First off, we are going to talk about wholesale deals. Wholesale deals are where people first cut their teeth in this business. They are the simplest deals. Basically, you find a deal and get some comps on the property. You will find out what other houses have sold for in the same neighborhood. It is public record, and you can find this out at your local courthouse. So, find the deal, get your comps, and make the offer. But, sometimes it’s reversed. Sometimes when you are talking to someone, you can make the verbal offer right then and there to get the deal going. Then after you make the offer and it is verbally accepted, you can come back and get your comps and check out what the real value is. It’s called due diligence. It’s like doing your homework and making sure you don’t get yourself in a hole. You need to do research at this point. Any deal without due diligence, comps, research, or checking things out can get you in big trouble. I suggest you make the offer first though, and get your numbers going so you don’t waste time on deals that never get anywhere.
In most cases, the seller is going to tell you what he is asking for. You don’t have to make an offer or counter-offer on that first call, especially if you are new to the business. If he says he wants $120,000, you don’t have to know right off the bat what it is worth, especially if you are not familiar with that area. There are some areas where I know right away, what the homes are worth. When you are new, that is not going to happen. So, don’t be afraid to accept the offer on the phone and let him know that you are going to do some homework, you are interested in the house, and will get back to him soon. So, find the deal, get the comps, make the offer, get the house under contract, find a buyer, and close. Note that we are not talking specifically about wholesaling here, but that is the gist of it.
We are going to discuss how to know what the right price is. What kind of offer should you make? That is where the ARV comes in. You have probably heard someone ask what the ARV is. The ARV is the Average Retail Value. It is how much those comps tell you how much the house is worth. Once you study the area and find out how much houses are selling for, you are going to get the comps. That is the ARV.
There are two ways to do this, assuming this home needs some repairs. Here is the first option: Let’s take the selling price of the house, $150,000 (which might be the ARV), and you are trying to come up with how much to offer for this house. You are not planning on buying it, but are planning on getting it under contract and selling it to someone else. You have to leave enough profit in there so that someone else can do the repairs, list the house or sell it without listing it, and make their profit back. They have to cover all of their expenses.
One way to do it is to take how much you figure that next person is going to sell it for, let’s say $150,000. Then, you subtract 4-6 months ,worth of mortgage payments that they will have to make while they are paying for that house, subtract funding fees (points), subtract repairs, subtract both sets of their closing costs, subtract taxes, subtract insurance, subtract utilities, etc. Am I confusing you yet? That is why I have a better system for you.
Here is your second option: What we do is we take the ARV in that area, of houses in good condition and subtract 30%. It is ARV minus 30%. Then you subtract how much the repairs are going to be. The rule of thumb is ARV (after the repairs or aka after repair value), minus 30%, minus repairs. Then you subtract how much profit you want to make on the deal. If it is a $150,000 house, don’t expect to make $30,000 or $40,000 on it. You have to leave the $30,000 for the guy who is going in and doing all of the work, making all of the repairs, plus making the mortgage payments. You are just wholesaling this. In my eyes, if you make $4,000, it’s a good deal. I have made $20,000 on homes like these in the past, but usually you are looking to make only $4,000 to $5,000. You are just flipping these.
To recap, you will take the ARV of $150,000 minus 30%. That leaves you with $105,000. Then you subtract the $20,000 in repairs. You are down to $85,000. If you want to make $5,000 in the deal, you are down to $80,000. I would then offer $79,000 to whomever I am buying it from. I would sell it for about $85,000 though.
The bottom line formula is this: After repair value, minus 30%, minus repairs, that‘s how much most rehabbers are looking for. A lot of them are looking for a specific profit, say $30,000. ARV is very universal. Good Luck!
Showing posts with label real estate investing. Show all posts
Showing posts with label real estate investing. Show all posts
Friday, November 13, 2009
Thursday, September 24, 2009
Staging Houses In Real Estate Investing
Three years ago, houses were selling fast. Anyone could get a mortgage, and interest rates were low. Now interest rates are still low, but it’s hard to get a mortgage. So, you do have to take a little more time to sell your houses.
Now, there are some types of deals that you might want to stage, and some you might not have to. For example, wholesale deals where you sell to other investors, those you probably don’t have to stage as well. Of course, you do want to make them look good so it looks like it won’t need so much work. An experienced rehabber will know what he’s going to have to do, anyway, after walking through the house.
The houses I am talking about are the ones that you are selling to the public, a retail buyer who is going to move in and buy the house. If you have a house that you are putting up for auction, or you have a house that you have an option, doing a retail flip, or if you are a rehabber and you just renovated a house, and you want to make it look good to sell, you might as well make it look the best it can.
When you are staging a property, you always want to appeal to the senses. You want to make it smell, sound, look, and feel good. A home is a home. It has to be warm, comforting, and inviting.
First, let’s talk about what you see. The kitchen and bath are especially important to the ladies. Everybody knows that the kitchen and bath are usually what sells a property. Put some towels up, hang them on the racks, fold a towel and leave it out by the sink. Put some bowls or wooden spoons out on the stove. In my smaller properties, I leave a box of dishwasher cleaner on top of the dishwasher, put some detergent by the sink, make it look like you have taken the extra care to make sure the place is clean. Appeal to their senses in the kitchen. Decorate it a little bit so it’s not a big long empty countertop area. Maybe put a little rug in front of the sink, so it feels a little bit warmer. In the bathroom, do the same thing, put a little rug in front of the sink, as well in front of the bathtub. Hang a shower curtain as well, as well as putting towels in there. Also, make sure there is toilet paper on the roll. You can also put some handsoap and perhaps a cup on the sink. You want to make it look inviting.
On the front porch, it’s a good idea to put a welcome mat out, as well as a little throw rug in the foyer, perhaps. If there are sliding doors in the kitchen, it might be a good idea to put a throw rug in front of the doors.
As for the living areas, if you have a fireplace, it might be a good idea to put a picture frame on the mantle with the picture that comes with it. Fireplace tools are a good idea as well. It makes them imagine what it would be like with a nice warm fire going, while sipping a cup of tea. A fake plant or two by the fireplace or other living area space would be great as well. Buy some neutral rug runners and you can put them in a long hallway in the house. You don’t want them hearing an echo in a long hall. It sounds and looks better. If you have some extra pictures, hang some big pictures up as well.
In the bedrooms, I don’t do a lot, but here are some tips. For the kids’ rooms, you can find those rugs with kids’ designs on them, perhaps a basketball-type one for the boys’ room and leave a basketball there, or even go with a baseball theme. For a girls’ room, you can put a Disney princess-type rug down and place maybe a rocking chair with a little crown on it, it would really make it look inviting. And when the kids check out those rooms, they come out asking if this room can be theirs. You want them to assume what it would be like if they were living in their house.
As far as furniture goes, there are many options. You can go ahead and fill the whole house, if you like. You can go to Court Furniture or Aarons, as well. If you want to put a bed in the master bedroom, that would be great with throw pillows and end tables and a lamp. For the living room, you can put in a couch with a table and a lamp on either side with a matching chair is excellent. For the dining room, a table with 4 chairs and maybe some flowers in the middle, that would be great. I know it’s some extra work, but these companies will come out and set it all up for you. When you think about it, $499 or $500 a month is less than making additional mortgage payments. You want people to imagine what it would be like living there.
To make it sound better, you can also put a radio upstairs and downstairs with the same station on with some inviting music as they are walking through. During an Open House or when you know people are coming over, brew some coffee and perhaps make some cookies so it smells like home.
Open all of the blinds and turn on all of the lights so that it’s bright, airy, and open. If it’s a nice day, open the windows a bit so that they can hear the birds and nice outside noises. It helps to make a nice overall feel to the house.
To Learn more about real estate, watch videos, get free reports and more, go to: www.RealEstateInvestorPlus.com
Now, there are some types of deals that you might want to stage, and some you might not have to. For example, wholesale deals where you sell to other investors, those you probably don’t have to stage as well. Of course, you do want to make them look good so it looks like it won’t need so much work. An experienced rehabber will know what he’s going to have to do, anyway, after walking through the house.
The houses I am talking about are the ones that you are selling to the public, a retail buyer who is going to move in and buy the house. If you have a house that you are putting up for auction, or you have a house that you have an option, doing a retail flip, or if you are a rehabber and you just renovated a house, and you want to make it look good to sell, you might as well make it look the best it can.
When you are staging a property, you always want to appeal to the senses. You want to make it smell, sound, look, and feel good. A home is a home. It has to be warm, comforting, and inviting.
First, let’s talk about what you see. The kitchen and bath are especially important to the ladies. Everybody knows that the kitchen and bath are usually what sells a property. Put some towels up, hang them on the racks, fold a towel and leave it out by the sink. Put some bowls or wooden spoons out on the stove. In my smaller properties, I leave a box of dishwasher cleaner on top of the dishwasher, put some detergent by the sink, make it look like you have taken the extra care to make sure the place is clean. Appeal to their senses in the kitchen. Decorate it a little bit so it’s not a big long empty countertop area. Maybe put a little rug in front of the sink, so it feels a little bit warmer. In the bathroom, do the same thing, put a little rug in front of the sink, as well in front of the bathtub. Hang a shower curtain as well, as well as putting towels in there. Also, make sure there is toilet paper on the roll. You can also put some handsoap and perhaps a cup on the sink. You want to make it look inviting.
On the front porch, it’s a good idea to put a welcome mat out, as well as a little throw rug in the foyer, perhaps. If there are sliding doors in the kitchen, it might be a good idea to put a throw rug in front of the doors.
As for the living areas, if you have a fireplace, it might be a good idea to put a picture frame on the mantle with the picture that comes with it. Fireplace tools are a good idea as well. It makes them imagine what it would be like with a nice warm fire going, while sipping a cup of tea. A fake plant or two by the fireplace or other living area space would be great as well. Buy some neutral rug runners and you can put them in a long hallway in the house. You don’t want them hearing an echo in a long hall. It sounds and looks better. If you have some extra pictures, hang some big pictures up as well.
In the bedrooms, I don’t do a lot, but here are some tips. For the kids’ rooms, you can find those rugs with kids’ designs on them, perhaps a basketball-type one for the boys’ room and leave a basketball there, or even go with a baseball theme. For a girls’ room, you can put a Disney princess-type rug down and place maybe a rocking chair with a little crown on it, it would really make it look inviting. And when the kids check out those rooms, they come out asking if this room can be theirs. You want them to assume what it would be like if they were living in their house.
As far as furniture goes, there are many options. You can go ahead and fill the whole house, if you like. You can go to Court Furniture or Aarons, as well. If you want to put a bed in the master bedroom, that would be great with throw pillows and end tables and a lamp. For the living room, you can put in a couch with a table and a lamp on either side with a matching chair is excellent. For the dining room, a table with 4 chairs and maybe some flowers in the middle, that would be great. I know it’s some extra work, but these companies will come out and set it all up for you. When you think about it, $499 or $500 a month is less than making additional mortgage payments. You want people to imagine what it would be like living there.
To make it sound better, you can also put a radio upstairs and downstairs with the same station on with some inviting music as they are walking through. During an Open House or when you know people are coming over, brew some coffee and perhaps make some cookies so it smells like home.
Open all of the blinds and turn on all of the lights so that it’s bright, airy, and open. If it’s a nice day, open the windows a bit so that they can hear the birds and nice outside noises. It helps to make a nice overall feel to the house.
To Learn more about real estate, watch videos, get free reports and more, go to: www.RealEstateInvestorPlus.com
Monday, August 24, 2009
How To Talk To Sellers In Real Estate Investing With Seller Financing
Basic Sales Tactics that Work in Real Estate Investing
First off, there are some subliminal things you have to learn how to do. When I say subliminal, 
there are some basic sales tactics that work in any type of sales environment, especially in real estate.One of them is association. You have to let your sellers know that people do this. This is a regular thing. It’s not this big unheard of thing for someone to sell with seller financing. If you have done this in the past, talk about this. Mention about doing this in the past. People also want to do what other people do. If they know other people are doing it, they will feel good about doing it. Let the seller know that people do this all of the time, lots of people do it, then they will be more likely to do it. Unfortunately, we have a herd mentality. A lot of times we have to see that someone else did something first, then we have permission to do it.
Also, you want to have some fear of loss, indirectly, in the tone of your voice. You want to make it sound like this is the only way you can do this deal. In a lot of cases, this is the truth, so you’re not lying to anybody. Let them know that. Be indifferent about it. You have to have an attitude about you that there are other houses you can buy, especially in this market. Make them feel that they are going to lose something if they don’t go ahead with the sale with you.
Offer the Seller with a Good Interest Rate
Now, let’s get into the topic itself. There are some things you can do to sway the seller into going your way. One of them is to offer them a good interest rate. In most of these cases, we are buying these houses, not for a long-term deal, maybe to have it for a couple of years with a lease-option tenant in it to pay it off, or just looking to buy it for a short period of time to fix it up and maybe sell it. Or perhaps, we are just looking to get it under contract to sell it to someone else. So, offer a nice interest rate. Offer an interest rate that makes it attractive to the seller to give you seller financing, to trust you. You are not going to have it that long. That extra 2, 3, or 4, percent is nothing. I’ll pay 15 or 20 percent interest if I have to if the deal is right, just to get the deal under my belt and make some money on it. If you are only going to make 3 or 4 payments on it, what’s the difference if you are paying 20 or 25 percent on it? It’s only going to be an extra couple of hundred dollars. If the deal is good enough to take, it’s good enough to take with a higher interest rate. Don’t make the mistake of financing at the same rates the banks give.Offer the Seller with a Good Balloon on a Mortgage
Another tip for you if someone is uncomfortable is to offer them a balloon. A balloon on a mortgage means that the mortgage is going to be paid in full by a certain amount of time. So, a mortgage with a 3 year balloon guarantees the seller that in 3 years or sooner, we are going to pay that mortgage off and they will have all of their money. It also allows them to defer their taxes. If they sell their house today for cash, and they get their HUD, and they go to closing and they get that full amount, they are liable to pay taxes on the full amount of their profit. (Make sure your accountant double checks this for you on an individual basis). When they sell you the house with owner financing, they don’t have to pay taxes on the whole amount, because they don’t get the full amount. It allows them to defer their taxes for a year or two, or until you pay the loan off in full.Also, they are acting as a bank. I have told sellers that the people that are making money in selling houses are usually the banks. I tell them that they will be in a position like a bank, and they will earn a lot of interest on their property. I add it up and tell them how much profit they will be making on the deal. For example, it’s a $200,000 house and I’m giving them 8% interest. That’s a $1,467 dollar a month payment. Let’s say I make that payment for 2 years. At the end of 2 years, on that $200,000 house, I’m going to owe about $197,000 or so. So, I will show him in a year, it equals $17,000 that I have paid him. If it takes me 2 years to pay you off, I will have given you $35,000 on your house, and I’m still going to owe you $197,000. Let him know that he will end up selling that house for $237,000 because of my monthly payments and the amount due at payoff. Not the original $200,000 on the contract. Explain that that is how the banks make their money. Point out to him the real dollars that he will be getting over a period of time.
On an interest-only loan, you will be giving them interest every month after month. At the end of the loan, you will still owe them the full amount. If it’s a $250,000 house and they are giving me an interest-only loan on the house, I still owe them $250,000 whenever I pay it off. So, everything I give them up- front is money in their pocket. Make sure you tell them that the whole payment every month goes right into their pocket no matter when I pay this off, I will STILL owe you the full amount of the loan.
It’s a good deal for a seller. And it’s the truth. That’s how the mortgage companies and banks make A LOT OF MONEY! That’s why some investors quit investing after a period of time when they put a million dollars in their accounts and become hard money lenders. They become private lenders and make a lot of money for NOTHING!
Go with Owner Financing
In a lot of cases, you will have a seller that will go with owner financing, but needs some money NOW. Point out to them that if you give them $20,000 now, and pay off the difference, they are going to have to pay taxes on that $20,000 (again, double-check with your accountant about this). Suggest this to them if the home is paid in full: So they can save money, they can instead go get a loan/mortgage on the house for $20,000. You can put that $20,000 in your pocket right now. I will then make the payments on that loan until we sell the house and I pay you off in full. And right now, you don’t have to pay taxes on that $20,000. This is a great way if they want some money now.
Here’s a tactic that works and will continue to work. Once you get a deal on seller financing for a house that is selling for $300,000 and it has a 5 year balloon, tell the seller that within 5 years or sooner I will pay you off. If in the near future, I have someone ready to buy that house, I’ll call the seller and tell them that you have some extra cash, offer to pay about $250,000 for that home RIGHT NOW. Guess what. That $250,000 today is better than $300,000 in 4 or 5 years, and you have just make $50,000! If they make a counter-offer for a little more, tell them you will think about it, wait a day or two, call back and accept their offer. There are lots of ways to make money in this business.Just Make an Offer
The bottom line is: MAKE AN OFFER. You have to believe that people are going to accept your offers. Don’t think for a minute that just because maybe you don’t own your house outright, that a lot of other people don’t. I own a house outright. I can borrow money against it, I can rent it. In any case, make an offer. There are many people out there that own houses that are paid for, and they are just sitting there. Make the offer, look them in the eye, pitch them high, and watch them buy. Believe in yourself!
