How to know if a real estate investment is good
How To Know If a Property Is A Good Investment
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Listen, you don't have to search very hard in the real estate game before you
get somebody that's going to come along and say, "Hey, I've got an amazing deal, you got
to check this out." And the reality is, it might be the most amazing deal but
there's a chance that it's a nightmare packaged like a present and when you
open it up, there's gremlins going to crael and rip your heart out, it's going to
be all bad nightmares. So how do you really know if the deal is
really good or not? That's what I want to share with you
today on Limitless Wealth TV.
I'm amazed at how many lessons hindsight has to
teach us by the time we wrap up an experience. In the game of real estate, my
favorite part is when we get to the end of the deal and I get to look in
hindsight because I started with an expectation of what I hoped would happen
and then when I get to the end, I'm looking at, did I actually get what I
wanted? And in the world of real estate, you are going to meet bird dogs, realtors
and people, they are going to tell you this is a good deal. Heck, if you work with me
and my team, we're going to say, this is a good deal and today's question is, how do
you really know if it's a good deal? Let's dive in. So imagine this scenario.
I'll never forget this happening to me. I have this realtor come to me and they
had this deal that was so incredibly good and so I met with them so that
they could actually show me the deal, they emailed it over to me and because I
was a seasoned investor, I was shocked at what I saw, whether this realtor knew it
or not, they had sent me a property with numbers so doctored up,
altered, changed, enhanced that it had taken a property was for sale and added
$200,000 of value to it that simply wasn't there and they
were telling me this was a screaming deal and it's either this person's going
to hell or this person has no freakin' idea what they're doing and I just
had to know which really was it and today's video is to protect you from
falling in line with people that are telling you there's a good deal and
you're taking their word for it versus do in the real sniff check. I want
to talk to you today about the sniff check. How did I so easily know that that
deal was not a good deal? Well before I teach you the principle, I want to share
with you something. The only way to really know what a house
is worth is when you sell it but we're buying, we're not selling so we're
trying to find a way to read this crystal ball and the best way to know
what something is worth is to take a look at the other similar properties
that have recently sold in close proximity and the feeling is, this home,
if it behaves enough like those homes then we should be good. To give you a
really simple example, let's just imagine for a moment that we were trying to buy
a condo. I don't do condos but let's just say we
were buying a condo because there's a row of a hundred of them and in the last
six months and they're all the same minus six some have nicer condition,
maybe one has tile, one is linoleum, they're the same, okay, we got a hundred
condos and you have a condo and it's time for you to sell this condo and you
have five other neighbors in the last six months down the road that
successfully sold their condos, all of them for a hundred thousand dollars, what
do you expect you would probably get for your condo? Probably a hundred thousand
dollars, right? Because in the last six months, these other almost near identical
properties sold just the same, that's what a good CMA is trying to do. What
this one realtor had done and presenting me this deal, is they took this tiny
2,000 square foot home and they compared it to a 5,000 square
foot home that was in the river bottoms in one of the nicest parts of town and
the house was hundreds of thousands of dollars worth more and when they put it
into the computer system and compared them like, hey, let's say that this
$200,000 home is like this half a million and you know what that
half a million dollar home did? It bumped up and skyrocketed the value of the
other home, that was a misjudgment, that was a mistake, that was just blatant
error and I'm just praying for the soul of that human being that they had no
idea what they were actually doing in fact, that really had to be the case so
how do you really know if you got a good deal or not? You need to first of all
request to CMAm a comparable market analysis. Right now in the United States,
there's several different of these systems but what they all are designed
to do is to take the subject property, the one that you're looking at buying
and they're going to compare to other properties. Now who chooses which
properties to compare it to? The realtor does and in my world, I do. Right now if
you're brand new, you're going to your realtor, you're going to trust what they
say but I'm not telling you not to trust your realtor, I want to train you
how to trust yourself and how you can verify information rather than just
trusting information at face value so you don't find yourself getting into the
wrong kind of investment so as I share that with you, here's what you need to
understand. When a realtor is performing this computer analysis, a CMA, they're
going to take the property that you're trying to figure out the value of,
they're going to do this comparable market analysis and a list of homes are going to
come up that have sold an area. The most responsible thing that realtor can do is
find the closest homes that are the most similar in style so I want you to write
down some of these things. Number one, proximity. You don't want to look at
homes that are a mile away or two miles away or three miles away, you're looking
for homes that are around the corner as much as possible.
