Real Estate Investing Facts

Real Estate Investing

How To Evaluate A Deal

One of the most important members of your investment team is your real estate agent. When you or your real estate agent find a particular property that you are interested in your Realtor will provide you with comparable properties.

The real estate agent will use the MLS listings to compare similar properties that have been sold in the last 6 to 12 months. Obviously the closer the comparable properties date is to the present time, it will show a more accurate reflection of current prices.

When doing a comparable lay the information out in front of you and then figure out what amenities one property has that the other properties don't. You then add or subtract value of the amenity or lack of it.

As an example lets say we have two properties that are very similar. Both properties are the exact same in every way except one has a two car garage and the other has no garage.

The property with the garage sold 6 weeks earlier for $85,000. The other property without the garage has an asking price of $80,000. We now know that a two car garage would give the property an extra value of $5,000 and that the property without the garage is priced accurately.

Make sure you get a home inspection or a very reliable handyman to go over the property and get a preliminary title report as part of you property valuation.

Create a financial analysis of the property. Once you have established the fair market value of the property multiply that amount by 70%, then subtract your estimated costs for repairs. Your total would be the price that you would offer. Try to get a 20% profit (more is okay).

To calculate the offer price on the $80,000 property (fair market value).

$80,000 x 70% = $56,000

Now we will say that the repairs are $6000, subtract that amount from the $80,000. For this property our offer would be $56,000-$6,000=$50,000. If you put in an offer of $50,000, your profit would be $30,000. A very nice profit.

This is one of the many advantages a good real estate agent can give you. So make sure you can find one that you like, trust and is experienced in investment properties.

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