The Insider's Way to Predictable Real Estate Profits

by Jay Gottleib

When you ask most people how much they are willing to pay for a property, they usually say something like, "Well, the asking price is $275,000 . . . maybe I can bargain that down to $245,000."

That's how they decide how much they are willing to pay for a property. And that kind of thinking makes no sense. To make sure you make a profit from every deal, you have to "back into" the price you will offer by working the numbers.

First, Determine Your Estimated Sales Price

This is the price you will be able to sell the property for after you have improved it. Look at comparable sales in your area, determine whether the market is going up or down, and understand exactly how much your property will sell for.

Don't exaggerate this figure, based on optimism. Don't expect your property to sell for more than comparable homes, just because you think it will. It is that kind of unrealistic optimism that causes most people to lose money on real estate investments.

Second, Total Up Your Projected Expenses

These generally include:

• Closing costs - Total closing costs, both for the time when you are buying the property and the time when you are selling it too.
• Costs of renovations - Cosmetics, mechanicals, masonry, painting - everything.
• Taxes - And don't forget that the longer you hold the property, the more taxes you will pay.
• The cost of borrowing to buy the property - Your loan costs money, both at the inception and every month.
• Realtor commissions - Unless you can realistically expect to sell the property yourself, plan to pay realtor commissions when you sell it.
• Hidden costs - Depending on the age and condition of your property, you can expect that something unexpected will go wrong or need to be added to your list of renovations to perform. An older house can hit you with as much as 15% of its market value in unanticipated expenses.
• Insurance - Buy fire, liability as well as builder's risk insurance.
• Maintenance costs - You will have to hire companies to shovel the show, cut the grass, do post-construction cleanups and possibly protect your property from vandalism while it is vacant.

Third, Subtract Your Projected Expenses From Your Estimated Sales Price

For example, let's say that you realistically expect to sell a property for $375,000. However, your projected fix-up and other expenses total $125,000.

That means the maximum sum you should offer the seller is $250,000. Otherwise, the deal makes no sense. Actually, you should offer the seller less than that. After all, you are investing in real estate to make money. If you are not making money, what is the point of investing in real estate? So know how much you would like to make on the deal and work that into your estimates too.

Numbers never lie. Make them work for you, and never pay more than you should for any property. If you do, you have no one to blame but yourself. But if the numbers tell you that you stand to make a good profit, negotiate hard for the price that will allow that to happen. If the seller won't accept your offer, don't feel bad about walking away. There will be another deal. When it comes along, work the numbers to make sure it will earn you a handsome profit.

Jay D. Gottlieb is one of the real estate experts on the Trump University faculty.

"Flipping" is the buzzword of the year in realestate, it's on every major renovation show, in all the newspapers and realestate seminars that charge huge dollars on how to do it.

Flipping just means buying a property and reselling it quickly, as opposed to holding on to a property long term as a rental. Flipping comes in several varieties, most of which are legal and profitable, some of which are not.

With my experiance, I always tell my clients the money is made when you buy! Not when you sell.  Whether you are a seasoned renovator, a handyman or a first time buyer looking for a great deal the rule is always the same. Buying right does not always mean the lowest price, terms and conditions can be more valuable than price. More on this later.

Finding that deal is labour intensive, needs a lot of research and knowing the history in the area market place. That's where I can help. My resources and knowledge are my clients to use. I have a background in the construction industry for over 20 years, I am a licenced mortgage broker for The Mortgage Alliance Co. of Canada if you need financing, and a licenced realestate salesperson with Coldwell Banker Terrequity Realty and eager to find the hot deals. All this means is I can give you an advantange is pursuing your dreams of building wealth.

To get this free report "Seven Ways to Flip a Property"

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