Welcome to the SSF REI Newsletter for June. Each month, we pride ourselves in bringing the latest information to help you in your real estate business, and we know the ideas in this newsletter will help you find success with your investing.
Article of the Month
“Establishing the Value of Real Estate For Explosive Profits”
You’ve located the property you are potentially interested in purchasing, you have looked at it, and determined that it meets your basic investing goals. Before you pat yourself on the back for a job well done, you need to establish its value to avoid potential financial disaster. If you take the word of the seller, or the county tax rolls to establish its value, you could lose your shirt, especially in a real estate market that has seen values drop by tens of thousands of dollars within a matter of months.
Depending upon the kind of investor you are, you’ll utilize one of the three methods of establishing the value of a property.
You can also get a rough estimate of values in many areas by utilizing an on-line resource such as Zillow.com. Once you have your comparable sales figures, you’ll need to compensate for any differences, such as the lack of a garage, fireplace, or even a swimming pool. In order to compensate for the differences in square footage of your subject properties, you can divide the sales prices by the square footage of living space to come up with a cost per square foot.
If you’re experienced at estimating building costs accurately, and are aware of the current cost of building materials and supplies, the replacement cost method may be one which you will want to utilize.
However, it isn’t utilized very frequently. If the Replacement Cost method is one that you’d like to use to determine value, you could very quickly arrive at a figure by contacting a local contractor, and asking them how much they would charge you by the square foot to build a home in the area of your subject property. Don’t forget to factor in depreciation to match the condition of your subject property.
Income Valuation Method –
Once you’re able to determine the value of a property you can write an intelligent offer that doesn’t cause you to run the risk of overpaying for a property. Remember though, that real estate prices are extremely volatile right now, so make sure any properties you use for comparative purposes are recent sales figures. If you have accurate numbers, you can write precise bids that stand a greater chance of being accepted, and allow you to turn average returns into explosive profits.
Peter Vekselman has been successfully investing in real estate since 1996. He has completed over 1000 real estate deals, owned a construction company, been a private lender, and owned a property management company. Peter currently works with clients all over the US. http://www.CoachingByPeter.com