Mistake #1
They take TOO Long. Good deals don’t
wait around for indecisive people. Many people “think a
deal to death.” One way to lower your anxiety level with
a deal is to move forward provisionally (i.e. with a
clause of some sort.)
Mistake #2
They trust the seller’s numbers. Even if
there are only good intentions, most sellers just aren’t
knowledgeable, and they are inherently a bit biased.
Mistake #3
They trust appraisals. An appraisal
really isn’t meaningful, unless YOU hired the appraiser,
and YOU gave the instructions, and YOU are handing the
appraiser the check.
I can influence an appraiser to appraise a “$100,000”
house for as little as $80,000 and as high as $120,000
(or more). That’s a 20% variance! That’s a lot to have
in a marginal deal. So take any “appraisal” the seller
hands you in the spirit that it was intended--as a
MARKETING piece!
Mistake #4
They do their math in pencil. The next
time you catch yourself thinking it’s okay to “fudge”
your numbers a little to make the deal cash flow or the
rehab payoff, BEWARE! Some investors have a tendency to
“play” with the number a little to make them show a
marginal deal is better than it really is.
Mistake #5
They overestimate market rents. This one
happens all the time. The way you know what a house will
rent for is to do a market rent survey. The rents listed
in the paper may or may not be accurate.
Mistake #6
They overestimate “as is” value. So many
investors forget that to turn a house in 60 days or less
requires the price to be REAL--not pie in the sky. Be
conservative in your estimate of value going into the
deal. The worst case then is that you make MORE money
than you thought you would!
Mistake #7
They get bogged down in process. Use a
“Layered” Approach: I will be talking about this
innovative way to analyze a deal FAST on Real Estate
Radio.
Mistake #8
They worry about the house on the first
layer analysis. On your first pass, you are only
concerned about three things:
-
Why is the seller selling
(motivation level)?
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Is there any equity?
-
Would the property cash flow if you
held onto it?
Mistake #9
They underestimate the time it will take
to flip, fix, fill, or sell. I’ve bought a lot of houses
from investors who got stuck with holding costs too much
for them to handle. Be careful here.
Mistake #10
They SKIP analysis until the deal falls
apart on it’s own. Wishful thinking isn’t pretty.
Bonus Mistake #11
They hide behind analysis when they are
AFRAID to act!
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Foreclosure Process