HOW YOU FIND GOOD DEALS By Albert J. Lowry PhD People always want to know how you find good deals. Even in a hot market like the one we are experiencing today, there are always good deals out there somewhere. Some people always wind up finding properties that are selling below market value at favorable terms, no matter how much competition there is. How do they find these deals? By looking at dozens of bad properties. I wish there were simple, easy answers to give you, but there are not. Good deals are not just sitting there with signs on them, saying that they're good deals. You have to know how to recognize them. In order to understand what a bargain is when you see it, you have to know what people are looking for and what they will pay. If you don't know what the property will sell for or rent for on the open market, then how do you know what to pay for it, or whether to buy it at all? A bargain, is a property you could resell or rent immediately for a profit. It doesn't matter if the purchase price is higher than the asking price as long as the resale or rental price will be even higher. But, if there is deferred maintenance, or if there are improvements which need to be made before you can resell or rent the property, then you need to take all that into consideration. You have to think about what prospective renters and buyers are looking for. Is that what this property has to offer? Can you easily rent it or resell it? That is the serious question, before you even worry about the purchase price and/or terms. If the property suits your needs as a rental or resale, that's the first step. After that you can worry about the price and terms. If the property won't even suit your needs, then why bother? Maybe the area, or the property itself, just won't attract the kind of tenants or buyers you want. The property could be too large for single people or couples without children, or too small for families with children. The neighborhood may lack the amenities that prospective tenants would be looking for, such as transportation, recreation, access to jobs, etc. What sort of rents are people asking? Do the rental ads say anything about schools, transportation, restaurants and entertainment? What areas seem high-priced and in demand? What areas seem desperate for tenants? Now, cross reference these rental ads with the property for sale ads. Do any of the areas where potentially interesting properties are offered for sale - properties that are priced right and/or offer flexible terms - seem particularly suited as rental areas? Is there an easy way to improve properties in those areas, to increase the value and resell them? How do the price and terms correspond to the potential rents? What is the proportion of home owners to renters? Is that changing, or likely to change? When you find a neighborhood in the path of the city's growth, a neighborhood that is attracting higher-income residents, or a higher percentage of home owners, or that is beginning to be developed by builders, then you stand to rake in a big profit by buying property there even in a hot, super-competitive market. Even if you don't improve the property, you may be able to raise rents because of the upgrading of the neighborhood. Or, your location itself may become so valuable that a developer will buy the building and bulldoze it away for an apartment house or condominium. So, your first objective is to learn about the "good" locations all around you, instead of complaining that there are no deals out there. Think about this. Just as you can learn to use other people's money, you can learn to use other people's efforts to help make you rich. Be aware of anything that state and local governments, large developers, small developers, and even individuals, may be doing or planning, that may have an impact on the area. Even if nothing big is planned, little things can often have a big effect and a hot market, a seller's market is usually when things begin to happen. BACK TO REAL ESTATE ARTICLES PAGE CONTRACT WIZARD HOME PAGE TAX SALE RICHES HOME PAGE MORTGAGE MAGIC HOME PAGE |