By Christopher Seder
As a beginning investor one of the hardest parts about real estate investing is evaluating deals. How do you know if you are getting a good deal on a property? Most will tell you it takes experience and I truly believe it does. But there are steps you can take to help you evaluate deals even with no experience.
Initial Lead taking
First you get a phone call from a seller. What you want to do is, ask him a series of questions to really get everything you can about the property. You really need to try and build rapport with the seller, so they know that you are not trying to take advantage of them but there to help. Never take advantage of anyone, I personally will never work with an investor who has. There are bad investors out there and they give us good investors a bad name. So be kind and passionate with every seller and put their best interest first.
You need to ask for the address, beds, baths, square footage, any special features, ask them the reason they want to sell, repairs needed, the loan balance, are the payments current, if not the bank name and home many months behind, then ask them what they are looking to get for the property. There are other questions I ask sellers but these are the basics.
After they have said an amount they want for the house, always say if I can pay all cash and pay all your closing costs what is the lowest you can possibly take. Never be the first to say a price; always get the seller to say a price first. In a negotiation the first one to name a number always loses.
The reason you want to get why the property owner is selling is because you can determine their motivation. If a seller tells you there is an auction next week, then I would think that they are pretty motivated. Let the seller know that you will try and help them with what they need. If they are going to need a place to live once they sell the property try and find them something they can afford. Always try and understand their situation and know that everyone goes through tough times.
It is going to take you about 10-50 calls before you really feel comfortable with asking all the questions you need to ask. You cannot be afraid to ask tough questions, you need to know all the facts in order to save yourself money and so you can best help the customer.
The next step you need to do is run comparables. This way you get a good feel for the area and what similar houses in the area are selling for. If you are a real estate agent you have access to the MLS which will allow you to see comparable sales. When looking at comparable sales always look in a half a mile radius of that property. Also take into consideration the location of each comparable. Some comparables can be a block away but because on is on a busy street it may not be a good comp.
Now if you do not have access to the MLS yourself you can contact a realtor and see if he/she can help you out. There are also some software programs out there that can provide you with comps. Just make sure that the comps you are finding are recent and accurate.
Go look at the property
Next you need to go out to the property and take a look at it for yourself. I also recommend driving to each of your comps and making sure they are similar to your house. You will never really know if a property is what the seller says it is until you go and look at it yourself. If the seller lets you take a look at the inside then you can determine around what the rehab cost will be. You will not know exactly until you have a chance to get some contractors in there or if you have done a lot you can kind of determine rehab price.
Determine you asking price
Now once you have all of your data piled together of what similar houses are selling for you can determine what you want to offer the seller. For doing rehabs you need to buy the property around 65% of what the after repair value would be. This means that if you find a property worth $100,000 in mint condition you need to buy the property around $65,000. But this will also depend on the amount of repairs that are needed. If the property needs $30,000 in repairs then it’s not a deal. Some deals you may have to buy at 40% of the after repair value depending on the repairs needed. It will just take some time to really get a feel for where you need to buy the properties.
There are also other fees, commissions, your profit and things that you need to consider into you deal. Make sure that you are very detailed about what your expenses are going to be. This should have given you some idea about where you need to start and the process of evaluating a deal.
Tags: Baths, Beds, Best Interest, Big Sky Property Solutions LLC, Billings Montana, Billings Montana Real Estate, Billings Mt Real estate, Christopher Seder, Closing Costs, Flip This House Billings, Flipping Houses Billings, Investing Billings, Investor, Investors, Loan Balance, Motivation, Negotiation, Phone Call, Property Owner, Real Estate Investing, Real estate investing Billings, Real Estate Investing Billings Montana, Real estate investing tips Billings Mt, Reason, Rehabbing Properties in Billings mt, Seder, Special Features, Square Footage, Wholesaling Billings