How to know it's a good deal.

Question

So please excuse this being such a rudimentary question. But I'm looking to getting into flipping. It's safe to say that one of the most valuable skills a real estate investor can have is not only finding, but recognizing a good deal. How do I know there's a good deal in front of me, without actually getting the house appraised? Surely, I have to be able to quickly sift through dozens of houses to know which are worth looking into more. Am I supposed to look at comps, use Zillow etc? And then, approximately how much cheaper should I be trying to get a house for than what it is estimated to be valued at for the deal to be worth it?

Michael Lewis Lee · Answer

Hello Josh!  There is many things you should be informed on.  The demand overall in that area, especially population and job growth in the area then to rent or sell.  Also, you should consider the tax ramification.  12 months is the main time to consider ordinary income (which is more on short term ownership) or passive income ( which is usually a more long term ownership) which is taxed lower. Nearby sales comps will tell you what that house might be worth.  Use sales comps that are about 6 months or less.  The number of comps will also tell you about the demand in that area.  Pick an area that has good and frequent sales and do not worry about the competition.   Nearby retail development, especially big employers like hospitals and manufacturers and does the area retail commercial development fit your intention like for low income, middle class, or high class and does it fit your plans.  The area curb appeal, rating of the nearby schools, and the existence of nearby public transportation and a nearby stop for it.  The parking location and its type.  The nearby sales or rentals on the market going to mean more competition?  Does it have the most popular floor plan (like 3/2), if not can you add a bathroom without more slab?  Can you increase the value by adding something that would be on average in that area.  I probably missed a thing or two that should be considered.  Is that property within a mile from your nearest highway?  Is your site very accessive?  Good luck to you!