How to Get Good Comps in Real Estate Investing
There are some ways to figure out what price you should offer on your houses to get a deal, or to give someone else a deal. I will also show you how to maximize your investment.
Comps are basically the true value of a house. You can look at the price of houses for sale, but that doesn’t tell you the true value of a house. The true value of a house in an area is based on how much houses are SELLING for, not how much the houses are listed for.
So, if you look in a neighborhood, you may find houses listed at high prices. They don’t sell at those high prices. They get made offers, they also come down before they sell. It’s the selling price of the house you want to go by to make a decision on how much you want to get for your house, or how much you want to offer on your house. It’s also known as ARV (average retail value, or after repair value). The comps let you figure out what the ARV is.
Comps also need to be similar houses of a similar age, in the same location. Now, when I say the same location, you want them to be less than a mile away, the closer the better. You want them to be sold, if possible, less than 60, or even 30 days ago. With this volatile market, you really want to make sure that those comps are done on homes sold recently. So, the closer to your subject property and the more recent those homes were sold, the more accurate your comps are going to be.
Now, we’ll talk about where you can get your comps from. First off, you can get comps from a Realtor or the MLS. If you are a Realtor, you already know how to access them. If you are not a Realtor, you can befriend a Realtor, and usually for about $20 or $25, you can get a Realtor to run comps for you. Realtors are good for getting comps because they are professionally trained to do so. Note that sometimes when they are working with a Seller, they MIGHT want to bump their price up a little bit to maximize their commission. Sometimes they might even do it for free. It’s give and take, do them a favor, give them a listing now and then, you’ll find a Realtor that can do it. The problem is, a lot of Realtors, they won’t do it over and over again. They’ll do a couple, but they don’t want to be your source for comps. Sometimes you can need 5 or 6 a day.
You can also get comps online, but be leery. Some companies are good resources, they list sold house prices, but don’t trust them so much when it tells you how much your subject house is worth. You can use them to see how much houses sell for in your area, but when it comes to finding out how much your house is worth, I have seen as much as a $50,000 spread up and down. $50,000 low, to $50,000 high. Those online free sites are not very accurate, unfortunately. I suggest against that. The worst thing you want to do is buy a house for even as little as $15,000 more than what it is worth. Then, you will become a motivated seller, and you don’t want that.
You can also go to the courthouse, though it is tedious for only one comp. You can contact them and get all of the records for all of the homes that sold in one area and find out what they are selling for.
I personally use a service online that runs comps for me. I put the subject address in and it gives us all of the recent sales around there, it tells us how much they sold for, how much loans are for on present houses too. But, not everybody wants to pay for it. If you are a true investor, it’s worth paying for, because you want to sit down, push a few buttons, and get your comps. Please research these companies before signing up with them. Now, you can move on to make your offers and talking to sellers are buyers.
Now, how do you evaluate? It’s easy if all of the properties are the same where it’s the same model home over and over in the same subdivision. It makes it a lot easier that way. When you get a few of the sale prices, average them out, then you can figure out how much the house is worth. It’s real easy with condos because it’s the exact same unit, right across or down the hall. Make sure that the time is there. If three identical units sold 7, 9, and 11 months ago, they are not good comps. You have to adjust for the time in which the market changes for that period of time.
If they are different types of houses, you have to go by different things. You have to do more
research. You have to look at the size of the houses, the age of the houses. If one house is 50 years old and one house is 5 years old, the value is different. You have to look at the condition of the houses. You have to look at the extras on the house. Maybe one house has a 3 car garage and one house has a 1 or a 2 car garage. One house has a pool. You have to adjust for that. If one house has a pool, that house is going to be worth more than the home without the pool.
In a lot of cases, you can ask your seller what they feel the house is worth, which is always high. Ask them how they came to that price. Maybe they will tell you that they had a Realtor who gave them a CMA. Always double-check on that. You always have to run comps. Never take a seller’s word for it. Always do your own research.
