| One consistent fact about investing in | | | | also need title insurance and other |
| real estate is that you determine your | | | | types of insurance, depending on whether |
| profit when you buy a property. You goal | | | | you plan to live in the property or not. |
| is to buy low and sell high. If you pay | | | | Finally, there could be utility costs |
| too much at the beginning, you've stolen | | | | and other unexpected repair costs. |
| profits from yourself. Never buy a | | | | 3: Check the Feasibility Of the Project |
| property at market value, unless you | | | | Once you've determined property values |
| have no desire to profit. There are five | | | | in the neighborhood, you're ready to |
| ways to make sure that you avoid this | | | | evaluate the feasibility of your |
| mistake. | | | | project. Start with the current value of |
| 1: Know the property values | | | | the unimproved property. Add your |
| You have to research and understand the | | | | renovation budget, other project costs |
| neighborhood property values. This step | | | | and estimated interest to get a total |
| is critical for your success. You need | | | | project costs. Then add your minimum |
| to actually visit any property you're | | | | profit to that. If the total you |
| considering and compare it to other | | | | calculate is more than improved homes |
| properties in the neighborhood. Online | | | | sell for in that neighborhood, the |
| research can't give you a feel for the | | | | project isn't feasible. Walk away. |
| neighborhood or the property. | | | | 4: Calculate the Maximum Purchase Price |
| Keep a detailed record of selling prices | | | | Figuring out the maximum amount you |
| in the neighborhood for run-down and | | | | should pay for the property works the |
| improved homes. You can gather this | | | | other way. Start with the final selling |
| information from local real estate | | | | price you think you can get in that |
| brokers, the county clerk's office, the | | | | neighborhood. Deduct your profit margin, |
| tax assessor's office and from real | | | | as well as selling costs, renovation |
| estate appraisers. Collecting and | | | | costs, and the other project costs |
| analyzing this kind of information is | | | | listed above. The figure you end up with |
| often called a comparative market | | | | is the maximum amount you should be |
| analysis, or CMA. | | | | prepared to pay. |
| 2: Estimate your project costs | | | | 5: Negotiate Hard But Fair |
| Once you have information on actual | | | | Once it's time to purchase, you have all |
| property values, you can start to | | | | the knowledge you need to negotiate |
| estimate how much you can spend and | | | | well. Your knowledge puts you in a |
| still make your desired profit. There | | | | position of strength. As you meet with |
| are several types of costs you should | | | | the seller, strike a balance between |
| consider. Acquisition costs include the | | | | sensitivity and professionalism. |
| purchase price, taxes and origination | | | | Negotiation is an art and it may take |
| fees. Get estimates from several lenders | | | | some time for you to be comfortable with |
| and compare. Don't get surprised by | | | | it. But the steps above have given you |
| extra closing costs. | | | | the financial boundaries. It should be |
| Repair costs include everything you'll | | | | clear to you when it's time to strike a |
| need to improve the condition of the | | | | deal and when it's time to walk away. |
| property. This is where your visit to | | | | The key to your real estate investment |
| the property really pays off. You'll | | | | profit is in the purchase price. |
| have a better idea what repairs are | | | | Everything about your project hinges on |
| needed. You should also get a few | | | | this critical number. Research into your |
| contractors to provide estimates for | | | | target neighborhood and realistic |
| some of the repairs. | | | | estimation of costs will give you the |
| Other possible costs to consider include | | | | knowledge you need to negotiate a |
| inspections, a title search, a survey | | | | profitable purchase price. |
| and a certificate of occupancy. You may | | | | |