10 big real estate investing secrets
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Investing in Real Estate has made a lot of people wealthy and it can do the same for you. Most people are not aware that the best time to get into Real Estate Investing is in a down market. In this ...

Investing in Real Estate has made a lot of people wealthy and it can do the same for you. Most people are not aware that the best time to get into Real Estate Investing is in a down market. In this report, we will discuss some of the secrets that will help you cash in on the POWERFUL Real Estate market.

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10 big real estate investing secrets 10 big real estate investing secrets Document Transcript

  • 10  BIG  Real  Estate  Investing  Secrets By: The Renegade Wholesaler renegadewholesaler@gmail.com www.renegadewholesaler.com 1
  • 10  BIG  Real  Estate  Investing  SecretsAs you probably know, recurring income is the best way to live a comfortablelifestyle these days. Without it, you are left feeling worried and wonderingwhere your next dollar is coming from.However, if you have systems that generate “recurring” income, you alreadyKNOW where your next dollar is coming from. Whether it’s your job, a socialsecurity check, or an unemployment check, knowing that more money is onthe way helps you sleep at night.But what about all of your bills and expenses...?Does it seem like your money is spent BEFORE you even get it? Do youspend every day pinching pennies to make your dollars stretch until thatnext paycheck? Do you dream about ways that you can boost your incomeand live a better lifestyle?Unfortunately, just having “recurring income” is not enough these days. Yourincoming cash flow must exceed your outgoing cash flow (expenses) if youreally want to achieve some level of wealth.So although you may have money coming in every week or every month,does it exceed the amount of money leaving your bank accounts every weekor month?In order to afford the lifestyle that most people dream about, you have tosetup “lucrative, residual income streams.”Residual income is money that comes in month after month, year after yearon auto-pilot after the initial work has been done. For instance, singersusually get paid royalties every year for their songs without having to singthem over and over again.Having a system such as this that will pay you for years to come allows youto control your own income, create income security, and allow you to live thelife you want to live.What if you could setup a powerful, profit-producing system that will pay youover and over again? A system that could make you financially free in avery short amount of time?Well, it is very possible with Real Estate Investing. 2
  • 10  BIG  Real  Estate  Investing  SecretsInvesting in Real Estate has made a lot of people wealthy and it can do thesame for you. However, getting started in the Real Estate Investing businesscan be very overwhelming!There are so many different ways to make money in this niche that peoplesometimes get lost on wild promises and dreams that never come to fruition.This is enough to leave anyone frustrated and confused about the viability ofthis business.You may be asking yourself:“Invest in Real Estate? In this depressed market?”The answer is “ABSOLUTELY.”Most people are not aware that the best time to get into Real EstateInvesting is in a down market. Many people today are losing their homes toforeclosure, which opens up a lot of doors for Real Estate investors.While this situation overall is very unfortunate, it has created some greatinvestment opportunities for Real Estate Investors. The overwhelmingnumber of foreclosures and distressed mortgages has caused many lendersto sell of mortgages at very steep discounted rates.Imagine purchasing a property today for $3,000... and being able to turnaround and sell it for $25,000 or more!How about purchasing a property with a mortgage payment of $250/mo andbeing able to rent that property out to someone for $650/mo?Are you starting to see the power in Real Estate Investing?These two examples are just the tip of the iceberg! There are so many otherways to purchase properties for just pennies on the dollar and generatehefty cash from them. 3
  • 10  BIG  Real  Estate  Investing  SecretsIn this report, we will discuss some of the secrets that will help you cash inon the POWERFUL Real Estate market. There’s no easier way to start makinglarge sums of money in no time - even if you’re brand new to the Real EstateInvesting business!1. Purchasing Discounted MortgagesOne way to build residual income in the Real Estate business is purchasingdiscounted mortgages. This is one of the safest, quickest, and easiest waysfor you to start generating income in the Real Estate Investing business.A discounted mortgage is one that is sold or purchased for less than its facevalue. For instance, let’s say there’s a mortgage of $100,000 with aninterest rate of 12% and a 30 year fixed payment of $975.The mortgage holder wants