A happy Monday to you!
I constantly get questions about how to find the best investment properties for wholesaling. Today I’m answering them…
It’s not enough to simply identify potential investment properties within a neighborhood; you have to dig deeper to find their values so you can identify the real profit-makers! This email provides you with effective techniques for determining property value. Once you’ve identified your low-income and moderate-income areas, it’s time to dig deeper! You do that with the help of a Realtor: you want him or her to give you comps of every listing that’s sold or is currently for sale in a target neighborhood.
There should be two comp reports — one for the past six months and one for the past year. These reports will tell you what the trend is for appreciation of the properties within the neighborhood. In addition, you want to pinpoint the dollar amount per square foot of the houses. (You can also get this information from the sellers or the tax appraisal information.) Obviously, the dollar amounts per square foot will vary with the neighborhood and the area in which you are looking. This information is very useful in order to determine what price you should offer sellers.
Another important item to look for in the comps is days on market (DOM). This step is especially important in today’s market. You want to know how long the houses are on the market before they’re sold. More specifically, you want to know DOM for houses that need work and DOM for houses that are already fixed up or rehabbed. These figures will tell you how hot (or cold) the market is.
For example, if the DOM is thirty to sixty days (or less), that tells you there’s a greater opportunity to wholesale houses more quickly and for more money. Also, you can show the DOM figures to the seller, and they’ll likely respond with a thought or a remark like, “Wow, I can make my money quicker, and I don’t have to wait six months to get paid.”
When checking the comp information, be sure to look at the agent’s remarks (or public remarks) on the property information sheet. These remarks are important because they can provide you with important facts. For example, they can tell you if it’s a foreclosure, if a regular seller is trying to sell it, or if another investor is trying to wholesale it. They can also tell you if the seller has given any contribution toward the buyer’s closing costs or not. That’s important because you can deduct that amount from the sale price of the home and determine a more accurate value of what the house actually sold for.
In general, you want to use the MLS services provided by a Realtor to find properties that competitors aren’t looking for. Don’t look for bank-owned properties, REO properties, or HUD homes. Everybody and his dog has his eyes on those houses, and your chances of making a profit are much lower.
Here’s some important advice on working with real estate agents or brokers: work with them only if they’re giving you the inside scoop on what is really going on with a deal. Otherwise, they’ll be throwing properties willy-nilly at you that don’t meet your wholesaling criteria. This is a waste of time. You can subtly remind them that it’s in their interest to find you ideal properties. After all, they get both sides of a commission on your deals so it’s also a waste of their time if wholesaling deals don’t get done!
To Fun, Fortune, and Freedom!
P.S. Did you see the awesome webinar Doug hosted with Mike Warren last week? It was just chock-full of new investing information, and Mike shared his insider Judgment Lien secrets. If you want to see the replay of the webinar, make sure to go check it out right now, because it is expiring TONIGHT at 11:59 PM Central time along with all of the special bonuses Mike offered! Go here to see the webinar replay!