How To Tell If A Deal Is Profitable For Real Estate Investing
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Thriving real estate investing requires that you obtain deals that will leave a profit for you no matter how you buy and sell houses.
Here are a few tips to guide you on how to identify profitable deals for your real estate investing business.
1) Market Value
You must know how much a house is worth before you can make an offer to buy it. When I buy houses, I prefer to work with conservative market value to be safe.
The county records market value of the property is a good indicator of market value. It is usually lower than comparable sales of homes sold in the area. However in a poor house market, depressed house values can be caused by foreclosures in the neighborhood. If you do not have access to the MLS, you might need a local realtor in your dream team to run comps for you.
2) Renovation Estimates
Repair is an integral part of buying and selling houses. You must have a fair estimate of the repairs needed without getting down to the nail and bolt. As you get more experienced, you can reliably estimate repairs by looking at a house in 5 to 10 minutes.
I try to work with higher repair estimates to stay safe.
3) Mortgage Balance
You cannot make an offer on the property unless you know the mortgage balance. If your offer cannot pay off the mortgage and leave a profit for you, then you may be better off looking for another deal.
If a seller is not motivated enough to provide this information, you better look for another deal.
4) Sale Price
If a seller wants full market value for their house, they are not motivated enough for you. Unless they can allow a margin for profit, you may be better off looking for the next deal.
Sometimes, you might need to show motivated sellers your numbers so they understand how you arrive at your offer and leave room for profit.
5) Is It Vacant?
This will tell you how motivated they are to sell their house. If they are making more than one or more mortgage payments, they must sell fast. It also means you can take ownership of the house as soon as you buy it.
How do you gain access to this information?
It is necessary to have a good real estate investor website to receive this information. The website should teach them how you buy houses, and provide them with the opportunity to submit their house information through your website.
The form should collect as little information as possible, but just enough to know whether it is a deal or not.
The less information you request the more people are likely to respond via your website. This will save you lots of time because you only talk to motivated sellers whose numbers make sense.
You can then ask for any remaining information once you talk to them on the phone.
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