to sell the mortgage to get $30,000 right now.Once they find an investor, they will negotiate the terms and figure out howmany months of the mortgage they would have to sell to get the $30,000.If this transaction goes through, the seller will benefit by getting the moneythey want or need right now. The buyer will continue to make their monthlypayments of $975 to the investor for the remainder of the note.The investor benefits by receiving the $975 monthly payments from thebuyer over the remainder of the note, which will end up being much morethan $30,000 - so they receive a nice profit over time.Here’s where your opportunity comes in...As you probably already know, there have been an extreme amount offoreclosures and distressed mortgages in recent years.Banks are not prepared to deal with the influx and are doing everything theycan to liquidate these assets - including selling them at deep discounts toinvestors. Some non-performing loans can be purchased for a little as .50cents on a dollar!Many banks will sell large portfolios of distressed mortgages to hedge fundsand large-scale investors, as well as sell smaller portfolios to individualinvestors. 4
  • 10  BIG  Real  Estate  Investing  SecretsSo even as a new investor, you stand to make some very lucrative RealEstate deals. However, this method does involve some work and takes timeto accomplish.Some note sellers will take months - and sometimes years - before they willclose a deal with you. If you become impatient and frustrated too soon, youstand to walk away from thousands of dollars in profits.Remain diligent and patient and your reward could be larger than you everimagined.2. Purchasing ForeclosuresAs mentioned above, there is an extreme surplus of distressed andforeclosed properties all across the world.Another way to create residual income in Real Estate is to purchaseforeclosed properties.A foreclosure is a lenders action to reclaim a property where the owner hasnot been paying their mortgage notes. Simply put, if a homeowner does notpay, they lose their home.The foreclosure process consists of 3 major stages: 1.Pre-Foreclosure 2.Foreclosure at Auction 3.Post-ForeclosurePre-ForeclosureIn order to make real money with foreclosures, you want to get to thembefore they actually become public knowledge. In other words, oncesomeone goes two to three months without paying, the foreclosure processbegins - and this is where you can step in.In fact, the earlier you can intervene, the greater amount of leverage youcan have over the entire process. Leverage means you can do a lot morewith a lot less. Coming in early in the process allows you to help the ownerand create a win/win situation for everyone involved. 5
  • 10  BIG  Real  Estate  Investing  SecretsAttending Foreclosure AuctionsIf you prefer, you can go to the actual foreclosure auctions. If you choose togo this route, here are a few pointers:* Before you start bidding first go to several auctions so you can becomefamiliar with the process.* You need to do your appraisal work properly, because the lender willprobably come in with the first bid at the auction. This will be at least asmuch as the foreclosed loan balance plus interest and expenses. If you bid,you want to make sure you bid over that amount, but substantially less thanmarket value. Why? Because you don’t want to eat your PROFITS!!!!!! * Also check for your state’s Rights of Redemption, or the original owner’sright to satisfy the loan before, and even sometimes after foreclosure(Statutory Rights of Redemption). Original borrower may delay your plans,depending on her or his rights.* Contact local county courthouse or county clerk’s office.* You can also contact some of the auctioneers themselves to get answers toquestions you may have. Inquire at county clerk’s office as to who theauctioneer would be, or look them up on the Internet.* Bidding can be verbal or through sealed written offers.* Usually you will need a 10% deposit up front, with the remaining 90% dueat closing within 30 days.* Regular deed or Torrens title? One of them is required to properly conveythe property. If lost by the original owner, replacement of a deed is a fairlyshort process. Just go down to the local county clerk and pay for a copy.However, the Torrens title is a little more complex. This title lists what arecalled "memorials", or the listing of all legal instruments ever associated withthe property, such as liens, mortgages, etc. 6
