Comet Settlement Real Estate

Knowing what a Good Deal is – Is the Key to Success in
Real Estate.

Dear Investor,

Take this little survey: The most important key to Real Estate Success is:

1. Finding Motivated Sellers

2. Funding Your Deals

3. Negotiating

4. Knowing a Good Deal when you see one.

Yes all of them are important. And if you answered #4 – you’re right
on the money. Why, because if your deal is a not good one, all your other skills
and marketing and power will not make you money, and may even lead to disaster.

On the other hand, if you can unfailingly target good deals, you will always
be successful and all the other skills and your marketing methods will serve
to increase your success.

What is a Good Deal?

It’s a lot easier to state the question than give the answer. Why? Because
it depends on many factors like:

- Market value and purchase price

- Expenses, carrying costs, repairs

- Cashflow and profit

- Holding time

- Loan terms

- Risk factors

- And more . . .

And most importantly, it depends on the type of deal you’re doing. For example,
if you have a loan on a property that you intend to rent or sell on a lease
option, the terms of the mortgage, future tax increases, and current area rents
are critical to consider in insuring a positive cashflow. However, if you are
planning to do a short rehab job, and sell or just flip to another investor,
rental income is irrelevant as are future tax increases.

It’s What You Don’t Think About that Can Get You

The thing that trips up many investors, is that in our enthusiasm to do a deal
that we’ve found, we don’t take into consideration “hidden” costs.

For example, if you’re doing a renovation and you’ve done your due diligence
on contractor costs, have you also considered your carrying costs such as mortgage
payments, utilities, etc. not only during the renovation, but also the time
it will take to sell and close with a new buyer?

Or if you’re using a realtor to sell the property, have you calculated the effect
of a 6-7% commission and the closing costs the seller will pay on your bottom
line. A 10% profit margin can shrink pretty quickly to zero under those circumstances.

Read Those Loan Terms Carefully

Or have you taken into account, not just your loan to value ratio on the property,
but your investment to value ratio (e.g., the total of all outstanding loan
balances plus the additional funds you’ve put in from your own cash or borrowed
from your home equity line or friends and family)?

And on the income side, have you calculated how long you should hold the property
to receive a significant profit from the pay down of the mortgage. With a new
30 yr loan, you may have to wait 5-10yrs to get the same pay down you’d get
after a few years from a 30yr loan that’s been seasoned for 10 years.

And did you carefully read the note contracts to take account of adjustable
rates and pre-payment penalties?

Checklists aren’t Enough

A number of courses and real estate gurus will give you checklists. That’s helpful
in not forgetting something, but it doesn’t help you with the laborious and
complex task of putting all the numbers together.

There’s just something about working with the actual real numbers, that brings
the reality of the deal into actual focus. Our hopes and wishes dissolve before
the actual profit and loss calculations.

Moreover, the numbers can pinpoint the weaknesses in a deal, and point the way
to a solution. No mere checklist can do that.

What About Risk?

I think you’ll also agree that a Good Deal, is not just High Profit, but also,
most importantly Low Risk. Many a dream of a golden future has come crashing
down because some little thing went wrong.

Many a would-be mogul, is now working at a 9 to 5 because their killer deal
was wrecked by an unforseen glitch. This is what we mean by high risk.

The successful investors do deals with low risk. Deals that are so robust that
even if almost everything went wrong they’d still come out with a profit.

Build In A Safety Margin

For example, suppose you have a rental with a positive cashflow. Is your cashflow
high enough or your option payment big enough, that even if you had to evict
your tenant for non-payment and it took you 2 months to fill it with another
cash-paying customer, you’d still come out ahead?

Or, is your investment to value so low that even if you had to offer your buyer
a big discount for a quick sale, you’d still walk away from the closing table
with a fat check?

In real estate things can and usually do go wrong. It’s Normal. So, wouldn’t
you like all your deals to have these kinds of safety margins?

Fixing the Problems with Your Deal

Now, if you knew in advance that your risk was too high, or your cashflow was
too low, or your profit over the life of the deal wasn’t enough, you’d want
to think of solutions.

This is what is meant by being a “transaction engineer”. Find the
solution, fix the problem, test it on the numbers, and then negotiate it into
the deal.

And if you can’t find a solution (but there always is one) or the seller won’t
accept itNEXT!

I can tell you from real experience, a bad or risky deal is NEVER WORTH DOINGno
matter how enticing the vision. The personal stress, heartache, and loss of
confidence can be even more harmless than the potential financial loss. In the
words of an ex-president’s wife, if you are faced with doing a bad dealJust
say No!

What’s the Answer?

Some experienced investors have a feel for good deals, and can avoid trouble
most of the time. Others only do a particular type of deal and use a rough “rule
of thumb” to evaluate their risk and profit.

However, what’s really needed is a “calculator” or computer program
that will take in all the variables and

1) Calculate the exact profit and cashflow for all kinds of deals.

2) Measure and Evaluate the financial risk in the deal

3) Use standard and safe criteria for what constitutes a good deal

4) Suggests alternatives to fix what is wrong

The Deal Evaluation Tool

We’ve taken tons of real estate courses and looked at all kinds of real estate
software, and nothing has come close to what we as investors need. So we decided
to create our own Deal Evaluation Tool.

Well after several months of testing and improvement, we now use it for all
our dealsshort sales, subject to, lease option, rehab, wholesaling, and
even some commercial.

Since we can try out different “what-if” scenarios, it’s kept us away
from some real pitfalls, and helped us negotiate better profit margins. We wouldn’t
“leave home without it”.

Constantly Meeting The Needs Of Investors

Well, some other investors wanted to try it, so we put it on our website. Much
to our delight we now have a community of users and a users group that shares
their insights about doing deals and creative ways to use the Deal Evaluation
Tool.