There is also a square footage method. Let’s say you have eight different comps for homes that are all different in a certain area. I toss out the top one, which is always a lot higher. I then also toss out the low one. Then, I figure out how much a square foot the other houses are selling for. I take the square footage, the selling price, do the math, and figure out how much per square foot each of those houses sold for. I write it down, then I average it out and that will give you a good idea. So, what you do is figure out the average price per square foot is for homes that sold recently in that area, and then you multiply that by the square footage of the house you are looking at. That will give you a relatively decent comp. Again, it’s not an exact science. It comes with a little bit of experience.
It also comes with learning the territory. A lot of you are working only in one area. But, there are certain parts of Chicago here, that you can tell me it’s a one-bedroom, one level garage in Country Club Hills, and I can tell you how much it is worth, then adjust it for condition. It’s because I have dealt with that area. But, if you are investing all over the country, or if you are in a big city, you have to run your comps. The easiest way for me is to use a service, instead of doing all of the square footage work.
Now, there are things that you have to look at, that you have to adjust for. Sometimes you have to throw out homes that sold for very low prices. You might have 8 or 10 houses all that sold within a twenty thousand dollar range and one that sold for thirty thousand less. You have to find out why it sold for thirty thousand less. Did it have a foundation problem? Was it a foreclosure or short sale? Right now, there are so many foreclosures and short sales going on, you have to be aware of that. When you look at your comp list and one or two homes look way high or way low, you either have to throw it out or you have to find out why. These foreclosures are lowering the prices in areas.
Now, when I am selling a house, this is what I do. When I have an appraiser come in, or when I’m pricing my house, I use the highest comps in the area. When I am buying a house or negotiating with a seller or I’m doing a BPO and that BPO Agent is coming in, and I’m going to give him some comps to help influence his BPO on a short sale, I’m going to give him the lower comps in the area and will tell him that we are basing our offer on these comps. So, use the higher comps when you are selling, use the lower comps when you are buying.
Once you have your comps and know the prices that houses are selling for, use these tips to evaluate them:
Comps are basically the true value of a house. You can look at the price of houses for sale, but that doesn’t tell you the true value of a house. The true value of a house in an area is based on how much houses are SELLING for, not how much the houses are listed for.So, if you look in a neighborhood, you may find houses listed at high prices. They don’t sell at those high prices. They get made offers, they also come down before they sell. It’s the selling price of the house you want to go by to make a decision on how much you want to get for your house, or how much you want to offer on your house. It’s also known as ARV (average retail value, or after repair value). The comps let you figure out what the ARV is.
Comps also need to be similar houses of a similar age, in the same location. Now, when I say the same location, you want them to be less than a mile away, the closer the better. You want them to be sold, if possible, less than 60, or even 30 days ago. With this volatile market, you really want to make sure that those comps are done on homes sold recently. So, the closer to your subject property and the more recent those homes were sold, the more accurate your comps are going to be.
Now, we’ll talk about where you can get your comps from. First off, you can get comps from a Realtor or the MLS. If you are a Realtor, you already know how to access them. If you are not a Realtor, you can befriend a Realtor, and usually for about $20 or $25, you can get a Realtor to run comps for you. Realtors are good for getting comps because they are professionally trained to do so. Note that sometimes when they are working with a Seller, they MIGHT want to bump their price up a little bit to maximize their commission. Sometimes they might even do it for free. It’s give and take, do them a favor, give them a listing now and then, you’ll find a Realtor that can do it. The problem is, a lot of Realtors, they won’t do it over and over again. They’ll do a couple, but they don’t want to be your source for comps. Sometimes you can need 5 or 6 a day.
You can also get comps online, but be leery. Some companies are good resources, they list sold house prices, but don’t trust them so much when it tells you how much your subject house is worth. You can use them to see how much houses sell for in your area, but when it comes to finding out how much your house is worth, I have seen as much as a $50,000 spread up and down. $50,000 low, to $50,000 high. Those online free sites are not very accurate, unfortunately. I suggest against that. The worst thing you want to do is buy a house for even as little as $15,000 more than what it is worth. Then, you will become a motivated seller, and you don’t want that.
You can also go to the courthouse, though it is tedious for only one comp. You can contact them and get all of the records for all of the homes that sold in one area and find out what they are selling for.