  • 10  BIG  Real  Estate  Investing  SecretsCopies of the Torrens title must be ordered by a court and can take months.Thus, the Torrens may give you, the borrower/investor, more time to arrangefinancing. You can find out about the Torrens title by searching the file at thecounty clerk’s office, or via the foreclosure search originated by the lendinginstitution.You bid on the mortgage balance, not the market value and please don’toverbid! The difference between the mortgage balance and market value isyour current profit margin.Post Foreclosure“Real estate-owned” means that the property is owned by the bank orgovernment agency, maybe because the property did not sell at foreclosure,or the bank won the property back at the auction.You really need to learn how to build a business relationship with bank assetmanagers and get to know who the players are at the banks.Keep a list of whose job it is in the individual banks to handle the REOdivision.REOs are sold in a variety of methods: directly with the bank/governmentagency, listing with real estate brokers, auctioneer companies, and evensome on mailing lists and web sites.Advantages1. Lower interest rates2. You may get the lender to offer a discounted price.3. You have access to the property for inspection.4. The Lender may have evicted current tenants in advance of the sale.5. You have more time to set up favorable financing.6. The Lender can restructure loan with more favorable terms and financing.Disadvantages1. The biggest disadvantage is the price will probably be closer to marketvalue, as opposed to mortgage balance at auction but can be negotiated.2. If listed the broker or agent can kill the deal.3. Repairs are sometimes numerous.4. Lender may not provide financing5. Lender may not be flexible with terms. 7
  • 10  BIG  Real  Estate  Investing  Secrets3. Purchasing Tax LiensA tax lien happens when you have not paid your taxes to the localmunicipality. They will put a lien against your property and this will preventthe sale of the property until the lien has been satisfied.When the public authority offers the property for sale to satisfy a tax lien,the successful bidder buys the right to own the property if the propertyowner does not repay him.There are three types of liens:1. Judgments or judicial liens, results when a creditor files a lawsuit. Insome states once these judgments are docketed in the Superior Court, theybecome liens on real estate.2. Statutory liens -IRS or county/state tax liens, and property tax liens.3. Consensual liens, such as mortgages.You don’t have to be an attorney to understand liens. However, I suggestyou ALWAYS consult with one before purchasing a tax lien. You must decide,based on your research, whether to do the deal.* You don’t pay your local taxes.* The local government puts a lien on the property for the unpaid taxes thatprohibits sale or transfer without payment.* Government auctions tax lien certificates to compensate for the unpaidtaxes. You bid.(NOTE: Always physically check out the property and do lien, judgment andtitle searches before you buy.)* Lowest interest bid, or fixed interest to the highest bidder. 8
  • 10  BIG  Real  Estate  Investing  Secrets* What if the property owner doesn’t satisfy the lien? In some states, the taxlien certificate owner just applies for and gets the deed. In others, theproperty is auctioned off.There is 10% cash deposit required, and the remainder will need to be paidin 30 days. You bid the unpaid taxes plus interest due you. This is a truescenario.A tax purchaser purchased a lien on a piece of commercial property for$12,000. The property was owned by unknown owners, which all the propernotices were sent out and there was no redemption.He acquired the property, which was valued to be over $350,000.00. Hisreturn was over 29 times his investment.Arizona pays certificate holders 16% interest. At the end of 20 years, a$2,000 would have grown to more than $30,000 with tax-deferred earnings.4. How to Find Good Investment PropertiesRenting out a property is very popular among real estate investors.Unfortunately, not everyone can make a profit on rental investmentproperties. Finding a good piece of property for your real estate investmentportfolio is actually harder than you think.Fortunately, here is a list of simple steps that will guide you on how to findgreat investment properties.1. First, you have to decide how long you plan to own the property, evenbefore you take other factors into consideration. If the asking price seems tobe too large for your time period, then look for another piece of real estatethat you may invest in.2. Next, do the numbers… Find out how much you would have to spend formaintenance and repairs, given that you rent it out for a certain period oftime.Since you are merely renting it out and not selling it, it remains yourresponsibility to take care of the major repairs that may be needed. Short- 9
