Video footage of Than Merrill From A&E’s “Flip This House” Teaching Powerful Investing Techniques For Real Estate and Evaluating A Real Estate Investing Deal

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By Than Merrill

To learn about Real Estate Marketing, look at Marketing For Deals or to attend Than Merrill’s exclusive weekend seminar, check out the Marketing and Wholesale Bootcamp

At my real estate seminars I am often asked by my students what area of the business they should study first. With so much to learn and so many different niches it can sometimes seem overwhelming for many new investors. I see a lot of investors flounder the first couple years because they don’t know where to spend their time. I started buying rental properties and quickly learned this was not the niche to begin with. Likewise, I spent a lot of time studying areas of the business which were meant for year three and four of my development. I strongly urge my students and most investors to start out wholesaling and rehabbing until you build up significant capital reserves. However, whatever your niche of choice is you must understand and spend significant time studying how to find deals. In fact, FINDING DEALS SIGNIFICANTLY BELOW MARKET VALUE is your number one job. In order to do this you must begin to think of yourself as a marketer first and real estate investor second. So congratulations you are NOW A MASTER MARKETER not a real estate investor.

Real Estate Investing Basics Tip #1 – The Best Investors Understand Marketing

Marketing is the first area of the business you should study as a beginning real estate investor. Marketing is what makes the phone ring and generates leads. Leads are the lifeblood of your business. They are the oxygen your business breaths. The more leads you have the more money you will make. If you don’t have leads, then you won’t buy any properties. If you don’t buy any properties then you can’t make any money. If you can’t make any money then you can’t build a business. As a result you should spend the majority of your time figuring out how to get your phone to ring with motivated sellers. (The same thing can be said for dating!)

Successful marketing is an art, and those who understand marketing set themselves apart from other investors. There must be a mindset shift as an investor. You are not in the business of flipping homes. You are in the business of generating leads from people who want to sell their home under market value. If you can do this you will control the market and you will figure out the rest of the business very quickly. If you have a potential $80,000.00 dollar pay day on the other end of the phone believe me you learn quickly. (Ask me how I know this!)

There are many different forms of marketing you can utilize to get your phone ringing. Direct mail, billboards, TV, cold calling, and networking are all marketing strategies you can use to find deals. The key is to narrow down your market and find your target, develop a compelling message with an irresistible offer, and consistently touch these people with multiple marketing mediums. Then you will want to develop marketing systems so you can repeat this process over and over again.

Real Estate Investing Basics Tip #2 – Wholesale Properties to Build Your Cash Cushion

Once you find the deal now you have to find someone who is willing to buy the deal from you at a higher price. This is where wholesaling comes into play. Wholesaling is the business of finding bargains and selling the deals to bargain hunters at a higher price. You are not adding value to the property. Wholesaling properties should be essential part of every real estate investors business. It is a way to generate income with little to no risk. Many times, you never take ownership of the property – you simply are the transaction coordinator. In essence, you are bringing a buyer and a seller together. Through your marketing efforts, you locate deals and then you assign them to other investors that you locate through your various forms of marketing. If your marketing machine is in motion, you should have no problem finding buyers. Successful marketing and networking in the real estate community will enable you to find wholesale buyers.

Real Estate Investing Basics Tip #3 – Rehabbing for Large Profits

Rehabbing is when you redevelop the property yourself instead of wholesaling the property to someone else. This is where the larger profits lie. The reason is you will be selling the property to a retail buyer who will be willing to pay full market value for the property as opposed to a another investor who is looking for a discount.

Rehabbing is an entire business in itself and there is a lot you need to learn about this niche. It is important if you choose to include rehabbing in your business that you spend time educating yourself first. Learning pricing of labor and materials as well as whom are the qualified contractors in your area is essential to rehabbing properties.

Being able to add value to properties through renovations is a not only very profitable, but also very rewarding. You are providing a great service, not only to the city in which you do business, but also to the end buyer of your newly remodeled home. When you become experienced at rehabbing you will have the confidence to be able to take on projects that many people would never even consider. This separates you from the other investors and creates more opportunities for you in that real estate market.

To find out more about our life changing Real Estate Investing Courses and Real Estate Investing Seminars, see them using the corresponding links or email us at info@fortunebuilders.com

By Than Merrill

To learn about Real Estate Marketing, look at Marketing For Deals or to attend Than Merrill’s exclusive weekend seminar, check out the Marketing and Wholesale Bootcamp

Being able to quickly and accurately evaluate real estate deals is one of the most important skills you can acquire as a real estate investor. Even with a great marketing plan in place and when generating a ton of leads, if you can’t differentiate a deal from a dud, you will find yourself spending too much time trying to make chicken salad out of you-know-what. First we will explore the five essentials for deal evaluation.

