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Here’s a video I found that I thought you’d like:
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The one common mistake that I’ve seen that puts investors out of
business revolves totally around doing their due diligence or
lack of due diligence.
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As your just starting out and sometimes even after you’ve
completed several deals, your adrenaline is pumping every time
you look at a deal. You’re hungry, maybe even a little
desperate to get a deal done. Your hearts pumping from the
excitement to make that offer, and all you can think about is
buying this property. And as a result of your eagerness, you
tend to slip up and make mistakes. The one critical mistake
that will cost you your business comes from simply over valuing
a property. You analyze the deal’s numbers, slightly
exaggerating the property’s “as is” value and it’s true
potential. In other words, you appraise the property value for
more than what you’ll ever be able to sell it for. Now, there’s
some good news to all this: I can show you exactly how to keep
from making this one critical mistake. This is not information
that is optional; it’s vital to your business that you get this
right.
So, here are three bulletproof ways to evaluating properties to
keep your property values in line:
1. The tax accessed value. For every piece of real estate,
there is a tax parcel id that reveals the tax value of the
property. The owners pay tax every year based on the current
value of the property shown at the tax assessor’s office. This
information is freely available to the public in every market.
In some areas, tax assessors only access property every three or
four years, therefore these values can be drastically off from
fair market value. You’ll need to find out when the latest
assessment was performed in your area. You can go to
http://www.netronline.com for a list of all the county
recorder’s offices and tax assessors.
2. Comparable Sales. This is exactly what licensed appraisers
use when evaluating a property’s value. They will look at the
property; it’s current features, and the condition. Next, they
will go to the MLS (this is the listing service most commonly
used by real estate professionals) to pull all real estate sales
surrounding the home within the last three to six months usually
within a half a mile of the subject property. You can perform
the same exact exercise with the help of a realtor. Simply call
a realtor and ask them for the listings and homes sold for that
compare to the house that you are looking at. Now, you want to
get a list of the homes sold and the ones that are on the
market. After all, you’ll want to know who your competition is
when you start marketing the property for sale. You’ll want to
compare the square footage, the age, the roof’s age, and all the
features that are available. How does your property stand up to
the market? Does it have more or less to offer for the money?
Also, pay attention to how long the properties are sitting on
the market before they sell.
3. Drive By. That’s right, get off your butt, get out there and
drive to learn your current market. The fact is that there is
no better way to learn your current market conditions than
getting out to look at what the market has to offer. Currently,
there are tons of websites that you can subscribe to that will
give you comparables, however, knowing your market from simply
going neighborhood to neighborhood is priceless. Buy yourself a
cheap map with a yellow highlighter. Now, start in one area of
your market driving the neighborhoods and you’ll work your way
until you’ve looked at every neighborhood in your market,
highlighting the areas you want to work. When you are driving
these neighborhoods, you’ll want to record every house for sale
and collect every flyer that is advertising a home for sale.
Next, make some observations about each house. Look at the
structure, at the rooflines, whether the houses are in good
shape. On every property, guess the age, the square footage,
and the price, recording all of this information. Then compare
your answers with the information you collect from the real
estate agents, the seller themselves, or the flyers that you
collect. This method alone will get you totally familiar with
your market in a very short time frame.
You must understand how significant this one step is in
evaluating your deals; otherwise misjudging one property value
can take you out of business for good sending you back working
for that dumb-dumb of a boss of what some call a job. Your goal
is to learn everything about your market so that when you get a
lead, you’ll have a good estimate of what the house values in
the area are before you ever leave the house. Start today using
these three methods to evaluate your market and you’ll build
your business on a solid foundation avoiding the common mistake
of over valuing properties that many investors make.
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