Real Estate Comes Down To The Numbers

Category: Finance, Real Estate.

Real Estate Investing is simple, but not necessarily easy!

It s like telling someone how to drive a car. You see, people can complicate anything! It s not complicated at all. Sit down. Just open the door. Turn the car on and put it into drive.

They start asking thinks like" which door should I open. the left or the right? " or" Do I unlock it with a key or click the button" and on and on we go. But, people always make things harder than they need to be. Twenty minutes later, we ve still not even been able to get into the car. There are really 5 things you need to know- or steps- when it comes to real estate. I liked that analogy because it applies to real estate. Here are your Top 5 Real Estate Investing Tips!

Stop wasting your time trying to make deals out of deals that aren t there. Tip# 1: Find a Motivated Seller. Sellers are motivated to sell a piece of real estate by only 3 things: Change in personal situation. Personal reasons for selling a home are: job loss, relocation, divorce, illness, etc. Sellers become very motivated to sell their properties when things in their personal lives change and they can no longer afford the home or there is an emotional reason for selling. Tip# 2: Evaluate the Deal. Real estate investing comes down to the numbers.

Once you ve found a motivated seller, it s time to decide if the deal is going to work. There are 5 factors to consider in order to decide whether or not to invest in a property. If real estate is located in an area that is full of abandoned properties and rundown houses, the score will be lower than if the house was located in a prime location, close to all of the area amenities. Location. Condition. For instance, a brand new home is going to have a substantially higher score than a property that s rundown and needs major repairs. The better the condition of the property, the higher the score will be.

Price. The goal is to purchase real estate for as little as possible. 30% or more below market value will score much higher than when the seller is asking for market value or better. The lower the price, the better! Financing. If the seller is willing to give you financing with flexible terms and low interest rates and you don t have to come out with any of your own money, it s better than when the seller needs all cash up front. Real estate comes down to the numbers. Seller s Motivation.

The more urgent their situation is, the higher the motivation score. On a scale of 1 to 10, how motivated is the seller to sell his/ her property? Tip# 3: Write an Offer. But before you write your offer, make sure you have 2 exit strategies in place. After you ve done your homework and looked at the numbers, it s time to put the pen to the paper. This way, you re not stuck holding onto a piece of real estate that you can t rent or sell.

Consider submitting 3 contracts on the same property with different prices and terms and let the seller decide what works best for his/ her situation. Many people are losing their shirts in real estate because they jumped in on pre- construction and hoped to" get rich quick" . For instance, you may have a wholesale offer at 50% of market value, a seller financed alternative that you might use for a rental, and a lease option which you might do a sandwich lease- option. Once the seller has agreed to one of your offers, it s time to get the deal closed. Tip# 4: Line Up Your Financing. If you re wholesaling the property, find your investor- buyer.

Also start looking for a tenant or tenant- buyer if you re goal is to build a long term real estate portfolio. If you re going to close on it yourself, line up the financing via a conventional lender, hard money lender or line of credit. The key is to get your financing lined up in accordance to your exit strategy and begin moving immediately. Many real estate investors purchase a piece of property with one plan, buy- fix- sell. Tip# 5: Follow Through with Your Plan. They write the offer based on a certain sale price and with a specific plan to renovate. If you follow these steps and remember the tips, then you will make money in real estate.

Then, once they close on the home, they over- improve and try to sell it for more than it s worth or use a hard money lender and then decide they want to rent it. If you deviate from the plan, then your chances of running into problems increase. Remember, real estate investing is like driving a car. You wind up with the wrong type of financing, you can t find tenants, the holding costs eat the profits, etc. It s simple. Get in, put it in, turn the key drive, and go!

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