What to Look For When Buying Real Estate
Construct a goal and a team
Whether your plan to buy and hold investment real estate for “long term” profits or you intend to “fix and flip” for immediate cash, you should develop a goal to help you achieve your ultimate objective. You need to determine what type of property are you looking for? How much time do you have to dedicate towards real estate investing? (A passive investor needs very little. An active investor needs a lot more.) How much money do you have to invest?
Start with sitting down and determining where you are and where you want to be. If you’re just starting out then we recommend buying one single family home, condo or townhome. Once you have some experience an education then you can start to branch out.
Start putting a team together. You may not need all of the team members today but you will need some of them immediately. Your team should include wholesale real estate investment companies like ours, The Real Estate Professors. You may also need Realtors, attorneys, title and escrow companies and officers, CPA’s, bankers, contractors, lenders, property managers and any other team player that will help you reach your goal.
These team players will help you to achieve your goal and will give you access to professionals that you can go to for advice. No one does it alone they can’t, start to build your team today.
Comparable Sales
The first step is to determine the price you are willing to pay for an investment. When looking at purchasing a single family home or condo look at recent sales (usually 6 months or less) or what is called “comparable sales”. Comparable sales are properties that are in the same general vicinity of the subject property and have similar features. Make sure you compare properties of like kind, i.e. single family, multi-family, land, commercial, industrial etc.
There are three main sources to access comparable sales information.
- Multiple Listing Service (MLS). Access to the MLS is limited to only licensed real estate agents. If you are looking for comparable sales data through the MLS contact your Realtor team member. They will be able to help you determine the value.
- Internet. There are several good sources on the internet for determining comparable sales data. Two websites we like are www.Zillow.com and www.HouseValues.com.
- County Assessor’s Office. While most assessor offices are now online some are not. By going down to the assessor’s office or going to the assessor’s website they will have sales information on properties that are in the surrounding area to help you determine the subject properties value. This can be a slow and tedious process an one we recommend you use only when necessary.
Whenever possible use the appraiser’s approach to appraising property. Look at homes in the same subdivision that are similar in square footage, year built, number of bedrooms, bathrooms, and type of construction. If that doesn’t work then expand your search to include properties within a mile radius. Make sure the comparable properties are still similar as you expand your search.
Once you have found 3 or 4 similar properties then you can adjust the value of the property up or down depending on the comparable properties. Adjust for items like garage or carports, swimming pools, lot size, fire places or whether the property backs or fronts a major road. The art of pricing a home takes a sensible approach as well as a realistic one. Common sense never goes out of style.