Their suggestions, are leading to a rapid improvement of already incredibly
useful tool. There is just nothing out there like it. We’ve also put a demo
up for those investors who would like to get a feel for using it. And we hold
classes for new users.

Knowing all the numbers, and having evaluated our risks with the Deal Evaluation
Tool gives us more confidence in negotiating deals with sellers and more consistent
high profit real estate deals.

And that’s what we all want, isn’t it.

Richard Odessey along with his wife Michelle have the premier site on the internet – http://www.InvestorWealth.com for training and teaching real estate investors
to do high profit deals. They offer regular Free Teleseminars by the top real
estate investors in the country, the best tools to enhance your real estate success
like the Deal
Evaluation tool. They also offer 4-8 hands-on training seminars with personal
advice from experts that investors can take from the comfort of their home. Richard
and Michelle have been investing for over 5 years and personally teach and mentor
other investors.

One of the quickest ways to real estate profits is through preforeclosures. What is a preforeclosure, exactly? A preforeclosure takes place from the time the bank gives notice of default to the time the house sells at auction. Typically, this is around the time of 90 days into default, depending on state law.

The key to preforeclosure investing is equity – the difference between what a house will sell for and what is owed on the house. Preforeclosures allow you to buy a house for less than fair market value, creating immediate equity for yourself.

Preforeclosures are your opportunity to buy low and sell high, maximizing your profit quickly. How can you cash in on preforeclosures and exit with the maximum profit?

Here’s how to do it.

Step 1. Find and Secure the Preforeclosure

You must submit a written contract directly to the owners in order to buy a preforeclosure, since the property still belongs to them during this stage. Ads in newspapers and subscriptions to preforeclosure listings will help you locate the properties. (See more about this in article 1.) Once you’ve located a property, you’ll need to do the following to screen them and prequalify your homeowners:

Buying foreclosures can be extremely profitable for real estate investors. However, most of these homeowners are mortgaged to the hilt. They have no equity, and big loan payments. In fact, many actually owe more than the property is worth!

Most investors will walk away from these deals because they see no obvious profit. However, you can “create” your own equity by negotiating a “Short Sale” with the bank or lender.

What is a Short Sale?

The concept behind the short sale is simple: your goal as a real estate investor is to convince the bank to sell for less that is owed as payment in full. Of course, this concept is easy – buy the foreclosure from the bank at a big discount, sell the real estate, and make money!

How to Negotiate the Short Sale with the Mortgage Holder

Once you have your secured a contract with the homeowner and have your paperwork in order, you’ll be ready to deal with the loss mitigation department of the bank. Short Sales success relies on dealing with the loss mitigation department at the bank. Although most lenders look at short sales as a necessary evil within the lending industry, that doesn’t mean that the bank will just roll over and do your bidding.

Understand the Bank’s Perspective

With foreclosures at a 52-year high, the loss mitigation department at the bank is busy, if not highly overworked. Turn this disadvantage into an advantage – sell them the benefits of your short sale.

Short sales contracts help lenders unload unwanted property and spare many expenses associated with the foreclosure process. These expenses include, but are not limited to, court costs, bankruptcies, repairs and marketing. This is in addition to the $300,000 to $800,000 (or more!) normally held in reserve by lenders. Federal regulations require this reserve, which is usually many times over the actual price of the bad debt.

As the investor, keep these benefits at the top of your mind. After all, it’s up to you to convince the lender that cutting their losses short is the best option.

It’s time to hone your negotiating skills. Here are 3 Steps to help you out.

Step 1: Have Your Paperwork Ready

There is paperwork that all lenders will require in order for you to submit your offer for the short sale. Second, many of the larger institutional lenders have their own short sale package (their own forms to be filled out and signed).

Since many of these forms have to be signed by the homeowner(s), it’s best to have them with you when you meet with the homeowner to work out a deal. At a minimum you should have the homeowner fill out and/or sign:

Buying foreclosures can be extremely profitable for real estate investors. However, most of these homeowners are mortgaged to the hilt. They have no equity, and big loan payments. In fact, many actually owe more than the property is worth!

Most investors will walk away from these deals because they see no obvious profit. However, you can “create” your own equity by negotiating a “Short Sale” with the bank or lender.

Why Short Sales Don’t Work

However, even experienced investors fail to create successful short sales, because they do not know the most important secret of all when doing short sales. Without this secret, an investor with the greatest negotiating skill will fail. Without this secret an investor armed will all the right paperwork with fail. And without this secret, even an investor with an air-tight case of low value including repair estimates, etc. will fail.

It’s not that negotiating, paperwork, and a convincing case are not important. It’s just that you’ve overlooked, the most important element that lenders use to determine what they will take for a property in default. It is therefore

The Ultimate Short Sale Secret

Ok, I won’t keep you in suspense. Here’s the secret: In order to get big discounts from a lender on a property facing foreclosure, you must control the Broker’s Price Opinion. (BPO).

What is a BPO? In short, it is a value appraisal. When a short sale package is submitted to the bank, they send out a real estate agent or Broker to the property to judge its value.
The broker or agent handling the BPO is working with the bank. Their job is to simply visit the property and give their opinion on its value “as is”.

And here’s the key: it’s a broker’s price OPINION! And since opinions are subject, you have the ability to Influence that opinion. Learn how to do that and you can create $10,000’s in your bank account with little effort.

Step 1: Do Your Own Research

Before you’re ready to influence the BPO, you’ll have to start out with doing your own research and preparing your short sale package effectively. What should you include?

By this time, you should have already done a walk-through of the property. If you have not done so already, inspect the property (preferably with a home inspector or real estate broker of your own) and gather the following: