It’s hard to tell whether or not you’re getting a good deal in real estate, especially when compared to the more mundane and everyday areas of your life. When you’re familiar with a product and its market, it’s easy to see when you’re saving or when you’re spending too much - just like when your favorite coffee creamer goes on sale.
In the world of real estate, however, new investors can find it difficult to calculate and understand large figures that they are unfamiliar with, leading to many shaky deals and missed opportunities. Some lucky investors come out with a great deal on their first few purchases, but how can you better ensure that you’re actually getting the best deal you can possibly get?
Understand and Identify Investment Goals
There are many reasons to invest in real estate property. Some like to do so for a quick house flip or turn around. Others want to have a property appreciate before selling it for more than they paid. Others like to build up their equity and credit with property investments. No matter what your reason for investing in real estate, you absolutely need to nail your goals down. Once you know exactly what you want, then you’ll know exactly how to get there. This is important when you consider the longevity and the weight of the investment you’re making. This can greatly factor into how much a deal is worth to you.
Double and Triple Check All the Numbers
When you look at a deal, you need to fully understand all of the numbers involved, including percentages and financial figures. Knowing mortgage rates, inflation, the after repaired value (ARV), closing costs, and other miscellaneous figures can allow you to fully see how much you’re committing to this deal and how it stacks up against other offers on the table. A lot of money comes into play when you’re talking real estate. Make sure you know all the numbers you’re dealing with and how they affect what you’re paying and receiving.
Talk to an Expert About Your Decision and Options
If you’re a new real estate investor, it’s absolutely imperative you consult with someone who is more knowledgeable and experienced than you. Show them the offer and see what they say. Don’t be afraid of talking about this with others: no one is trying to rip you off. Seasoned investors are important people to talk to when you’re starting out on this career path. Not only can they guide you when it comes to monetary affairs, professional and experienced investors can also clue you in to less-explored areas of investing, such as area knowledge and local housing laws.
Making the Final Decision
If you’ve identified your goals, considered all monetary angles, and talked with an experienced investor, then it’s about time you said yes or no to the deal, right? After you’ve made sure that all of your T’s are crossed and I’s are dotted, then yes, it’s time to make the final decision. As an investor, it’s your responsibility to make sure that you’ve made a wise investment and are willing to take responsibility for the property you own. If you said no to the deal, then continue on and repeat the process until you finally find one that's worth approving.