I personally use a service online that runs comps for me. I put the subject address in and it gives us all of the recent sales around there, it tells us how much they sold for, how much loans are for on present houses too. But, not everybody wants to pay for it. If you are a true investor, it’s worth paying for, because you want to sit down, push a few buttons, and get your comps. Please research these companies before signing up with them. Now, you can move on to make your offers and talking to sellers are buyers.
Now, how do you evaluate? It’s easy if all of the properties are the same where it’s the same model home over and over in the same subdivision. It makes it a lot easier that way. When you get a few of the sale prices, average them out, then you can figure out how much the house is worth. It’s real easy with condos because it’s the exact same unit, right across or down the hall. Make sure that the time is there. If three identical units sold 7, 9, and 11 months ago, they are not good comps. You have to adjust for the time in which the market changes for that period of time.If they are different types of houses, you have to go by different things. You have to do more
research. You have to look at the size of the houses, the age of the houses. If one house is 50 years old and one house is 5 years old, the value is different. You have to look at the condition of the houses. You have to look at the extras on the house. Maybe one house has a 3 car garage and one house has a 1 or a 2 car garage. One house has a pool. You have to adjust for that. If one house has a pool, that house is going to be worth more than the home without the pool.In a lot of cases, you can ask your seller what they feel the house is worth, which is always high. Ask them how they came to that price. Maybe they will tell you that they had a Realtor who gave them a CMA. Always double-check on that. You always have to run comps. Never take a seller’s word for it. Always do your own research.
There is also a square footage method. Let’s say you have eight different comps for homes that are all different in a certain area. I toss out the top one, which is always a lot higher. I then also toss out the low one. Then, I figure out how much a square foot the other houses are selling for. I take the square footage, the selling price, do the math, and figure out how much per square foot each of those houses sold for. I write it down, then I average it out and that will give you a good idea. So, what you do is figure out the average price per square foot is for homes that sold recently in that area, and then you multiply that by the square footage of the house you are looking at. That will give you a relatively decent comp. Again, it’s not an exact science. It comes with a little bit of experience.
It also comes with learning the territory. A lot of you are working only in one area. But, there are certain parts of Chicago here, that you can tell me it’s a one-bedroom, one level garage in Country Club Hills, and I can tell you how much it is worth, then adjust it for condition. It’s because I have dealt with that area. But, if you are investing all over the country, or if you are in a big city, you have to run your comps. The easiest way for me is to use a service, instead of doing all of the square footage work.
Now, there are things that you have to look at, that you have to adjust for. Sometimes you have to throw out homes that sold for very low prices. You might have 8 or 10 houses all that sold within a twenty thousand dollar range and one that sold for thirty thousand less. You have to find out why it sold for thirty thousand less. Did it have a foundation problem? Was it a foreclosure or short sale? Right now, there are so many foreclosures and short sales going on, you have to be aware of that. When you look at your comp list and one or two homes look way high or way low, you either have to throw it out or you have to find out why. These foreclosures are lowering the prices in areas.
Now, when I am selling a house, this is what I do. When I have an appraiser come in, or when I’m pricing my house, I use the highest comps in the area. When I am buying a house or negotiating with a seller or I’m doing a BPO and that BPO Agent is coming in, and I’m going to give him some comps to help influence his BPO on a short sale, I’m going to give him the lower comps in the area and will tell him that we are basing our offer on these comps. So, use the higher comps when you are selling, use the lower comps when you are buying.Once you have your comps and know the prices that houses are selling for, use these tips to evaluate them:
- Only use sold house prices, never listed ones
- Do not use these comps for properties over 4 units, those are commercial, and done differently
- Try to use comps as close as possible to the subject, hopefully less than a mile, and closer
- Comps should be as “fresh” as possible, 30 days old or less
- Compare “apples to apples”, not 3 year old homes to 60 year old ones
- If a property is priced substantially higher or lower than the rest, find out why
- If the comps are extremely varied, figure out the square footage price for the area, and use that
- Use high comps when you’re selling, and lower comps when you’re buying, in negotiations
How to Get Started in Real Estate Investing
Let’s face it. If you’re reading this, you either ARE an investor, or want to get started investing in Real Estate, but SO many people, say SO many things… some is great advice, and some is “garbage”, so I’m going to try and get you off on the right foot!
