High Profit Real Estate Investing make A Good Deal Every Time

K nowing what a Good Deal is                                         - Is the Key to Success in      Yes all of them are important.     Real Estate.                    And if you answered #4 - you're                                          right on the money. Why, because  Knowing and being able to             if your deal is a not good one,    negotiate good real estate deals      all your other skills and          every time is the key to real         marketing and power will not make  estate investing success. What       you money, and may even lead to    to look for, and how to calculate     disaster.                          your profit, cashflow and risk                                           exactly and then evaluate the         On the other hand, if you can      deal is revealed. These              unfailingly target good deals,     techniques apply to all real          you will always be successful and  estate investments including          all the other skills and your      foreclosures, short sales,            marketing methods will serve to    rehabs, flips, muliti-family,         increase your success.             lease option and owner financing.                                                                              It's a lot easier to state the                                           question than give the answer.     Dear Investor,                        Why?                                                                                                        Take this little survey: The          SO... WHAT IS A GOOD DEAL?     most important key to Real Estate                                    Success is:                                                                                                    It's a lot easier to state the     1. Finding Motivated Sellers          question than give the answer.     2. Funding Your Deals                 Why?                               3. Negotiating                        Because it depends on many         4. Knowing a Good Deal when you       factors like:                      see one.                                                                > Market value and purchase price     enthusiasm to do a deal that                                             we've found, we don't take into    > Expenses, carrying costs,           consideration "hidden" costs.      repairs                                                                  > Cashflow and profit                 For example, if you're doing a     > Holding time                        renovation and you've done your    > Loan terms                          due diligence on contractor        > Risk factors                        costs, have you also considered    > And more . . .                      your carrying costs such as                                              mortgage payments, utilities,      And most importantly, it depends      etc. not only during the           on the type of deal you're doing.     renovation, but also the time it   For example, if you have a loan      will take to sell and close with   on a property that you intend to      a new buyer?                       rent or sell on a lease option,                                          the terms of the mortgage, future     Or if you're using a realtor to    tax increases, and current area       sell the property, have you        rents are critical to consider in     calculated the effect of a 6-7%    insuring a positive cashflow.         commission and the closing costs   However, if you are planning to       the seller will pay on your        do a short rehab job, and sell or     bottom line. A 10% profit margin  just flip to another investor,        can shrink pretty quickly to zero  rental income is irrelevant as        under those circumstances.         are future tax increases.                                                                                       READ THOSE LOAN TERMS          IT'S WHAT YOU DON'T THINK         CAREFULLY                      ABOUT THAT CAN GET YOU                                                                                     Or have you taken into account,    The thing that trips up many          not just your loan to value ratio  investors, is that in our             on the property, but your          investment to value ratio (e.g.,      doesn't help you with the          the total of all outstanding loan     laborious and complex task of      balances plus the additional          putting all the numbers together.  funds you've put in from your own                                        cash or borrowed from your home                                          equity line or friends and            There's just something about       family)?                              working with the actual real                                             numbers, that brings the reality   And on the income side, have you      of the deal into actual focus.     calculated how long you should        Our hopes and wishes dissolve      hold the property to receive a        before the actual profit and loss  significant profit from the pay       calculations.                      down of the mortgage. With a new                                        30 yr loan, you may have to wait      Moreover, the numbers can          5-10yrs to get the same pay down      pinpoint the weaknesses in a       you'd get after a few years from      deal, and point the way to a       a 30yr loan that's been seasoned      solution. No mere checklist can   for 10 years.                        do that.                           And did you carefully read the                                           note contracts to take account of      WHAT ABOUT RISK?           adjustable rates and pre-payment                                         penalties?                            I think you'll also agree that a                                         Good Deal, is not just High        CHECKLISTS AREN'T ENOUGH      Profit, but also, most                                                   importantly Low Risk. Many a                                            dream of a golden future has come  A number of courses and real          crashing down because some little  estate gurus will give you            thing went wrong.                  