Three Important tips for getting great Real Estate Deals

[Raul Leyte]

Suppose you want to use a new recipe when making your dinner tonight. You get a cookbook with a recipe that looks good, discover a great fried chicken meal, and make your grocery list of ingredients to make a meal for your family. You head to the store and start picking up the items on your list. Chicken, basil, olive oil, and any other items begin to fill your shopping cart. Suddenly you see the spaghetti and remember another recipe you wanted to try one more time with spaghetti. You begin to reach for the spaghetti, but then your shopping list comes to mind. Spaghetti is not on the list for dinner tonight, so you eliminate the distractions and go on the way home to make a nice dinner for your family.

Real estate is no different. Your selection criteria list is like your list of ingredients in the above example. It is designed to focus on shopping for the things you need and not wasting money on other good things along the way. Real estate is exciting with many different niches and strategies, so it's easy to get distracted by the next big thing or trend. Having a clearly defined selection criteria will help you stay focused, avoid "analysis paralysis," and keep you on track to buy a wonderful investment property. By defining your criteria, it will be easy to winnow down the choices in the market, and you will then eliminate the great majority of deals that are merely distractions.

This sounds sufficiently simple, however not very many real estate investors really practice what they teach. Rather than just closing a modest bunch of good deals a year, the average investor will take a shot at fair deals that consume their time. If you want to be an excellent investor, you might want to start out focusing on very good deals. Below are a few tips to get you started:

1. Look at the numbers: More often than not, you should be able to determine the strength of a deal just by considering the numbers. The problem that a great many investors have isn't trusting what they see. In their hurry to close any transaction, they fudge the numbers to make the deal look more attractive than it actually is. If it is not, you should have the discipline to move on to step two.

2. Know when to leave: Good investors have the discipline to know when to leave. In real estate, you are not judged by what number of arrangements you close a year. It is far superior to just pursue a good bunch of value deals than to get involved with every so-so deal that comes in your direction. There is nothing amiss with making a profit every now and then, however you have to know when to pick your fights. A few investors might contend that a couple of thousand dollars is not worth losing a deal over, but rather it isn't that simple. When you become involved in a bidding war, there is no telling where it will go. When pride and ego gets involved, a couple of thousand dollars can rapidly transform into significantly more.

3. Desirability: Not every new property is a blank canvas. However, you can generate changes that accommodate your market’s needs. There are some properties, however, where many selling factors are out of your control. There are times where you can’t do anything with the layout, or there isn't a space to put a bedroom. You can make the rest of the house sparkle, but it will not be enough to achieve the appeal you would like. A good property is one that will retain or generate demand in different markets. You may get a great deal on a property on an undesirable area, but how will that benefit you? If the bargain looks good, you need to look at why. Even the best contractor in the world can’t change a location.