Knowing what a Good Deal is – Is the Key to Success in Real Estate.

Knowing and being able to negotiate good real estate deals every time is the key to real estate investing success. What to look for, and how to calculate your profit, cashflow and risk exactly and then evaluate the deal is revealed. These techniques apply to all real estate investments including foreclosures, short sales, rehabs, flips, muliti-family, lease option and owner financing.

Dear Investor,

Take this little survey: The most important key to Real Estate Success is:

1. Finding Motivated Sellers
2. Funding Your Deals
3. Negotiating
4. Knowing a Good Deal when you see one.

Yes all of them are important. And if you answered #4 – you're right on the money. Why, because if your deal is a not good one, all your other skills and marketing and power will not make you money, and may even lead to disaster.

On the other hand, if you can unfailingly target good deals, you will always be successful and all the other skills and your marketing methods will serve to increase your success.

It's a lot easier to state the question than give the answer. Why?

SO... WHAT IS A GOOD DEAL?

It's a lot easier to state the question than give the answer. Why?
Because it depends on many factors like:

> Market value and purchase price
> Expenses, carrying costs, repairs
> Cashflow and profit
> Holding time
> Loan terms
> Risk factors
> And more . . .

And most importantly, it depends on the type of deal you're doing. For example, if you have a loan on a property that you intend to rent or sell on a lease option, the terms of the mortgage, future tax increases, and current area rents are critical to consider in insuring a positive cashflow. However, if you are planning to do a short rehab job, and sell or just flip to another investor, rental income is irrelevant as are future tax increases.

IT'S WHAT YOU DON'T THINK ABOUT THAT CAN GET YOU

The thing that trips up many investors, is that in our enthusiasm to do a deal that we've found, we don't take into consideration "hidden" costs.

For example, if you're doing a renovation and you've done your due diligence on contractor costs, have you also considered your carrying costs such as mortgage payments, utilities, etc. not only during the renovation, but also the time it will take to sell and close with a new buyer?

Or if you're using a realtor to sell the property, have you calculated the effect of a 6-7% commission and the closing costs the seller will pay on your bottom line. A 10% profit margin can shrink pretty quickly to zero under those circumstances.

READ THOSE LOAN TERMS CAREFULLY

Or have you taken into account, not just your loan to value ratio on the property, but your investment to value ratio (e.g., the total of all outstanding loan balances plus the additional funds you've put in from your own cash or borrowed from your home equity line or friends and family)?

And on the income side, have you calculated how long you should hold the property to receive a significant profit from the pay down of the mortgage. With a new 30 yr loan, you may have to wait 5-10yrs to get the same pay down you'd get after a few years from a 30yr loan that's been seasoned for 10 years.
And did you carefully read the note contracts to take account of adjustable rates and pre-payment penalties?

CHECKLISTS AREN'T ENOUGH

A number of courses and real estate gurus will give you checklists. That's helpful in not forgetting something, but it doesn't help you with the laborious and complex task of putting all the numbers together.

There's just something about working with the actual real numbers, that brings the reality of the deal into actual focus. Our hopes and wishes dissolve before the actual profit and loss calculations.

Moreover, the numbers can pinpoint the weaknesses in a deal, and point the way to a solution. No mere checklist can do that.

WHAT ABOUT RISK?

I think you'll also agree that a Good Deal, is not just High Profit, but also, most importantly Low Risk. Many a dream of a golden future has come crashing down because some little thing went wrong.

Many a would-be mogul, is now working at a 9 to 5 because their killer deal was wrecked by an unforseen glitch. This is what we mean by high risk.

The

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