you consider that the market prices are still going down in some areas - of evaluating the deal. Your goal with a short sale, after all, is to purchase the property for less than you will be able to sell it for; if the current owner owes more for the property than its current value, it is going to be extremely difficult for you to get the home at the right price (the price that will let you turn a profit).

Evaluating deals is vital - if it is a step that you try to overlook or skip over, you’re likely to find out the hard way just how important it is.

It used to be that it didn’t take much to evaluate a real estate deal - when housing prices were consistently on the rise, it was possible to make money and succeed in real estate investing even without carefully evaluating a deal because just about everyone was making money. Now that the real estate market has slowed, however, it’s essential to evaluate deals carefully in order to ensure your success:

(source)Rather than betting on possible gains in real estate prices, he made sure that the rent he received from a property put cash into his pocket each and every month, from the very first day he bought a property. “When things are going well, when interest rates are declining and property values are going up, then it’s really easy to look like you’re smart,” he says. “But when things go the other way, it’s really easy to lose money too. That’s why you need a long-term strategy based on some realistic expectations.”

When you’re evaluating deals, you need to be sure that you are looking at your own business goals; it’s also important to be sure that you are able to make money without straying from your business plan. Focus on your goals and when a property becomes available, make sure that you are looking into all of the options and how they fit with your goals.

Simply put, evaluating deals lets you look at the big picture and whether or not a particular investment will help you to reach your business goals. Making money isn’t the only focus that you should have, however, when your goal is to create wealth as a real estate investor, it is an important focus.

By evaluating deals carefully before you make them, you’ll find that you are able to move forward with the confidence that you’ll need to succeed.

When you’re looking at real estate investment opportunities, it’s key to evaluate each deal so that you can see whether or not it is going to help you to reach your business goals. Of course, evaluating deals means knowing which points you should focus on and consider.

Here are a few key considerations for evaluating deals:

• What is the market value of the property? You may find that a property may have a reasonable list price, but would it really sell for that price on the market? When you consider the market value of the property while evaluating deals, you’ll be able to develop a sense of whether or not you’d be able to really turn the profit you’d like on an investment.


• How much equity will you be able to build from the time of purchase? When you’re evaluating deals, you’re going to find that there needs to be a little bit of a buffer. The instant equity that you’ll be able to build will help to give you a sense of your profit margin - and how it might be affected if it takes longer to sell than you’d anticipated.


• What’s the market like in the area? When you are evaluating real estate deals, it’s important to consider the market in the area where you are making the investment. If properties seem to stay on the market indefinitely, you may want to pass on the opportunity.

By knowing what it takes to evaluate deals, you’ll find that success from real estate invesmtnet is a lot easier to come by.

One of the “tricks” of real estate investing involves evaluating deals. After all, in order to know that you’re making the right choices - buying the right types of property, selling in the right market - it’s essential that you evaluate the deal and make sure that it will help you to reach your goals.

When we are talking about evaluating deals, however, it’s important to recognize that there are different real estate investment strategies and that, therefore, a deal that might look great to one investor may not be good for another:

(source)When investing in real estate, there are long-term and short-term investments. Rental Properties are long-term investments, while flipping houses would be short-term investing. There are pros and cons to both types of real estate investing. To determine the right real estate investing choice, decide what you want to achieve and have a clear vision of your investment goals.

When it comes to evaluating real estate goals, it is essential that you are taking a look at the goals that you have set for yourself. Whether you are a long term or a short term investor, you’ll find that knowing what you hope to accomplish will be invaluable when it comes time to evaluate the deal.

By evaluating each deal - and looking at your potential investments on a one by one basis - you will stand a far better chance of achieving the real estate investment success that you are looking for.

When you are investing in real estate as more than just a hobby - when real estate investment is your business - you’ll find that there are a number of steps involved in evaluating deals. Some of these steps are simple and straightforward; others just seem like they should be:

(source)One important thing you should do if you bid at tax auctions is inspect the properties. Especially in Baltimore it is important to make sure there is actually a building there. A case in point, this last weekend my partner and I were out looking at properties. We saw a property in a very nice single family home neighborhood. It was assessed at $100K but the neighborhood is worth double that. It would be a very desirable neighborhood to own or do a rehab in. There is just one problem. It was an empty lot. Clearly the building had just been demolished because we could see fresh grass seed growing.

