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Making a Good Real Estate Deal

– Contributed content –

Aerial view of homes

(Chuttersnap, Unsplash)

6 Jan. 2020. When it comes to the real estate market, there’s really no guidebook that explains every little tip and trick that helps you grab a bargain. After all, the state of the real estate market is always in flux, meaning that it’s going to take a lot of trial and error to build up the knowledge you need to dominate the local market. If you ever decide to take your real estate business nationwide or even overseas, then you have even more to study and learn–and there are no shortcuts.

Thankfully, there are plenty of ways that you can determine if a real estate deal is worth your time or not just from a glance. Of course, this isn’t going to be a comprehensive look at the deal, but more a general assessment that could help you get a better understanding of the property, its history and also what it could be worth under your guidance.

So without further ado, here’s a comprehensive beginner’s guide on what to look for when it comes to assessing a really good real estate deal.

Don’t focus on just the property, look at the local area as well

One of the most important things to remember when looking at a real estate deal is to stop tunnel visioning on the property itself. Far too many beginners look at the property and fail to realize that there’s an entire city surrounding it. In fact, its surroundings could have a much bigger impact on the price of a property, and it goes a long way when it comes to evaluating if a real estate deal is worth it or not.

When evaluating a real estate deal, don’t just look at the property itself. Focus on any zoning issues and liens, and make sure that the property you plan to purchase has a future in its local area. A good example of this would be converting properties into smaller homes and apartments. If the local area is extremely competitive and there are a lot of buyers searching for homes, then you need to figure out why they’re doing that. Is it because new transport options are making it a more accessible place to live? Is it because there are excellent schooling options around the area? Or perhaps they’re choosing it because a celebrity recently moved on.

Sometimes, we just don’t know what’s causing a sudden increase in popularity because it could just be a freak coincidence. However, the bottom line is clear and simple; don’t focus on the property itself and make sure you’re also looking at the local area and how it could be affecting the property that you’re evaluating.

Examine the structure of the property

A lot of real estate deals can end up going horribly due to a lack of attention paid to the structure of a building. For instance, if you neglect the fact that a property isn’t structurally sound before you rent it out to others, then you might face heavy fines and repair costs in the future. If you don’t do your due diligence and realize that the foundation of a property is wonky, then you’re going to be facing some serious penalties if someone gets hurt or loses their home.

Even then, these types of properties can still be worth the investment. The best way to analyze this is to check what work needs to be done and then ask for quotes. For instance, if you’re concerned about the structural; integrity of a building in an area that commonly suffers from tremors, then speaking to commercial earthquake retrofitting services can be incredibly helpful. With these types of services, you can easily “fix” structural issues in your property before they’re able to do any damage. The quotes will also help you decide if a real estate deal is good or not.

Renovating older properties isn’t as worthwhile as you think

It might be a shock to some people, but trying to buy and renovate older properties to sell them at a higher price isn’t as worthwhile as you think. This is because a major factor in determining the price of a property isn’t what’s in the property itself, but the local area that it’s in. Sure, you can buy a run-down property and try to upscale it to be a luxury modern home, but it’s still going to be surrounded by other run-down properties. They’ll ruin the appearance of the property itself, and buyers aren’t going to pay attention to the illusion of wealth and luxury that you’ve tried to create.

With that said, renovating for a profit can be an effective way to profit in the real estate market, but don’t let it define if your real estate deal is a good one or not. One good reason for this is because any buyer is capable of doing their own renovations. Someone who can afford a luxury property will have no problem doing their own renovations because they have the money. They’re going to buy a property because it has space for them to realize their visions, and they’re more interested in paying for the location than the property itself. On the other hand, frugal homeowners are going to look for a bare-basics property so that they can perform renovations on it themselves.

In short, trying to renovate older properties can be a profitable venture if you know what you’re doing. However, if you’re interested in real estate and making higher profit margins, then avoid the renovation hype and focus on other aspects of the real estate market instead.

Look at how the property is presented

If you’re trying to determine the value of a real estate deal at a glance, then one skill you need to pick up is analyzing the way a property is presented.

There are many little tricks that can help you determine if something is a good real estate deal or not, especially if you’re looking online or being emailed listings from other realtors and websites. One such trick is looking at the quality of the photos. If there aren’t many exterior photos, then there’s a good chance that the property doesn’t have much curb appeal. After all, why would a listing show pictures of anything that doesn’t look right? They’re going to take photos of all the good qualities of a property and show them off in the listing images. Anything they don’t specifically show is likely hidden for a good reason.

However, that’s not to say that you should avoid these properties. In fact, you should be scouting out for these types of properties and exposing their flaws. Once you’ve done this, you’ll have a much easier time negotiating discounts on issues such as a lack of curb appeal, outdated interiors and so on. By looking for these weaknesses in a property listing, you’ll find it very easy to shave off a couple of percentages from the asking price and convert it into pure profits.

Simplify the financials and make your decision there

One of the key characteristics of any successful property guru is being able to analyze a deal as quickly as possible. After all, you don’t want to be sat in the office looking at a hundred listings in full detail. We’ve already spoken about how you can analyze a property based on its listing, but you should also know how to calculate some basic financials to help you decide if it’s worth investing in a property.

The most basic calculation is to look at the amount of rent you could charge (or is currently being charged), multiply it by the number of tenants, and then multiply that by a year. Compare that number to the asking price for the property, and then you have a rough number of how many years it’ll take before you can recuperate your losses. This is heavily simplified but offers a very quick look into what you could be earning with that property. If you can make your money back in a year or two, then it’s probably a fantastic deal and warrants further investigation. This type of strategy can help you cut down on the number of deals that you need to analyze and will greatly speed up your productivity.

The real estate market is always fluctuating. Prices that are acceptable today might be outrageous or extremely cheap in the future. We don’t know how the market will evolve and we certainly don’t have a way to accurately predict what will happen in a few years time. Perhaps some new government regulation crashes the prices on certain things and makes it impossible for real estate agents to make a profit. Maybe a natural disaster occurs that makes all of your investments worthless. We can’t predict what will happen, but we can make smart decisions to help minimize the risks we take when trying to make it big in the real estate world.

Editor’s note: The opinions in this post are the contributor’s, not those of Science & Enterprise.

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