Locating a great property for sale at a phenomenal price means nothing unless it measures up to the standards you’ve set for your real estate investment business. If it’s the “house of your dreams” and a deal you “just can’t pass up” it can end up being the worst kind of investment for YOU.
Worth vs Value
Before you write that check or email an investor to resell the property, there are a few things you need to research. There’s a difference between worth and value. What’s the value of the investment you can’t wait to make? Is the property worth the same as similar properties with the same comps (comparables)?
You determine these things by evaluating the condition the investment property is in. How much is the property worth AS IS?
Many a great deal has often been poorly maintained and that’s why it’s such a great deal. It could be outdated, the paint could be chipped or worse. Depending on the extent of damage, disfigurement or plain old age … the property could be worth considerably less than the value the County Assessor placed on the property at the time of the original inspection.
How will you know when to offer; or as Kenny Rogers states in his song The Gambler, “Know when to walk away and know when to run?” Don’t be a gambler. This is where research comes in. Learn everything you can about the property and always offer under the County Assessor’s fair market value.
Are there Realtors® on your team? Get their take the value of the property before you open your checkbook. Determine what Realtors® think the property will sell for once you obtain clear title.
Include in your research an inspection of the County Assessor’s records of similar properties in the neighborhood. Knowing market value will help to determine what you’ll be able to resell the property for after bringing it up to code. Once the value of the property has been calculated, do the math and determine the property’s worth.
There’s a lot to consider when investing in real estate. Performing due diligence is vital to your success. Make educated decisions before taking action will help you avoid that “house of your dreams” dream deal turning into a “nightmare on Any Street.”