Creating successful offers on real estate properties depends on two important things – the value of the property and your exit strategy, i.e. whether it’s a keeper property, rehab property or wholesale.
Market Research is Key To Making Offers
Based on how well we research our market will ultimately determine how much we profit in our deals.Following are some important criteria when doing market research in your target market: -
Property Type and Location
In any given area, there are many types of residential properties such as single family homes, condos, town homes, duplexes etc. The properties can be further segregated based on price such low-end, high-end, and “middle-of-the-road”.
I like the “middle-of-the-road” properties because that is where majority of the buyers are, and therefore my exit strategies have the best chance of working for these types of properties than any other.
Comparable Sales
In addition to the type of property, it is important to know for how much the properties are selling, how many are on the market, how quickly (or slowly) they are selling, etc.
Property Amenities
Location, ease of access, and neighborhood amenities are also important factors when considering real estate investment properties.
Determining Value
The following items need to be considered when thinking about property values: -
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Location and Neighborhood. Is it on a quiet street, close to a freeway making commuting to and from work relatively easy, what is the sales activity in the area, what are the schools like, and is the community growing?
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What the comparable values of similar properties; there are several ways to get comparable sales data. A local real estate agent will be able to provide most of the information you will need. There are several resources on the internet which provides you sales data such as realtor.com and zillow.com.
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Property Condition. The condition of the property is yet another variable that goes a long way in determining the fair market value of a property, though this, by no means, is an exact science.
Financing
Almost all real estate transactions will require some amount of money – just how much will depend on your acquisition and exit strategies. The most talked about real estate deal is the magical “no-money down”.
Whilst it is entirely possible to do these deals, they are not the norm, and much fewer in numbers compared to all the deals that are out there.
Underlying financing is critically important and can make or break a deal.
The following are some sources of money: -
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Self. There are number of avenues to consider here: personal savings, line of credit, IRA/retirement accounts, and credit cards.An excellent way of accumulating investment capital is to wholesale real estate investment deals.
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Family, Friends, and Associates. Be careful with this scenario! You must make the arrangement beneficial to both parties. Each partner brings his or her own particular skills and resources to the table that will see the project to its successful conclusion.
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Conventional Banks. When dealing with conventional banks, there are at least two ways to get loans to purchase properties. The first way is a new loan from scratch and the second way where you assume or take over an existing loan that somebody already owns.
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Private Money. Private money lenders or “hard” money lenders are people or small businesses that lend money for a certain period of time to help you complete your real estate investment project.
Private lenders are generally more flexible and will give you the short-term loan you need to rehab and sell an investment property.
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Seller Financing. There are two types of seller financing to consider; conventional seller financing and creative seller financing, also known as lease options.
When a seller sells their home privately, the buyer agrees to make payments to the seller, instead of a normal bank or mortgage company. The seller would then make the mortgage payment to their bank.
There are several ways to use a lease option to sell a property. Each method may be slightly different in the way it is implemented, and they may be called different things (e.g. wraps, contract for deed, rent-to-buy, and seller carry etc.) in different areas, but they all fall under the same principle of lease option.
Next, read managing real estate investment deals.
