First and Foremost when investing in real estate, you must find great deals. Not good deals, great deals with plenty of equity, cashflow and multiple exit strategies. These types of deals can withstand worst case scenarios such as the bust recently where home values dropped approximately 40% in some areas and financing became extremely tight. Many new investors speculate, here are a few tips to find great deals.
Industry Standards
1. Max 70% – Total cost of purchase, fees and any repairs must be a maximum of 70% of the value of the property
2. Rents are 1% of purchase – A property that rents for $1000/mth should be purchased for no more then $100,000 or rents are 1% of purchase
3. Multiple exit strategies – With equity, cashflow and flexible financing you can sell at retail, sell to an investor, wholesale, seller finance a sale, lease option, rent and hold, refinance, possibly sell the note, sell the entity holding title to the property, quick claim deed the property to transfer title, etc, etc.
Real Return Real Estate(TM) Criteria
1. Approx 50% LTV – we buy properties fully remodeled at half the value
2. Rents are 1.5-3% of purchase – We usually pay around $50,000 for homes that rent for $1000, sometimes rents are 3% of purchase and twice Payment+Tax+Insurance. How do you like that positive cashflow!?
3. Multiple exit strategies – with 50% equity, tremendous cashflow and flexible financing we have unlimited options to make our deals successful and can withstand worst case scenarios. We only do deals we are certain are ‘SLAM DUNK’ or ‘HOME RUN’ deals.