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Becoming A Battle Hardened Real Estate Veteran Without All The Scars
s part of a new web site
that we just launched, Step 2 is to then determine the
www.GetPreconstructionDeals market trend for the area for
com, I get repeated requests which there are two critical
asking if a particular deal is pieces: 1) is the average price
good or not. While we can't increasing AND 2) is the volume
answer this for individual of sales increasing. If both are
projects, we can certainly look moving in your favor, then you
at what HAS to get done by the have the comfort of knowing that
investor to dramatically increase the right trend is in place to
the odds of a successful keep prices moving forward. In
transaction. stock market investing, there is
the saying that the trend is your
Step 1 is always to determine the friend and traders frequently
fair market value(FMV). As a observe price and volume data to
real estate investor, you can confirm the trend. If a hotly
always buy properties at the FMV. priced real estate market shows
My question is why would anybody signs of dropping in volume, be
want to do that? Through careful very careful.
selection, you can always find
properties that are priced below Step 3 is to learn about supply,
FMV, regardless if they are especially in the preconstruction
existing or if they are a marketplace. In some areas,
preconstruction project. The there are very few projects on
best way to determine FMV is to the books and in others, there
work with someone already are 15,000+ units expected to
familiar with the area or emerge within 1 zipcode, in 1
determine yourself through local year. Same is true for investing
websites showing recent sales in houses. In you are competing
histories. with a bunch of new houses that
are coming on-line, then rapid
price escalation may be limited. Step 5 is one of the most
For most savvy investors, they important risk management tools
like to see lots of demand with available to the investor in real
very little supply which is estate. Each property has
nothing more than common sense. typically an inherent rate at
which it can be rented, even if
Step 4 is to make your OWN that is not your intent. By
opinions of the macro conditions looking at rental rates, relative
of the local and regional to the amount of principle,
marketplace. So, for example, if interest, taxes, and insurance
you are a strong believer that (PITI) that you will have to pay,
real estate is overvalued in the then you can understand the
target area, why would you ever amount of cashflow that may be
consider investing? On the other required to support the property.
hand, if you believe that market If your objective is to produce
forces will continue to escalate cashflow, then you need to be
in the market, then why would you cashflow positive very quickly.
not be actively looking? As an If your objective is capital
example, some people believe that gains and the cashflow is
the graying of America is just negative, then you now understand
now starting to drive people to what you may have to support on a
warm, more attractive climates. monthly basis if things don't
Even though property values are work out.
high in these areas right now,
are we going to see 20+ years of Deferred maintenance then becomes
additional migration to them? our Step 6. For an existing
You have to decide for yourself property, how much maintenance
because we won't know the answer has the previous owner neglected
for another 20 years! that you will need to catch up?
Be careful here since this can be taking. If you were standing
one of the major places to get beside them and saw what they
nasty surprises. saw, you would gladly take the
risk as well and rapidly ignore
And now I saved the best for any small losses that you
last: Step 7 is to determine your experience.
own personal risk tolerance.
Some new investors look at a deal Hopefully this has given you a
and only see the positive. This good start at learning how to
is a huge mistake. EVERY REAL analyze a potential opportunity.
INVESTOR I KNOW HAS LOST MONEY IN Obviously each of these steps
A DEAL but they gladly will do requires additional work or
more. Why? They understand training but they are what
their risk's going in, they separate the new investor from
understand how to limit their the seasoned, battle tested
downside, and the gains are much veterans.
larger than the risks they are
About the Author:
Chris Anderson is a leading authority on preconstruction real estate investing. Get his 4 day e-mail course and a 33 minute video free today! Visit http://www.GetPreconstructionProfits.com & http://www.GetPreconstructionDeals.com. In addition, Dr. Anderson is the on-line training coordinator at the Van Tharp Institute, a group that provides world class training for investors and traders.
Source: www.isnare.com
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