How to Evaluate A Real Estate Deal

By MyVine | April 25, 2011

An important member of your investment team, is your real estate broker . When your real estate agent or you come across a particular property investing opportunity that you are interested in , your real estate agent will furnish you with comparable properties other properties to compare with .

A real estate agent will use the MLS (Multi Listing Service) listings to compare equivalent properties that have been sold in the last 6 to 12 months . Plainly , the closer the date of the comparable properties is to the current time , it will show a more exact reflection of prices that are current

Lay the information out in front of you whendoing a comparable and then figure out what amenities one property has that the other properties don’t. You then add or subtract the value of the amenity or lack of it.

For an example , we have2 properties that are very similar. Both properties are the precise same in every way, except, one has a two -car garage and the other has no garage .

The property, with the garage, sold 6 weeks earlier for $85,000. The other property, without the garage, has an asking price of $80,000. We now know that a two -car garage would give the property an extra value of $5,000 and that the property, without the garage, is priced accurately.

Don’t forget to order a home inspection or a very bona fide handyman to go over the property and get a preliminary title report as part of you evaluating deals.

Create a financial analysis of the property . Once you have established the fair market value of the property, multiply that amount by 70%, then subtract your estimated costs for repairs. Your amount of money would be the price that you would render. Try to get a 20% profit (more is okay).

To calculate the offer price on the $80,000 property (fair market value):

$80,000 x 70% = $56,000

Now, we will say that the repairs are $6000, subtract that amount from the $80,000. For this property, our offer would be $56,000-$6,000=$50,000. If you put in an offer of $50,000, your profit would be
$30,000. A very nice profit .

A realtor will be able to provide this advantage and many others . So, make sure you can find one that you like, trust and is experienced in investment properties when you are thinking about buying Canadian real estate investment properties.

Topics: Buying Tips, Foreclosures, General, Investing | Comments Off

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