Sound too good to be true? It isn’t it. The concept and recipe for success in real estate investing is very easy to understand, but very difficult to do. Forget everything you have heard from the “gurus”, and the promise of making sweet deal after deal with no money down that is going to pay you thousands and thousands of dollars. These late night infomercials are only after one thing – sell you their system. The one thing that you absolutely have to know and care in real estate investing is this:
My first real estate deal involved 2 wrong choices:
- Terrible partner
- Bought the real estate very near market value
This article is not about choosing the right partner, it’s about buying right. Most “good deals” that brokers, agents and websites that list houses for sale ARE NOT good deals. They are simply a ploy to get you interested in the property and rely on that old sales tactic – emotion. You fall in love with the house, and you pay the price. Real Estate agents are masters at this.
So what does it mean to buy right? Usually buying right means buying at 60-75% of market value or lower. How do I find out what the market value is? Start with checking the tax rolls for the house you are interested in, many of them are available online. If you are unable to find one online, check with your realtor. Second, have your realtor run a CMA (Comparative Market Analysis) as this is the best indicator of market value. It will reveal other similar houses in the area and what they have sold for. Have the realtor run the analysis for the last 6 months, as newer sold listings are better indicators of current market value.
Look for houses that are distressed, meaning foreclosure, owner in trouble, etc. I have had success investing in HUD houses, and current listings can be found at bidselect.com. Submit your offer. Start a little lower than the 60-75% percent so you can negotiate up (for HUD, you can resubmit a higher offer later if it gets rejected). Don’t worry about it being rejected, this is going to happen most of the time! Be patient, submit many offers until someone is willing to negotiate.
I know these are simple concepts, but most beginning real estate investors want to get a deal going so badly, they end up paying too much! This happened to me! Patience, patience, patience.