Evaluating a Real Estate Investment Deal

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Author: Gabrielle B Dahms

Gabrielle B Dahms is a real estate professional and a real estate investor with over a decade of experience. She is active in the San Francisco/Bay Area. Gabrielle knows the real estate marketplace, can communicate it, and devise the appropriate strategy with her clients. She is an expert in her field, who listens to her clients and who delivers.

Once you have located a potential real estate investment, it becomes imperative to evaluate the deal. Let’s briefly discuss how best to do that and what to pay attention to in doing your homework.

First things first: in order to make the least amount of mistakes in real estate investing, knowing the current real estate market, its property values, market rents, your target market, which properties are currently in foreclosure, and which properties are already bank-owned comprise important information.

Knowing your market may mean attending real estate seminars, real investment club meetings, reading the local papers, and collaborating with experts in your market place. Having excellent mortgage professionals, real estate professionals, contractors, bankers, title officers, and the like can save you time and money and protect your investment.

Once you know the general real estate market where you are focusing your real estate investment activity, it will be easy to calculate the following three figures:

          • Current value of the property
          • Estimated Repairs
          • After Repair Value (ARV) of the property

 

Make sure to know your numbers. In addition to this, consider appreciation of the property a bonus but never count on it. Essentially, you want to make your money upon entering the deal, whether appreciation happens or not.

Remember that many people who bought property in the boom years in the mid-2010s have lost and are still losing money or even the property now. Unfortunately, that includes real estate investors. Counting on appreciation is a risky strategy and could even be considered speculation.

The next important component in evaluating a real estate deal is having an exit strategy, a way to mitigate risk considerably. Such strategies include wholesaling, seller finance, lease options, renting and holding, refinancing, selling the note, and many more. Having an exit strategy is a must in real estate investing.

Once all your resources are in place and you are more comfortable with all the information at your fingertips, evaluating a real estate deal and knowing whether it’s going to be worth your time and profitable, will be a cinch.

This article is one of several in our Anatomy of a Real Estate Deal series. Further titles in this series include: Evaluating Property – Is There a Deal?, Real Estate Exit Strategies, Real Estate Financing: How and Where to Get Real Estate Investing Money, More Important Real Estate Investment Considerations, and The Real Estate Investing Machine (Stay Connected and Repeat).

Please read any and all of them and send them on to the people you like and trust – anyone who has ever considered being a real estate investor or is one now.

Gabrielle B Dahms is an active real estate investor as well as a real estate agent with a decade's experience. She continually educates herself and applies her energy, understanding, knowledge, and love to serve her clients. Follow her on Facebook at http://www.facebook.com/pages/San-Francisco-Bay-Area-Real-Estate-News/161447533871389 and connect with her on LinkedIn at http://www.linkedin.com/in/gabrielledahms.

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