  • 10  BIG  Real  Estate  Investing  Secretsterm investors should stick to those that have smaller maintenance costs.Make sure that you will be able to gain back what you will be spending.Before you can find good investment properties you need to first understandwhat is considered a good investment property. For example, if you’replanning on renting your property for cash flow make sure that after allexpenses are paid that you will have an annual rate of return of between 15to 20%.So, say for instant your purchase price was $25k. You decided to rent it outfor $750 per month. Your expenses totaled $400 per month so your netoperating income is $350 monthly ($750 monthly rental income - $400monthly expenses = $350 net operating income). This will give you anannual net operating income of $4200 divided this amount by the $25kpurchase and this is an annual rate of return of 16.8%.3. Finally, develop your own network of connections. This will help you tofind the most profitable properties to invest in, and these same connectionscan also assist you in finding interested potential tenants to rent them to.By knowing the right people, you will be able to find the best talents in theindustry and use them to your advantage. You can also check Craigslist realestate section. There you will find tons of properties being advertised forsale and for rent.5. How to Find HOT Markets for Buying Investment PropertiesHistorically real estate investing has been a very lucrative way to financialsuccess. This is even more so in the current real estate market. Why?Because due to the massive foreclosures which currently exist , you can nowbuy properties at 30 to 50% below market value.With that being said buying at such a huge discount you can quickly make agreat deal of money in a relatively short period of time. But you have to be aforward thinker to make any serious money in the buying and selling of realestate.The objective is to buy low and sell high and that means you have to makean EDUCATED guess as to what is GOING to happen tomorrow, next week, 10
  • 10  BIG  Real  Estate  Investing  Secretsnext year or ten years from now and not base your decisions on whathappened yesterday, or last week, or last year or ten years ago.The neighborhood that you grew up in may have been a new subdivisionwhen your parents first moved there but it’s not new anymore. It’s not on itsway UP. It’s on its way DOWN.The residents and the buildings are all beginning to show their age. This isthe nature of real estate. As we’ve experienced in the last few years, weknow what goes up will eventually go down. You ALWAYS want to buy whenthe area is on the rise and not when it is in decline.There are, of course, exceptions to this rule but there aren’t many. You needto find the hot markets when buying investment property and usually thehot market is where the people are GOING.The trick is determining where people are going. Buying in an area that isalready popular can be a hot market providing you can make a good deal onthe property but finding out about upcoming changes in the infrastructurecan lead you to where people will be going in the future.6. Finding an Investment Property OnlineA few years ago the most popular way to look for a home to purchase is tosee Realtors or go to the classifieds of the local newspapers. Currently manyof the Real Estate companies have websites that allow you to take virtualtours of homes (or at a minimum, view pictures and brief descriptions) oftheir listings online.Also, if you further your search online, you can get other vital informationsuch annual taxes, last sale date and the amount it sold for, etc. You mayalso want to investigate some of the other real estate web listings available,such as:http://www.realtor.comhttp://www.homestore.comhttp://www.realestate.com 11
  • 10  BIG  Real  Estate  Investing  Secretshttp://homeadvisor.msn.comhttp://www.housebid.comhttp://www.homeseekers.comhttp://realestate.yahoo.comYou can also find foreclosure homes online through Craigslist.org.Go to the real estate section to look for these homes.. There are manyproperties listed for sale daily in all states throughout the country andinternationally.Once you’ve found some potential homes to look at you will need to do yourown due diligence before buying. You’ll need to do a drive by to inspect thecondition of the home. Again, the Internet can come in quite handy. Bycreating customized driving directions with a few quick keystrokes, you’ll beon your way to your potential new home.7. How to Sell Your Investment PropertyEvery investor wants to achieve the best possible price in the shortest periodof time for their property when trying to sell. However, most are confusedabout the best sale technique to get the best results.Speaking from experience, there is no absolute right or wrong method inselling your property. From my ten years of experience in the market, I’vediscovered the best method of sale will depend on the property type and thelocation.In order to choose an appropriate method depending on your property youneed to first understand to different techniques and there advantages anddisadvantages.* Seller/Owner Financing - In the current market, seller financing termsis a very popular technique used by investors to sell their properties. Theproperty should be free and clear with no mortgage liens. 12