There was a $900 lien on the property. Without looking at the property it would be easy to bid $50-100K or more.

When you are involved in real estate investing - whether you are buying bank notes, investing in tax liens or purchasing physical properties - it’s important to evaluate the deal before you make it. It is essential that you look at the properties that you are thinking about investing in (or at least have someone else check it out for you) to see whether or not everything is as it appears to be.

The above example is a good one: when you take the time to do your research and look at a property before making an investment, you just might find that you are able to save thousands of dollars in the process.

When it comes to real estate investing, it’s hard to come up with any point that’s more relevant than this one: evaluating deals before you make them is essential.

In other words, before you make a commitment to buying any given property, it’s important to look at the ways in which the purchase would benefit you. You need to look at the current state of the real estate market in your area: remember, there’s no such thing as the real estate market, there’s only the local real estate market when you’re evaluating deals.

Think about it for a minute. In some areas, back in the 90s home prices skyrocketed, and now those areas seem to have prices that are falling lower almost every day. Other areas in which prices were rising at a much more reasonable pace may still be seeing corrections, but not such drastic ones.

Even when you consider short sales and pre-foreclosure deals, your ability to get the most out of your real estate investment is going to depend on how closely you looked at the market when you made the purchase. Though you could be purchasing a home for half of its market value, by the time you factor in market conditions and changes that you would like to make, you’re likely to discover that there are some deals that just aren’t as good as they first appeared to be.

When you’re in the habit of evaluating deals before going into them, you’ll find that you can have greater confidence that you’ll get the results that you’re looking for.

Evaluating deals is an essential skill that you’ll need to learn if you want to build wealth with your real estate investments. So, what does it take to evaluate your prospective deals so that you can be sure that you’re making the right investments?

One option is to take advantage of mentoring opportunities when they present themselves; what better way to learn which investments you should jump on and which you should shy away from than to talk over your options with someone who has had success?

Another option is to take the time to really research your options. Evaluating deals isn’t just about determining whether or not you’re going to be able to get the right price for a property that you want to buy; it’s also about knowing what the real estate market in that area is like, whether or not you’ll be able to turn around and sell the home at a profit.

Similarly, when it comes to entering into partnerships it’s important to be able to evaluate the deal. If you go into an investment with another party, you need to be sure that you’re making the right choice - it really is as simple as that.

However, whether you’re looking at an individual property or you are focusing on making the choice to go into a partnership, evaluating deals is an essential skill. Until it’s well-developed for you, keep in mind that if something feels too good to be true it probably is and, if there’s something that’s holding you back, it’s a good idea to do more research.

Wouldn’t it be great if you had a supercharged buying and selling ‘machine’ that brought you in profits every single month.  Can’t you just visualize that JOB fading in to the sunset?

I did and I want to share with you a system for making that a reality.

As most of you know, I am a technology buff – meaning I love employing technology to do as much ‘work’ for me as possible, and then delegating or outsourcing the management of that to a reliable team.

So, I find the best software (or develop it!) and then choose team members that all have their valued positions and play them well – and sometimes I even have 1st string and 2nd string team members. 

It is really the only way to (1) get it all done, but more importantly (2) it is the only way to grow your business.

When I found out that my guest, Larry Goins, for this teleseminar was regularly selling 10-15 houses every single month and never looking at any of them – not even driving to see any of them, I had to get him to tell us how.

Listen to the replay of this teleseminar now – if you want you can even download it to listen in your car.

Best of Success,
Michelle Odessey
michelle@investorwealth.com
770-338-2797 10a-5p M-F

 

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REO Question:

Dear Michelle,Thank you for this email. Here is a question I have for you.

Staying in touch with [the] REO [department] at a mortgage company after the [auction at the] court house steps could work to secure a property before it goes to a local realtor[, Right?].

In NC, the price jumps 5% with each bid after the courthouse steps. From your experience, can one contact a mortgage company immediately after the bid reinstatement period with a lower bid–one closer to the amount for which the bank took back the property, thereby cutting off the 5% jump in price.

(This assumes there have been no bids save for the bank’s on the property.)

Michelle’s Response:

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