As perhaps the most critical step in the acquisition of a property, properly analyzing deals is the key to timely and profitable transactions. More importantly, the ability to accurately analyze a deal is a skill-set in which investors can achieve their financial goals. Determining whether or not the property is as the seller has presented it will not only mitigate risk, but it will serve to maximize profit margins as well. Investors should be very comfortable with the process of analyzing deals, including wholesale deals, as to avoid any potential complications. The repercussions of a bad real estate deal analysis are crippling.
The following series will illustrate several tips investors can use to preform an in-depth assessment of potential profitability. Each is designed to help investors find the deals that will further their real estate endeavors.
Deal Evaluation Tools
The process of analyzing deals may seem foreign to unseasoned investors. More often than not, those unfamiliar with the process will question the accuracy of their calculations and doubt will ensue. However, several tools are readily made available to investors that award them a significant advantage. Accordingly, those who neglect to take advantage of said tools are automatically placed at a disadvantage. Familiarize yourself with the following tools when analyzing deals.
As perhaps the most valuable tool in any arsenal, the multiple listing service (MLS) provides investors with a wealth of relevant knowledge. As only licensed agents are permitted access to the MLS, we advise someone in your office to have the required credentials. This database will serve as your most trusted source for comparable homes. Knowing the price points of nearby properties is critical to determining an offer.
In addition to the MLS, investors should take advantage of the multitude of free online real estate websites. Each will provide information regarding the house in question, as well as houses within a specific geographic region. Take advantage of the data that these sites have worked hard to compile. It will save you a lot of time and money while you are analyzing deals.
Creating Packets
After a sufficient amount of data has been collected, create packets with the relative information so that it may be presented to the seller. Three packets should be made. They are as follows:
- A Buying Appointment Folder: This folder will contain all the necessary paperwork to sign a contract with the seller.
- A Comps Package: The Comps Package will contain documents you will use to help determine your offer when you meet with the seller at the property.
- A Short Sale Buying Appointment Add-On Folder: Just in case it has to be a short sale.
Once you feel comfortable in making an offer, present the seller with the packets you created earlier, along with your offer. Doing so will provide him with irrefutable evidence that your offer is fair for both parties.