  • 10  BIG  Real  Estate  Investing  SecretsSince the market downturn, the banks are not loaning money as in the pastand seller financed notes are very popular as a result. You will ask for adown payment, and create a note for 10 to 15 years.The promissory note is created for the balance that’s due after the downpayment. The note is secured by a mortgage and then recorded against theproperty as a lien in favor of the seller.You will attract more buyers to this method. If you’re flexible on thefinancing terms of the property, you increase your pool of buyers andthus the demand for your house.These seller financed notes can be sold to individuals who are looking forbetter investment alternatives. With questionable investments such thestock market, these seller financed notes are very attractive to individualswho would rather invest their money in a more tangible assets such as realestate. Here they can see realistic and stable higher annual rates of returnson their money, unlike the volatility seemed in the stock in the past fewyears.The disadvantage to using this method is having a higher percentage ofdefaults due to the soft terms and screening of buyers. This can be offset byperforming a more comprehensive screening procedure with your potentialbuyers. Make sure to get a larger down payment from buyers who havequestionable credit and payment history.* Auctions - An auction opens at the price the market determines and relieson a sense of urgency and competition.In this emotional environment buyers may bid more than they had intendedleading to a fantastic result for the seller. The relatively short campaignperiod for auctions, generally four weeks, is seen as an advantage by mostsellers.Unlike listing with an agent or private seller where the property could sit onthe market for a lengthy time period. Using auctions to sell, you’ll beworking to a short, defined time frame with a quick turnaround. If yourreserve price is realistic, the market is good and you are selling in an areawhere buyers are receptive to auctions, you can expect the property to sellon the day of the auction. 13
  • 10  BIG  Real  Estate  Investing  SecretsAuctions do have a disadvantage in that, if it is a non-competitive market orin an area where most people prefer a fixed price, it could lead to a lowerfinal price than you had anticipated.This is dangerous if you have to sell as the price starts low, and could remainlow. Adversely, if you set an unrealistic reserve price or is selling in a downmarket the property could be passed and gain a reputation as overpriced.A Real Estate Agent can help you set a realistic price for the property andavoid this pitfall.* Listing Agent - Listing the property with a reputable listing agent is verypopular with both sellers and buyers alike - it is relatively low stress andeveryone knows what they are in for.Sellers work with their agents to set a price for the property. Buyers mayoffer to pay less than the listing price, but it is up to the seller’s discretionwhether to accept this offer.In a conservative market you will generally achieve better results selling bylisting the property, commonly known as a private sale, compared to anauction. Areas where auctions are not common, buyers tend to be afraid ofauctions and prefer the fixed price offered by a private sale.The disadvantage of using this method is there is no chance of selling at ahigher price than the value you set. With no fixed time frame for thecampaign, your property may sit on the market for an extended time andyou’ll need to factor in additional marketing costs for this time into yourbudget.It is very important to work with a reputable listing agent who will help youset a realistic value for your property. Some buyers are savvy about theprice they should be paying so asking too much for your property could giveit a bad reputation. If this occurs you’ll end up having to lower the price anyway so why not start out with a realistic price in the first place?Finally, before buying an investment property you need to determine yourbest exit strategy first whether it be buy and hold, wholesale flip, or retail.8. Location, Location, Location... It’s EVERYTHING in Real Estate! 14
  • 10  BIG  Real  Estate  Investing  Secrets“The only three things that matter in real estate are location, location andlocation” …This is an old real estate saying that is very true.A beautiful five bedroom, four bath home with cathedral ceilings and aswimming pool that is sitting next to a dilapidated structure is nearlyworthless.However, on the other hand a small one bedroom, one bath shack sitting inthe middle of downtown Dallas would be worth a small fortune. As you cansee, location is tremendously important when you are considering a piece ofreal estate to invest in.What makes the location of a piece of real estate valuable? The answer isfairly simple. The value is based on nothing more than the desirability factor.Desirability is a fluctuating intangible that is really hard to nail down.Property that is totally undesirable to one person might be the next person’sdream home.This unique phenomenon is true for real estate investors, residential homebuyers and for renters as well. It is true for all aspects of the real estatemarket. The main point for any real estate investor to consider first is whattheir exit strategy will be for making a profit on a property.Buying is only half of the equation and whether the location of the propertyis good or bad depends upon that profit strategy.Here’s an example:If an investor is going to invest in a property with the intention of waiting forthe market to go up, investing in prime real estate is probably the very bestchoice.Also, locations that are near entertainment centers or developing areaswould be ideal because the likely hood that the property will go up in valueby waiting is a pretty good bet. 15
