New to BP forum, help?

Question

My name is Geovanni, I'm from New York, NY. I've been bird-dogging for investors here for about 6 months and I've been planning on moving up to wholesaling for awhile now. Thing is the buyers I worked with never really needed me to provides comps or detailed property reports so I never really practiced and wouldn't know whether I'm doing it correct or not. I've been reading the articles here and the forum posts and I'm just running in circles basically. I hate to ask on my first post but I was wondering of someone could give me a detailed example of how to determine whether a property is a deal or not, essentially an outline of things to do before you put your name on the dotted line?

Bill Gulley · Answer

LOL, if you don't have a calculator to use in RE deals and you only look for deals as obvious as Rob's car example,you won't be making much money or be around long.

While you may understand the terms, you need to study the basics and understand the comparable property valuation process, you don't need to be an appraiser and add values for a fireplace, but understand the valuation of the overall market, neighborhood influences, location, how a school influences price and conditions.

Go to a local college book store and buy a real estate 101 text book for $20.00! Understand that. Then move to specialized areas.Read information on appraisal sites for appraisal information and what those guys are saying, while you may not understand initially, you will catch on to more than listening to some guru type or cocky realtor that talks in circles.

Understand too that just because a property is a house that it could be worth three times as much as a commercial office or that its use could be changed.

There are many discussions here about valuation to supplement the information I suggested, it's just a matter of deciding if you want to be in real estate or around it! Good luck

Rob Gillespie · Answer

Great question. 
First, it should be so freaking obvious that it is a steal that the only reason to pull comps is to see how much ridiculous profit you are going after!
Next, you can put your name on any dotted line for an option or a purchase agreement, just have an exit clause in case you misjudged the deal. For example, put your name, and or assigns and make sure that there is a line that the deal is subject to favorable financing, or partners approval, or maybe an inspection. You get the picture.  
Think of it this way, if you saw a 2011 Mercedes 
S class sitting in a front yard for sale for 5k, would you need to check values prior to sale, or just make sure the title is clear and the car is sound? How hard would it be to do a contract on that Mercedes and call the local Mercedes dealer and sell them the contract for 5K? This would put them into a car that is worth 100k for 10k, and you made a quick 5 grand! 
In closing I will use my favorite line," if you need a calculator to figure if the deal is profitable, you are about to pay too much" :D

Geovani Castro · Answer

I'm fluent when it comes to Real Estate terminology. I talk to agents throughout the week looking for properties for my buyers, it's just that my buyers give me a price range to work with when I'm looking for deals so I wouldn't know particularly how to run comps and how an investor judges FMV and ARV. Basically I want to see from an investors point of view. Which is I want to know how they arrive at their figures when they determine a propertie's market value and ARV.

Jeff S. · Answer

You could look for a real estate license text book from a used book store, library or college library. Understand what real estate people are saying.

If you have a job you could learn a lot by buying a home to live in. This could be a fixer that you repair and resell or rent.

Mike G. · Answer

This may not help you, but the easiest way to get comps is to ask a real estate agent who you trust.  Maybe you have a friend of the family who would be willing to work with you?  It's good to have an agent or two on your team anyway.

Account Closed · Answer

A very broad question.  You need to know what your potential buyers are looking for.  Having a buyers list is an important start.

If your buyer is looking to rehab and sell.  You will need to be able get good estimates on repair costs and find good comps to know what the after repair value (ARV) is.

Someone looking to buy and hold may have other criteria for a good deal.

A good deal though is not just about the numbers.  Location matters.  Zoning, soil, crime, schools, demographics, wetlands, and many other considerations matter as well.

When I'm looking at properties I also look at value add potential.  I never pay more than the property is actually worth though today.  Most investors will not buy potential.

Geovani Castro · Answer

Thanks Jeff for your quick reply. I've been reading on and off for about 4 years now. I know the terminology and get te gist of what investors do. Basically all I want to know is how investors typically run their comps so I know whether a property is a deal. But I won't lie I'm sure there's alot I need to learn. Could you recommend any books in regards to real estate investing?

Jeff S. · Answer

G, you are a long way away from putting your name on any dotted lines.

Best thing to do is to start with the basics. Learn some vocabulary, read the simplest real estate books and read posts here on BP.

Try to understand what investors are doing and why. Good luck.