Five Initial Essentials for Evaluating Real Estate Deals

The following six initial essential skills for deal evaluation are important factors in helping to determine whether the lead you are evaluating is a deal or a dud. Furthermore, you must be able to evaluate a deal quickly otherwise you will never be able to increase the number of leads you look at in the course of a month.

After determining the essentials, and realizing that there is money to be made, the deal requires further evaluation to confirm all your initial figures, assumptions, and expectations. If you have prescreened your lead properly you should have most of the six essentials solidly in place before doing any further evaluation. But what are these essentials?

Step One: Determine Motivation

The first essential is the seller’s motivation for selling their property. This is readily obtainable by asking a simple, concise question, “Mr. or Mrs. Seller, is there a particular reason why you are interested in selling at this time?” You will find most motivated sellers will readily divulge this information, and those who question why you need this information typically have no motivation to sell. The answer to this question will not make or break a deal but, the answer is a great starting point in separating the deals from the duds. If the seller responds by saying, “I’m just trying to see if I can get my price…there is probably little motivation to sell and it is unlikely to result in a workable deal. On the other hand, if the seller responds by saying, “The property needs a lot of work and has been vacant for a while”, you may have a lead that justifies spending more time and paying closer attention.

Step Two: What is the Least the Seller Is Willing to Take for the Property

The next important piece of information you need from the seller is how much they are currently asking for the property. This is one of the most important questions you need to ask during your initial phone conversation. This will help determine whether or not the property is worth looking at and give you a starting point in the negotiations. Depending on how well you know the neighborhood you can sometimes determine the likelihood of a deal from the answer to this question alone. Occasionally you will have a seller who openly says “I am just looking to get out of debt.” This response doesn’t necessarily mean the deal is a slam dunk, as he or she may owe more than the property is worth, however, a response of this type always corresponds with some level of motivation. We will need more information to further classify the lead as a deal or a dud but seeing such motivating factors is a step in the right direction.

Step Three: Determine What the Seller Owes

The next important information about the property and general circumstance of the deal for us to determine, is the seller’s level of debt. This is an important piece of the overall equation and you should begin determining this in your initial phone call with the seller based on the lead interview sheet. Be sure to determine the total debt against the property and the composition of that debt whether it be a first mortgage amount, second mortgage amount, judgment lien amounts, IRS lien amounts, or some other form of debt. After you know the debt information and how much the seller wants for the property you can infer how much equity the seller thinks he has established. Again, this amount is just the seller’s perception of how much he or she is initially willing to sell the house for versus how much is owed.

Step Four: Estimate the Repair Costs

During you initial conversation with the seller try to determine a ball park figure for the repair costs for the property. Now, being the trustworthy people that all sellers are (mild hint of sarcasm), they always portray their property as being in much better condition then it actually is. There are a few leading questions you can ask that will make the seller divulge a bit more information about the property than might otherwise come to light. Asking the seller if the property needs work will probably get you nowhere. However asking, “If you were planning on staying in the property for an additional two to three years is there anything you would fix or replace?” This pointed question will go a long way toward helping you determine how much work the property needs and whether or not the property is worth visiting.

Step Five: Determining the After Repair Value and the As-Is Value

The final two pieces of initial information you need to properly classify the deal as worthwhile or not are the ‘As-Is’ and ‘After Repair’ values. To do this you will need access to comparable sales or “comps” as most real estate investors call them. You can get these comps from Realtors who use the Multiple Listing Service or online from a variety of different services. You want to locate comps that are geographically close to the property (1/2 mile or less), and similar in size and style to your subject property. This will help you determine the After Repair Value or what the property is worth when you are done fixing the property. These comparables will also help you determine the As-Is value of the property or what the property is worth as it sits right now. Like the repair figures, these values are only estimates until you can actually perform a more detailed on-site evaluation. At this point being aware of market values and the selling price of properties in the neighborhood in question becomes a very important piece of the puzzle. The better you know the specific area, the more accurate your in-office As-IS and ARV estimates will become. Knowing your market area well strengthens your ability to evaluate any deal.

To find out more about our life changing home study courses and live seminars, see them using the corresponding links or email us at info@fortunebuilders.com