  • 10  BIG  Real  Estate  Investing  Secrets9. Getting Started In Real Estate With Little to No MoneyYou are probably anxious to get started with real estate investing and havewatched those late-night infomercials with gurus promising you millions inreal estate profits with no money down.Many of these guys has never made a dime in real estate, but has builtfortunes through selling over-priced information to individuals who want toinvest in real estate and are clueless to the fact this information is worthlessto them.Most individual should realize that no real estate “system” is foolproof, and ifanything seems too be good to be true, it probably is. However, that doesn’tmean that you need excellent credit and a surplus of cash to get started inreal estate. Here are some strategies for financially-constrained aspiringinvestors to begin generating real estate cash flow.Do You Need to Own a Property to Make Money From It?.. NoSome real estate investors buy and sell contracts, not properties. They findbargain properties and sign purchase contracts with their sellers. Theseinvestors then sell these purchase contracts to retailers, making a solid profitin the process.This is known as “assignment of contract” or wholesaling. Make sure toinclude an assignment clause giving the purchaser rights to sell their rightsand obligations to another buyer with the seller’s consent. Usually, the onlycash required is the earnest money to secure the deal.A good dealer can then flip the contract for a quick $1,000 to $3,000 withoutever taking possession of the deed.Use a Double Closing for Greater Profit PotentialA double closing allows a dealer to earn a higher profit margin than anassignment of contract. 16
  • 10  BIG  Real  Estate  Investing  SecretsA double closing begins with the dealer signing a purchase contract with theproperty owner. Then the dealer signs a contract with the retailer, in whichthe retailer agrees to buy the property from the dealer at a higher price, anddeposits that amount in escrow.The property owner signs the deed to the dealer, who then signs it to theretailer and the process is complete – the property owner is paid his askingprice, and the dealer is paid the difference. Note that the dealer came to thetable with no money, and her credit was never an issue.Be a “Bird Dog” – No Cash or Credit RequiredBird Dogs or Scouts are a third type of real estate “flipper.” Instead offlipping actual properties or contracts, Bird Dogs flip information.Scouts face even less risk than dealers, and have no cash or credit concerns.They simply gather information about distressed properties and sell it tointerested dealers and retailers.In effect, Scouts do the dirty work for real estate investors, and investorsare willing to pay them handsomely for doing it. Typically Scouts will gatherthe following data on a potential deal: The owner’s name and contactinformation, the asking price, information about the mortgage and whetherpayments are current, outstanding liens on the property, a photograph of thehouse, and, etc.Investors typically pay Scouts between $500 and $1,000 for goodinformation, but what happens if an investor doesn’t pay? Simple – don’ttake any more deals to them. Successful investors realize the value of goodinformation, and they are more than willing to pay for it.Finally, keep in mind real estate success always requires an investment.However, as I have mentioned above, there are ways to profit from realestate without a significant financial investment. 17
  • 10  BIG  Real  Estate  Investing  SecretsThis is not to say that success come easy nor is it free. At the very least, youwill need to make a substantial investment in yourself. You must be willing towork hard. Be sure to invest in your education on a daily basis.One way to do this is attend local real estate investment clubs meetings.These meetings are normally held monthly. There you will find many savvyinvestors who are willing to share free information from their ownexperiences and the best way to learn is from individuals who are actuallyinvestors themselves.Learn as much as possible about your local market, real estate law, andinvestment strategies.10. Determining The Value Of A PropertyFiguring out the real value of a property can be difficult in the currentmarket where there are so many foreclosure and bank REO sales. Even intoday’s market, the comparable sales method is still the most accuratemethod to determine the value of single family homes, condo’s, and two tofour units and is also the most common one.Many tax assessor’s offices