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Real Estate - Five Ways to Make Sure the Price is Right

One consistent fact about investing inalso need title insurance and other
real estate is that you determine yourtypes of insurance, depending on whether
profit when you buy a property. You goalyou plan to live in the property or not.
is to buy low and sell high. If you payFinally, there could be utility costs
too much at the beginning, you've stolenand other unexpected repair costs.
profits from yourself. Never buy a3: Check the Feasibility Of the Project
property at market value, unless youOnce you've determined property values
have no desire to profit. There are fivein the neighborhood, you're ready to
ways to make sure that you avoid thisevaluate the feasibility of your
mistake.project. Start with the current value of
1: Know the property valuesthe unimproved property. Add your
You have to research and understand therenovation budget, other project costs
neighborhood property values. This stepand estimated interest to get a total
is critical for your success. You needproject costs. Then add your minimum
to actually visit any property you'reprofit to that. If the total you
considering and compare it to othercalculate is more than improved homes
properties in the neighborhood. Onlinesell for in that neighborhood, the
research can't give you a feel for theproject isn't feasible. Walk away.
neighborhood or the property.4: Calculate the Maximum Purchase Price
Keep a detailed record of selling pricesFiguring out the maximum amount you
in the neighborhood for run-down andshould pay for the property works the
improved homes. You can gather thisother way. Start with the final selling
information from local real estateprice you think you can get in that
brokers, the county clerk's office, theneighborhood. Deduct your profit margin,
tax assessor's office and from realas well as selling costs, renovation
estate appraisers. Collecting andcosts, and the other project costs
analyzing this kind of information islisted above. The figure you end up with
often called a comparative marketis the maximum amount you should be
analysis, or CMA.prepared to pay.
2: Estimate your project costs5: Negotiate Hard But Fair
Once you have information on actualOnce it's time to purchase, you have all
property values, you can start tothe knowledge you need to negotiate
estimate how much you can spend andwell. Your knowledge puts you in a
still make your desired profit. Thereposition of strength. As you meet with
are several types of costs you shouldthe seller, strike a balance between
consider. Acquisition costs include thesensitivity and professionalism.
purchase price, taxes and originationNegotiation is an art and it may take
fees. Get estimates from several lenderssome time for you to be comfortable with
and compare. Don't get surprised byit. But the steps above have given you
extra closing costs.the financial boundaries. It should be
Repair costs include everything you'llclear to you when it's time to strike a
need to improve the condition of thedeal and when it's time to walk away.
property. This is where your visit toThe key to your real estate investment
the property really pays off. You'llprofit is in the purchase price.
have a better idea what repairs areEverything about your project hinges on
needed. You should also get a fewthis critical number. Research into your
contractors to provide estimates fortarget neighborhood and realistic
some of the repairs.estimation of costs will give you the
Other possible costs to consider includeknowledge you need to negotiate a
inspections, a title search, a surveyprofitable purchase price.
and a certificate of occupancy. You may



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