High Profit Real Estate Investing

High Profit Real Estate Investing--make A Good Deal Every Time!
By Richard Odessey

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, cash flow and

risk exactly and then evaluate the deal is revealed. These
techniques apply to all real estate investments including
foreclosures, short sales, rehabs, flips, multi-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
> Cash flow 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 cash flow. 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 successful investors do deals with low risk. Deals that
are so robust that even if almost everything went wrong they'd
still come out with a profit.

BUILD IN A SAFETY MARGIN

For example, suppose you have a rental with a positive
cash low. Is your cash flow high enough or your option payment
big enough, that even if you had to evict your tenant for
non-payment and it took you 2 months to fill it with another
cash-paying customer, you'd still come out ahead?

Or, is your investment to value so low that even if you had to
offer your buyer a big discount for a quick sale, you'd still
walk away from the closing table with a fat check?

In real estate things can and usually do go wrong. It's
Normal. So, wouldn't you like all your deals to have these
kinds of safety margins?

FIXING THE PROBLEMS WITH YOUR DEAL

Now, if you knew in advance that your risk was too high, or
your cash flow was too low, or your profit over the life of the
deal wasn't enough, you'd want to think of solutions.

This is what is meant by being a "transaction engineer". Find
the solution, fix the problem, test it on the numbers, and then
negotiate it into the deal.

And if you can't find a solution (but there always is one) or
the seller won't accept it—NEXT!

A RISKY DEAL IS NEVER WORTH DOING!

I can tell you from real experience, a bad or risky deal is
NEVER WORTH DOING—no matter how enticing the vision. The
personal stress, heartache, and loss of confidence can be even
more harmless than the potential financial loss. In the words
of an ex-president's wife, if you are faced with doing a bad
deal—Just say No!

WHAT'S THE ANSWER?

Some experienced investors have a feel for good deals, and can
avoid trouble most of the time. Others only do a particular
type of deal and use a rough "rule of thumb" to evaluate their
risk and profit.

However, what's really needed is a "calculator" or computer
program that will take in all the variables and

> Calculate the exact profit and cash flow for all kinds of
deals.
> Measure and Evaluate the financial risk in the deal
> Use standard and safe criteria for what constitutes a good
deal
> Suggests alternatives to fix what is wrong

A DEAL EVALUATION TOOL

We've taken tons of real estate courses and looked at all kinds
of real estate software, and nothing has come close to what we
as investors need. So we decided to create our own Deal
Evaluation Tool.

Well after several months of testing and improvement, we now
use it for all our deals—short sales, subject to, lease option,
rehab, wholesaling, and even some commercial.

Since we can try out different "what-if" scenarios, it's kept
us away from some real pitfalls, and helped us negotiate better
profit margins. We wouldn't "leave home without it".

CONSTANTLY MEETING THE NEEDS OF INVESTORS

Well, some other investors wanted to try it, so we put it on
our website. Much to our delight we now have a community of
users and a users group that shares their insights about doing
deals and creative ways to use the Deal Evaluation Tool.

Their suggestions, are leading to a rapid improvement of
already incredibly useful tool. There is just nothing out
there like it. We've also put a demo up for those investors
who would like to get a feel for using it. And we hold classes
for new users.

Knowing all the numbers, and having evaluated our risks with
the Deal Evaluation Tool gives us more confidence in
negotiating deals with sellers and more consistent high profit
real estate deals.

And that's what we all want, isn't it.

Best of Success,

Richard Odessey

Click Here To Return To: Free Land Property Home Page

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: http://www.isnare.com