Posted By Sean Terry | December 16, 2008
One Mistake………..and Your Done!
So you want to buy a investment home and you want a smokin deal right….…Well, in theory it’s very easy but execution is the nail biter. I remember the first house I signed a contract on and committed to purchase. I had every doubt you could think of, I remember I rehearsed in my mind of ways I could back out of the deal. I had no clue what I was getting into, all I knew was I “thought” the house was worth $130,000 and I had a contract on it for $86,000. My intent was to quick flip the property to an investor doing a “double escrow” technique. What happened? Read on……
When buying a property there are several things you can do to prevent a huge mistake that could cost you thousands of dollars. Here are my top 3 tips on buying investment properties at the right price:
Determine the “Value of the Property”, click the link to read how this is done. This is absolutely crucial, if you screw up this one step than the other 2 steps are worthless. (Please post a question if you don’t understand this).
Step # 2
Determine the amount of work that needs to be done. If you are buying properties from the Court House, which require 24 hour cash closing, you don’t have allot of time to really nail down the cost of repairs. Check out this post “Case Study”, you will see that the house was a reck!!! If you are buying a bank owned home you will have an inspection period and are able to walk the property to get a good grasp of what it will cost to refurbish it to meet or exceed market value. I suggest you have several a licensed contractors walk the property with you and write up a work order of everything you would like to have done. Make sure before you go non-refundable with any monies that you have at least 2 quotes from your chosen contractors.
Now that you have completed steps #1 and #2, it’s time to determine the offer price. We use a spreadsheet to determine the amount we should bid or offer. As you can see we bid roughly 55% of the projected value of the property:
In this property example the repairs were only projected at roughly $3000 to $5000. If you look at the bid sheet we did for Villa Maria, we estimated $15,000 but actually paid $38,000! I know, big difference, but that’s what happens when we don’t have time to inspect.
If you bid 50% to 55% of the projected value for the property, assuming you have a grasp on the renovation cost than I believe you will be in good shape to take the risk of buying and renovating. Now i’m sure you are asking “Where Do I Find Deals Like This?” I will do another post on how and where to find these deals…so stay tuned.
So what happened to my first deal? Well I found an investor who bought the property from me for $97,500 and I did a “double escrow” and I netted $11,008.61. See proof below.
Real estate investing takes allot of guts and the willingness to take risk, what we offer at Fortress Investments is a program where the risk is reduced by 99%. There is no value risk, no repair risk no financing risk, no large cash risk. We take care of that for you…If you would like to learn more, check us out at: www.FortressInvestor.com.
Stay tuned for more posts on “How to do a double escrow” and “How to find great deals”
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