There’s NO doubt about it… if you want to learn this business, you need to INVEST. The question… is “what” do I have to invest? No, it does “not” have to be MONEY!
As a new or beginning investor looking to make money fast with a real estate deal, you have to be educated, but there’s “More Than One Way to Skin a Cat”. (or flip a house!) If you have the financial resources, there’s nothing wrong with spending a few hundred for a program, paying a few thousand bucks and going to a bootcamp, or even spending bigger money to get an experienced real estate investing coach.
But the truth, is most rookie investors couldn’t even come CLOSE to forking out that kind of “jack”! I certainly know I couldn’t, when I got started! So how “do” you get started in real estate investing then?
Investing Time and Money
You have to invest either TIME, or MONEY, to become a creative real estate investor!
But before you do, decide what “niche” of investing you want to invest in! Do you want to be a house wholesaler? Want to learn how to do short sales? Are you into subject-to buying? Are you handy, and love to renovate or “rehab” houses? There’s dozens… or possibly hundreds of ways to earn and make money with creative real estate investing… even as a beginner!
Once you’ve “done your homework”, and know what type of investor you want to be “when you grow up”, then it’s time to get educated! If you have money to spend, get a GOOD training program from a good real estate trainer. For $300-$1000 you can get a program consisting of CD’s, DVD’s, manual, books, and other tools. If you have more to spend, you can attend a live “real estate bootcamp”, where for 2-5 days you can be personally trained. Even higher up the ladder, and more expensive, you can hire a coach, or real estate mentor.
If you’re like I was when I started in real estate investing (WAY in debt) you can start by reading everything on the web you can find about your niche.
Yes, at some point you’ll HAVE to spend some money to learn this business, but it can be kept to a bare minimum, and it shouldn’t “break the bank”. Save your pennies, and start off with a $300-$500 program. “It’s hard by the yard, but a cinch by the inch!”
Don’t be in a hurry… start carefully, and consider making $500-$600 by finding a “seasoned” investor a deal, and getting paid for it, as a “bird dog”. Put the money towards a $500-$800 training program, and do ONE deal. Put that money into a bootcamp or real estate investor seminar, and get the training you need. Good luck!
There’s NO doubt about it… if you want to learn this business, you need to INVEST. The question… is “what” do I have to invest? No, it does “not” have to be MONEY!
As a new or beginning investor looking to make money fast with a real estate deal, you have to be educated, but there’s “More Than One Way to Skin a Cat”. (or flip a house!) If you have the financial resources, there’s nothing wrong with spending a few hundred for a program, paying a few thousand bucks and going to a bootcamp, or even spending bigger money to get an experienced real estate investing coach.
But the truth, is most rookie investors couldn’t even come CLOSE to forking out that kind of “jack”! I certainly know I couldn’t, when I got started! So how “do” you get started in real estate investing then?
Investing Time and Money
You have to invest either TIME, or MONEY, to become a creative real estate investor!
But before you do, decide what “niche” of investing you want to invest in! Do you want to be a house wholesaler? Want to learn how to do short sales? Are you into subject-to buying? Are you handy, and love to renovate or “rehab” houses? There’s dozens… or possibly hundreds of ways to earn and make money with creative real estate investing… even as a beginner!Once you’ve “done your homework”, and know what type of investor you want to be “when you grow up”, then it’s time to get educated! If you have money to spend, get a GOOD training program from a good real estate trainer. For $300-$1000 you can get a program consisting of CD’s, DVD’s, manual, books, and other tools. If you have more to spend, you can attend a live “real estate bootcamp”, where for 2-5 days you can be personally trained. Even higher up the ladder, and more expensive, you can hire a coach, or real estate mentor.
If you’re like I was when I started in real estate investing (WAY in debt) you can start by reading everything on the web you can find about your niche.
Yes, at some point you’ll HAVE to spend some money to learn this business, but it can be kept to a bare minimum, and it shouldn’t “break the bank”. Save your pennies, and start off with a $300-$500 program. “It’s hard by the yard, but a cinch by the inch!”
Don’t be in a hurry… start carefully, and consider making $500-$600 by finding a “seasoned” investor a deal, and getting paid for it, as a “bird dog”. Put the money towards a $500-$800 training program, and do ONE deal. Put that money into a bootcamp or real estate investor seminar, and get the training you need. Good luck!
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