Real Estate Investing is hands down the best way to build cash. Around 90% of the world\’s wealthiest people made their money through investing in real estate. But how can an ordinary person invest in properties and make a substantial amount of money in the current real estate market? What are the main things you need to understand before going to flip a house? And why is it important to educate yourself before flipping a house? In this article I will go over several ways that will assist you in your real estate investing venture.
Action Step 1: Find Buyers
In order to make money in flipping houses, it makes sense to find buyers first. You can build a buyers list by calling we buy houses signs, attending real estate auctions, working with real estate agents and using the Multiple Listing Service as well as other simple strategies and tactics. The best strategy to use if you ask me would be to target buyers that have a history of purchasing properties for cash.
Tip number 2: Gather Necessary Information
After you find the buyers the next thing you need to do is find out what your buyer\’s interests are. You can do this by asking them for the areas of town they are interested in. How much they are looking to spend on their ideal property? What type of property they are currently buying? And how fast they can close? Getting these questions answered will give you an idea of how to approach your buyers.
Tip number 3: Find motivated sellers
In order to make money in flipping houses you have to understand how to work with motivated sellers. A motivated seller can be anyone who is in distress financially, or physically. An example of a motivated seller is someone who is getting a divorce, going into foreclosure, paying 2 mortgages, need to rehab their property but don\’t have the cash, going bankrupt, and so on. Therefore, in order to get a great deal when real estate investing you have to find someone that falls within this category. You can find these sellers using various forms of marketing.
Step 4: Screening the Seller
When your advertising is working and the motivated sellers are calling, in order to really get a good house flip you want to get as much information from the seller as possible. You can do this by asking the seller for information on their house. You want to find out what type of condition the house is in as well as the asking price of the property, but the most important question you need to know is why the seller is determined to get rid of their property.
Action Step 5: Run Comps
Once you receive the information from the seller, the next thing you need to do is run comps to see if the deal will be a good investment property. You can do this by going to sites like Realquest.com, Zillow.com, Bank of America has a home value estimator and you can find it by going to Google.com and punching in Bank of America Home Value Estimator. You can also use sites like Eppraisal.com, or consult with a Realtor. There are many ways to run comps when you\’re looking to find out what a house is truly worth.
Step 6: Work the Numbers
After you get the comps for the house the next thing you need to do in order to invest in real estate is work the numbers. You can do this buy understanding the MAO formula. The MAO formula is as follows: You take the ARV (After repair value) and you multiply it by 65% and that leaves you with the amount that you\’re willing to pay for the house. Then you subtract the rehab cost, closing cost and overhead and that leaves you with the MAO or (Maximum Allowable Offer) that you can make on the house.
Tip number 7: Make the Offer
Once you have the MAO, the next thing you do is get your offer in. Your should always offer less than what your maximum allowable offer is. The best thing to do in this case is to subtract and additional 10% off of the MAO and start you\’re bidding with the motivated seller from there. Negotiations can make or break your deal when it comes to flipping houses so make sure that you\’re sincere and very clear with the seller from the beginning.
Tip number 8: Make Money
Once you get all of this done, you need to approach your investors list that fit the criteria of the particular property. Doing this will allow you to sell the property rapidly, being that you have pre-screen the buyers and you know that they can close fast! Once you have solid buyer then all you need to do is send the contracts over to the title company and wait for your check to come in the mail. The best strategy to use in real estate investing would be to sell the property for less than the market value without rehabbing it. This is called wholesaling the property.
Copyright 2010 Jamel Gibbs
All Rights Reserved
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