Learn Real Estate from a Pro
If you want to learn about real estate, you are going to have to learn your market. You are going to have to understand that every location is slightly different.
These differences can affect the real estate strategy you choose to pursue. Learning your market can be a time consuming but rewarding task.
To begin learning a real estate market, you are going to start gathering information on most of the homes for sale in your area. You are looking for the asking price of the homes that are for sale and how long the properties have been on the market. This will give you a good indicator of what the average sales prices in that area are.
For example, if someone has a property that they are asking $150,000, but it has been on the market for a year, you know that is higher than the average price of homes in the area because of the unusually long market presence. Great priced homes sell quickly.
When it comes to real estate investing you are going to want to avoid homes that are above the average home price. There are a few reasons to do so. First, you do not want your property’s value limited by the average sales price in the neighborhood.
Many people are unaware that the price of their neighbor’s home has a large effect on their property’s value. This is because appraisals are usually established through a formula that considers comparables. Comparables are similar properties in the area that sold recently.
You cannot tell the true market value of an area simply by the prices of the homes. You must always consider, the amount of time the homes have been for sale and what the homes that sold went for.
It is easy to walk into a potential investment home and get excited but you should remember you make your money in real estate when you buy, not when you sell. For instance, If you a buy a home for $100,000 and sell it for $110,000 you made $10,000 profit.
If you had paid $90,000 for the same home, you would have made $20,000 profit. It is important to always remember this point when real estate investing.
Once you have a good grasp on your investment area, you can begin going to see properties. It is important to see as many properties as possible. This can be the most time-consuming part of the process but it is essential to your overall results. You are looking for a property that requires no major repairs.
Unless you have significant resources or you are getting the home well below market value, major repairs are going to slow your process up significantly. Try to avoid leaky roofs and basements, as these can be costly repairs. The property you are looking for is going to have the maximum resale value.
You should also consider the motivation level of the sellers you meet. It is preferable to always meet the homeowners in person, because you can gauge their level of motivation. A very motivated seller will give you the most flexibility, when it comes to acquiring their property.
This can often be a great time to incorporate some no money down strategies into your investment plan. Many homeowners know other investment opportunities including additional properties they may own.
Once you have met with enough owners and seen enough properties, you will begin to know your market. You will understand the nuances of your area.
This is the point where you will gather all the information from the previously viewed properties and begin to compare them to find the best deals. You are looking for a maximum return on investment or ROI.
The main idea behind your ROI is to pay as little as you can and make as much profit as possible. For instance, you have a property that is worth $100,000 and the owner is very motivated to sell it to you.
You could approach this in many different ways to get a maximum ROI. You could pay him the $90,000 and place it directly back on the market at a fair market value of $100,000.
When the property sells, you make $10,000 from your $90,000 or around 11% ROI. Using this same property but a different strategy, you offer the homeowner a lease option of $90,000 with a $10,000 down payment.
You have lowered your initial investment by $80,000. Now when you sell this same property for $100,000 your ROI is 100% because your initial investment was only $10,000.
By knowing your market and the real estate strategies that are appropriate for it, you can easily increase your ROI. Do not think of real estate as a one size fits all type of business. Think of it as a custom tailor that can make each outfit to fit a person’s particular needs or wants.
This outlook will help you to see the opportunity in every property while avoiding the properties that are going to produce negative results. Start learning today at Real Estate Development Coach!
