Investing in Real Estate

Looking in to investing in real estate?

Here we will look at how to determine if a property meets good investment criteria -

One of the first things to keep in mind is the condition of the property you are considering purchasing. A new roof, repairing foundation, and a new heating and/or cooling system will be your most costly repairs to do. Typically an investor should stay away from properties that need this much work. On the other hand, fresh paint, carpet, even refacing kitchen cabinets are lower cost items and are usually standard when looking at investment properties.

So, let's say you've found a property that looks promising as far as needed repairs go; what about price... How much should you pay for an investment property? A great rule of thumb that we utilize in our business is
buy low, sell low. One of the biggest mistakes made when investing is trying to sell the property at a high price. What happens? It usually just sits there, costing you more money!

Here's an example, we're looking at a property that is listed for $89,000. I already know from the comps in the neighborhood that it should be selling for $120,000. The reason the asking price is so low is it needs some major work - roof, outside A/C unit, and some minor work - updating, etc. Now we had stated we wanted to make $20,000 on our next transaction - will this property make us $20,000? Well we need to be able to do all the repairs, plus account for closing costs. Say the repairs will total about $15,000.

$120,000
-$15,000
$105,000

So, in order to make $20,000 profit on this property, we would have to purchase it for $80,000 (taking into account $5,000 for closing costs).

There's our bottom line, now if we can negotiate this with the seller, we'll have a deal!