The Fine Art Of The Real Estate Deal

To be truly successful in the real estate investment business

, you must develop the art of the real estate deal. This can be quite challenging, but it can also be quite lucrative, if you do it right. With enough time and attention, you can create a deal that will be appealing to prospective home sellers so that you can increase your inventory and boost your home buying business.

It's important to come up with a workable formula that you can use when calculating your offer. The more reliable your formula, the more effective your offers will be. Fortunately, through trial and error, a certain formula has been established which seems to work in the majority of cases.

In order to be competitive in the marketplace, if a property is under $100,000, you should use 70 percent of the after-repaired value as your baseline. For a property over $100,000, you should use 75 percent. This formula should make you competitive with most individuals who are in the house buying business. Granted, home buyers who purchase one home a month or one home a year might be able to swing 80 or 85 percent of the after-repaired value, and you will not be able to compete against that. Fortunately, however, you can compete comfortably against the rest.

Many people have been trained to take 70 percent as the maximum. But, through experience, it has become evident that, with houses above the $100,000 range, 75 percent provides greater flexibility in being able to aggressively acquire a given property.

An exception to this formula would be a 'subject to' deal, in which you would use the figure of 85 percent. In such a case, you take the after-repaired value times 85 percent minus your repairs. Then you have a starting point for making your offers.

If you were to have no formula in mind, you would have no starting point, and that would make your dealing difficult. Without a starting point, the offers you would come up with would have no real relevance. That is why calculating a formula is so crucial.

It's true that the formula may not be fool-proof, but it remains the best means available for coming up with good offers. Without a formula, you would be at a total loss when dealing with potential sellers. With a formula in place, you can deal in confidence, knowing that you are basing your offer on workable numbers.

by: Alan Cowgill

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