Real Estate Information: investing in real estate, property management, Real Estate Listings, Houses for Sale, Rental Property, Realtors

Step 5 - Price Check!

One of the most important concepts in real estate investing is to Make Your Money When
You Buy! To do this, you need to know what is a good deal and what isn’t. An analysis of the average market value, average price per square foot and the appraisal value will allow you to spot the deals.

To calculate the following formulas you will need to refer to the comparables you collect in Step 3.

Ave Market Value = average of the sales price of your comparables

A ‘great deal’ will be priced at least 10% or more below the market price
A ‘mediocre deal’ will be priced +/- 5% of the average market price and should only be considered if there is a large upside in property appreciation
A ‘poor deal’ will be priced 10 % or more above the average market price
Look online for property assessments in the area. Often your city will post this info online.

Ave Price Per Square Foot = average price per square foot of your comparables

This is useful for comparing properties of different house plans (sizes differences)
This calculation can be the eye opener to how good a deal really is. If the propery has a much larger house plan than the others in the area, it could easily be under priced.
Price per square foot is especially valuable when comparing the price of condominiums

Appraisal Value – this is determined by having a certified appraiser inspect the property. The cost can be anywhere from $75 - $300. It is strongly recommended in old large houses and can be used as great bargaining power to reduce the listing price. Check with the current owner to see if an appraisal has been done on the property in the last few years. If so, ask to see it! This information is very valuable at predicting the appreciation rate and determining if it is the deal you’ve been waiting for. If the appraisal value is much lower and you end up purchasing the property, look into a ‘skip transfer’ to refinance the house at a higher value and pocket the difference.

Congratulations!!! You now know how to discover a lucrative real estate investment. Your next step is to use the Real-Estate-Analyzer to go through these 5 steps with properties you are interested in buying. If you haven’t searched for any properties yet, go to the Search Real Estate Listings page of this website.