and county courthouses offer online databasesthat allow you to view the prices for properties within a specific area. Youcan also in some instances get full details about the properties, includingsquare footage.There are free Web sites such as Zillow (www.zillow.com) also offer propertydata, but the information is less detailed than for the paid sites. Forexample, the seller’s name may be missing, which could be relevant if theseller was a bank, as in the case of a foreclosure sale. If that’s the case, itcan’t be considered a comparable sale because the property was sold indistress.I feel the best computer database for getting information about comparableproperties is the local MLS. The MLS systems are not accessible to thepublic so you will need to ask a real estate agent or an appraiser to assistyou in getting this information. 18
  • 10  BIG  Real  Estate  Investing  SecretsThis database offers detail information such as, the number of days onmarket and includes notes that indicate whether the property was updated,whether the seller offered concessions on the sale and so on.While many factors come into play when you’re evaluating a residentialproperty’s value by “comps” (comparable sales), the three main factors arelocation, size (square footage) of the home and the number of bedroomsand bathrooms. You should be able to look at comparable sales involvingproperties with these three factors and get a good idea of the value of theproperty you’re selling.Location is extremely important when you’re comparing sold properties. Aprofessional appraiser typically looks at houses within a one-mile radius orless. If there’s a wide mix of properties, such as in a subdivision, you mayneed to go outside of it to get comparable sales.Another thing to consider when determining a home’s value, be sure toevaluate the square footage. Note that appraisers typically look at homesthat are within 20% up or down in square footage as comparables. Generally(especially within a subdivision), most homes fall within a fairly limited sizerange. Therefore, you should be able to develop a good gauge for the sellingprice of homes in those particular sizes.The number of bedrooms and bathrooms is more relevant than just squarefootage. For example, a three-bedroom home with 1,500 square feet mightbe worth more than a two-bedroom home with 1,550 square feet. It alsomatters if the bedrooms and bathrooms are located on the main floor or thebasement.Bedrooms and bathrooms located in the basement does not add as muchvalue than if they are located on the main floor. Although finished basementscan add some value, the amount of that value is less than it is for above-ground living areas.Additionally, the quality and number of bedrooms and bathrooms needs tobe considered when using comps to determine the value of the home. Three- 19
  • 10  BIG  Real  Estate  Investing  Secretsbedroom homes are generally a big plus over two-bedroom homes, but fouror five-bedroom homes don’t add as much over a three-bedroom if they areroughly the same size in square footage.When comparing bathrooms, make sure you understand the different typesof bathrooms and compare them correctly. A full bathroom includes ashower, bath, toilet and sink and adds more value than a three quarter and ahalf bath.There are other factors to consider that affect the value of a home, butgenerally these factors have less weight than the location, size and numberof bedrooms and bathrooms. Some houses have one-car or two-car garages,some have carports and others have neither.The garage factors in some value, depending on the rest of theneighborhood. For example, if the neighborhood comps all have two-cargarages, this can affect value as much as 10% on the subject property if itonly has a one-car garage or no garage.In addition to looking at properties sold in your target area, you need to lookat properties that are for sale as well. This will give you an idea where yourlocal market is heading up or down.Also, keep in mind that if your strategy is to flip the property, the propertiesfor sale are your direct competition and thus the asking prices are veryrelevant. For example, if you find properties that have sold for $250,000 butthe current inventory on the market is prices at $240,000, the asking pricesof your competition become just as relevant, if not more, as the sold pricesof other homes.If you’re investing in the same neighborhood, keep a record of propertiesthat have sold, are under contract and are for sale within your area. Haveyour agent check the MLS every week for new listings and sold properties sothat your information is up to date. The more information you have, themore accurate your values will be! 20
  • 10  BIG  Real  Estate  Investing  SecretsHave more questions about investing in Real Estate, contact me atrenegadewholesaler@gmail.com.I would love to answer any questions you have and help you get started ifyou are brand new to the business. The Renegade Wholesaler renegadewholesaler@gmail.com www.renegadewholesaler.com 21