Six Steps to Real Estate Success
Step Two: Find It!
by Marinda Hemmert
The first step toward Real Estate Success is deciding which type of property will be best for your investment plan. There are many aspects to consider, such as your timetable, whether or not it should be income-producing, and your investment experience level.
Once you determine which type of property will best suit your needs, then you may set out on the quest to find just the right one. To start, make a list of which criteria are most important to you and those “must haves” required to fulfill your needs.
For example, if you plan to rent single rooms to college students, then proximity to your local college and the number of rooms will be most important—secondary to size of bedrooms or other features. Or, if you plan to rent to a single family, finding a house in a safe neighborhood might top the list. If you plan to fix it up and sell quickly however, then finding the absolute lowest price property, with problems you know how to fix, will be most important.
Robert G. Allen’s Nothing Down for the 2000s goes into great detail about each step in the Real Estate process: “If you’re looking to buy a property on your own price and terms, search the Internet, the classified ads, and the for-sale-by-owner listings for the ‘don’t-wanter.’ This is the seller who will do almost anything to get rid of his property. He might take a personal note from you secured only by your signature. He might take your SUV or pickup truck in exhange. He probably will give you a price that’s well below the market average because he needs to sell now. He wants out! Even in extremely tight sellers’ markets there are still plenty of don’t-wanters. Perhaps 5 percent of all sellers are willing to be flexible enough to be called don’t-wanters. A word of caution: Sometimes a don’t-wanter is a don’t wanter for a very legitimate reason. Sometimes the problems that go with a property aren’t easily solved. If you are not careful in analyzing what has made the seller a don’t-wanter, you could buy the property and end up being a don’t-wanter for the very same reasons” (Nothing Down, pgs. 61-62).
Once you find a property you like, it’s time to assess it with a complete Property Inspection and thorough Market Analysis.
“The condition of the property is extremely important to making sound investment decisions. As you inspect a property, you should focus on potential structural problems—the most difficult and costly items to repair. You can hire an inspection company to come in and check each of these areas for you and give you an estimate of cost to repair any deficiencies. I highly recommend such an inspection. It’s cheap insurance. You should be less concerned with cosmetic problems. These things include landscaping, painting, draperies, small appliances, carpets, and minor repairs. The cost of these items is small in comparison to the increase in value resulting from a minor fix-up” (Nothing Down, pgs. 96-97).
You can also complete a thorough inspection on your own, using forms provided on the Millionaire Hall of Fame. These are available on www.millionairehalloffame.com.
“As a savvy investor, your second major step is to conduct a market analysis” (Nothing Down, pg. 57). Page 98 of Nothing Down for the 2000s, by Robert G. Allen, has a sample Comparative Market Analysis form you can use or you can print it off www.millionairehalloffame.com.
“When you are seeking to buy income-producing homes, condominiums, duplexes, or apartment buildings, you must know the ‘going price’ in your ideal location. The best source for up-to-date market information is a local real estate agent. Pay close attention to the real estate section in your local newspaper. If you want to know the market values of homes in a specific neighborhood stop and ask a property owner. Determining if a property will actually produce income for you is a two-step process. First, you need to have a clear picture of exactly what you can expect to pay each year on your purchase. Next, check the annual property taxes assessed on the building. This is a public record and should be available online or at the courthouse. Once you calculate your total expenses for the year, just divide by twelve to determine how much your property will cost each month” (Nothing Down, pgs. 57-59). Then, divide the monthly expenses by the number of units available to rent to determine the price per unit you will need to collect each month.
When you have found the right property, it’s time to negotiate the price of the property. For details on this process, please reads Nothing Down for the 2000s, chapters 13 and 14, by Robert G. Allen, which include his Negotiation Checklist with eleven critical points to consider.
Once the property is negotiated to the right price for both parties, it’s time to make an offer. You can draft an offer using the Purchase Agreement Form on www.millionairehalloffame.com. Also, please consult a Real Estate Attorney to be sure this contract is applicable in your respective state.
The process will likely include counter-offers, so be prepared for those steps. Once you have an accepted offer, then you are ready to move on to the next step in the Real Estate Process, “Funding It,” where you will acquire the funds to actually buy the property.
During the steps in this process, be sure to utilize the helpful forms: Property Profile, Inspection Checklist, Comparative Analysis and Purchase Agreement available on the Millionaire Hall of Fame.
If you are ready to start the process, go to the Millionaire Hall of Fame (www.millionairehalloffame.com), register for the site and sign up to begin the 101- Day Real Estate Challenge. When you are logged in, you will have access to these forms and other valuable materials, in addition to being able to track your progress and learn from other students’ Real Estate Transactions!