Spotting a possible real estate investment and wonder if it can live up to its potential? No need to pull out your calculator! Check out how to do just that with this guest post by Julie Broad of revnyou.com.
I don’t need to pull out a calculator or use a fancy spreadsheet to figure out if a property is a good deal for me.
Years ago, that wasn’t the case. We would chase deals all over the place. We lived in Toronto and did deals in Niagara Falls, Ontario, Nanaimo, BC, and several different areas in the city of Toronto. Someone would say “I’ve got one for you” and we’d be off chasing it like my dog goes after a squirrel. Every deal was a brutal amount of work to find the right people in the area to work with, the market research to analyze the area and the data to run the numbers. It often took a gigantic amount of effort to evaluate and close on any one deal.
Eventually we realized how exhausting it was chasing deals all over the place – not to mention all the problems we faced because we couldn’t really establish a brilliant team or oversee it well with our efforts spread out so thinly.
Today we’ve simplified. We only buy in one city and only a few small areas within that city. We are buying a house every 4-6 weeks without breaking much of a sweat and many of our deals are close to homeruns.
If you want to do this too you’ll need to front end load your work. Pick a sub-market within your target city.
With your target area selected, you have to get comfortable with rent rates, selling prices and who is going to live there (what type of tenant will you attract and what kind of person wants to buy there). Once you know this information, the rest just gets easier and easier.
We have owned four houses on the same street. It’s our primary target area and half our holdings are within walking distance of this street. All the houses we buy in that area are similar – in fact most of them were built by the same company in the 70’s. The layout is great and the construction is solid. And because we are known to buy in that area, sellers contact us directly before they list, our trades give us heads up on deals and even realtors know to call our realtor to get fast deals done.
I know if I can buy the standard layout home for the area for $300,000 or less I have a handful of options to make money. I don’t need a calculator to tell you if it’s going to be profitable. Yes, we double check my numbers with the financing options, have the property inspected and consider any risks or opportunities specific to the property but it takes little time and so much less effort than when we found the deal first and did our research second. But you have to commit yourself to one area and stick with it for awhile … otherwise you’ll always have to have your calculator handy.
Julie Broad is a residential real estate investor in Nanaimo, BC, a #1 Amazon Best Selling author, speaker and investing coach. Connect with her at her website www.revnyou.com where she shares hundreds of videos, articles and real estate investing tips to help you in your business.