Number two, homes that are similar. Don't compare a single-family home to a condo,
don't compare a million-dollar home to a to a small simple single-family home.
You're looking for a home, it's like if this one's 2,400 square feet on a
split-level with 1,200 down and 1,200 down, up and down, then what am I looking
for? Split-level homes with similar square
footage. I'm looking for similar bedrooms, I'm looking for similar bathrooms and if
I can find all the homes and by the way, the more the merrier but you need at
least three, if you're selling a lot of homes in your market, you might have
30 to pick from, maybe a hundred to pick from. If it's been really slow in
the market, you might not even have one or two and then it becomes a big
guessing game but if the market's moving in you've got homes have sold in the
last six months, take as many as possible that are as similar to yours. Compare a
3-bedroom home to a 4-bedroom home maybe but not a 5, not a 6. So you get them
all the same and then at the end of the day it's going to spit out a number and say,
well, if you wanted to compare it to these very similar homes that sold, this
is what it's worth. I'm telling you right now, you don't have to be an experienced
investor to pick that report apart, all you're going to do is look at across the
board because it'll stack up the homes next to each other, square footage, square
footage, square footage, square footage, toss out the anomalies, toss out the
weird ones and ask questions, ask why is this one different?
Oh, well, that home was are foreclosure, it's like, do we really want to compare to our
foreclosure? This isn't a foreclosure. No, we probably don't.
Hey, this home is in pristine condition, this home is not, do we really want to
use that as a comparison? Hey, this home is 500 square feet bigger, do we really
want to compare to that one? Hey, this is a four car garage and this is a two car
garage, do we want to compare that? The system will make a financial adjustment
but it doesn't do anywhere near the justice and this is the part that I want
you to write down, the system will make adjustments but it doesn't do anywhere
near the justice of just picking good comparables in the first place so that's
really what the game comes down to, what I will do if I'm sitting down with the
realtor I don't know, I will actually sit down with them when they do that report
and I'll say pull up the list of properties and then we'll look at them
together and select them and I'm actually going to help use their license to
generate the report I want because that's really, I'm going to put my highest
confidence into a good report that I helped create. So friends, at the end of
the day, if you want to know what deals good, do not take someone's word for it,
instead learn how to read the numbers and understand the basic science of a
comparable market analysis. If you want a better understanding of this or if any
of this video went over your head, I want you to click the link, when you go there
on my website, you can download my book in PDF format, e-book and audiobook
totally for free. Some of you like audiobooks, get the audiobook but I want
you to also get the PDF ebook because I want you to skip to the section that
talks about performing a comparable market analysis and I'm really going to
point out step-by-step exactly how you do that, that's the best gift that I can
possibly give you today. At the end of the day, it's going to come down to aligning
yourself with people of honesty, integrity with a great track record, not
so you can trust them but so that they can do their part to present you with
accurate good information in the first place and then you can learn how to read
and interpret that information to make good choices that you feel good about. No
gremlins, nothing climbing out of the package that's going to be bad, smells weird.
Friends, you have the ability to look at these deals and know what's good and know
what's not. Download my book, click the link like and mention over here
get you some more information and get the PDF version so you can see all the
visuals and not just audio wise here and that's going to help train you up to
be a wise smart investor. A little bit of knowledge goes a really long way when it
comes to this game of real estate and we're friends, right? So what I want you
to do, subscribe, hit the bell so I can notify you when our next videos come out
so we can keep training you how to be the smart investor.
Related queries:
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how to know if an investment property is good
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