checklists. That's helpful in                                           not forgetting something, but it      Many a would-be mogul, is now      working at a 9 to 5 because their     with a fat check?                  killer deal was wrecked by an                                            unforseen glitch. This is what       In real estate things can and      we mean by high risk.                 usually do go wrong. It's                                               Normal. So, wouldn't you like     The successful investors do deals     all your deals to have these       with low risk. Deals that are so      kinds of safety margins?           robust that even if almost                                               everything went wrong they'd           FIXING THE PROBLEMS WITH YOUR  still come out with a profit.        DEAL                                                                                                    BUILD IN A SAFETY MARGIN      Now, if you knew in advance that                                         your risk was too high, or your                                          cashflow was too low, or your      For example, suppose you have a       profit over the life of the deal   rental with a positive cashflow.      wasn't enough, you'd want to       Is your cashflow high enough or       think of solutions.                your option payment big enough,                                          that even if you had to evict         This is what is meant by being a   your tenant for non-payment and       "transaction engineer". Find the  it took you 2 months to fill it       solution, fix the problem, test    with another cash-paying              it on the numbers, and then        customer, you'd still come out        negotiate it into the deal.        ahead?                                                                                                         And if you can't find a solution   Or, is your investment to value       (but there always is one) or the   so low that even if you had to        seller won't accept it—NEXT!     offer your buyer a big discount                                          for a quick sale, you'd still          A RISKY DEAL IS NEVER WORTH    walk away from the closing table      DOING!                                                                                                  I can tell you from real              > Measure and Evaluate the         experience, a bad or risky deal       financial risk in the deal         is NEVER WORTH DOING—no matter      > Use standard and safe criteria   how enticing the vision. The         for what constitutes a good deal   personal stress, heartache, and       > Suggests alternatives to fix     loss of confidence can be even        what is wrong                      more harmless than the potential                                         financial loss. In the words of       A DEAL EVALUATION TOOL     an ex-president's wife, if you                                           are faced with doing a bad            We've taken tons of real estate    deal—Just say No!                   courses and looked at all kinds                                          of real estate software, and       WHAT'S THE ANSWER?            nothing has come close to what we                                        as investors need. So we decided  Some experienced investors have a     to create our own Deal Evaluation  feel for good deals, and can          Tool.                              avoid trouble most of the time.                                          Others only do a particular type      Well after several months of       of deal and use a rough "rule of      testing and improvement, we now    thumb" to evaluate their risk and     use it for all our deals—short   profit.                               sales, subject to, lease option,                                         rehab, wholesaling, and even some  However, what's really needed is      commercial.                       a "calculator" or computer                                               program that will take in all the     Since we can try out different     variables and                         "what-if" scenarios, it's kept us                                        away from some real pitfalls, and  > Calculate the exact profit and      helped us negotiate better profit  cashflow for all kinds of deals.      margins. We wouldn't "leave home  without it".                          hold classes for new users.                                                                                 CONSTANTLY MEETING THE NEEDS      Knowing all the numbers, and       OF INVESTORS                      having evaluated our risks with                                          the Deal Evaluation Tool gives us  Well, some other investors wanted     more confidence in negotiating     to try it, so we put it on our        deals with sellers and more        website. Much to our delight we      consistent high profit real        now have a community of users and     estate deals.                      a users group that shares their                                          insights about doing deals and        And that's what we all want,       creative ways to use the Deal         isn't it.                          Evaluation Tool.                                                                                              Best of Success,                   Their suggestions, are leading to                                        a rapid improvement of already        Richard Odessey                    incredibly useful tool. There is                                        just nothing out there like it.       This article may be reproduced in  We've also put a demo up for          its entirety only if unaltered     those investors who would like to     and the resource box is included.  get a feel for using it. And we                                      About the Author: Richard & Michelle are experienced investors & founders of the premier site on the internet - http://www.InvestorWealth.com: training real estate investors to do high profit deals. Offering Free Teleseminars by the top real estate investors, how-to tools and kits and hands-on training with personal advice from experts from the comfort of your home Source: www.isnare.com