The life and times of an Arizona Investor

This will be my personal journal to document my failures and successes during my real estate experiences in Arizona. All stories, thoughts, and successes will be documented..

Tuesday, December 06, 2005

The "polished" technique for analyzing a deal

I'm about to share my techniques in analyzing properties. I 've analyzed over 100 properties in the last several years and I've learned several critical lessons.

I created a system that has been working well for me. Its probably not the quickest , however, when you have the knowledge to buy properties using sub-to, l/o, seller financing, wraps, conventional , hardmoney, and partner ships, you need to spend some time, you know?

In my marketing, I usually have people call me, so I have a finely tuned script that works very well for me. Its natural now, and I speak w/ confidence that makes the conversation go better. My favorite questions to ask are, "Sounds like a wonder property, why would you ever consider selling it? and "What's more important to you , getting a quick sale or getting top price?" When your in the business of motivation, these are critical questions.

Ok, when I determine that a call does not qualify, I hang up quickly. However, if its a deal (motivation in one form or another) I get more information and schedule a meeting at that time. Before I meet with this person, I do the following:

1) I have a form that I put all of the information that I have gathered. I list motivation level, and all the facts that the seller has given me. It helps to look at all the facts to tell the seller's story. I also document which piece of marketing he/she called on. I get loan info as well.

2) I go to the assesor's office to gather more information. I get info like names on title, purchase amount, purchase date, tax assesses value, and much more. This is a great check to see if the seller is telling the truth in his facts (Actually, I never caught anyone lying to me)

3) In my county, they have aerial photos of the complete city. Its awesome. I can see the neighborhood, where the house is located on the streer, calculate exact lot sizes, and position the property on the lot. This is very useful especially when verify lot size for new construction. In dumpy neighborhoods, you can actually see the trash in the back yards, and run down cars.

If your county doesn't have this, I suggest you use the new goggle software that pretty much does the same thing. I still need to check this software out.

4) Spreadsheet - I plug in all the numbers for the potential scenarios and project profits. Usually the unknowns are repair costs, because I know how much the lenders charge for different loan types. I run the numbers under two scenarios. 1) Rental or 2) fix and flip I never take a property with significant negative cashflow so if this scenario doesn't work , its a fix and flip. Actually, in my market, to make a rental work you need to be in the 70-73LTV.

There are exceptions: If its single-wide, I run the numbers for cashflow. If its a property that a new house can be built on, than the numbers are run for the existing property and new property under a rental or re-sale scenario.

So, there you have it! After doing this, usually 15 - 20 minutes, I decide if I still want to go the the house. If its questionable, I will call to dig into motivation. I NEVER talk numbers over the phone. Here is a critical lesson learned. In all of my deals, the numbers initially didn't look great. After establishing a relationship, negotiations turned into a deal. That is why if motivation is high and numbers are so-so, I go anyway. Don't expect to have a seller call you up and say, "Hey, I want to sell my house to you for 60 cents on the dollar, can you please come by now?'"

Also, if I go to the house, I always make a offer! Always! The offer is a price that works for me, not the seller. After spending this much time, you don't just walk away. Remember, its a numbers game, even if the seller doesn't accept your offer today, maybe tomorrow. That reminds me of the other critical lesson, always touch base with these people in a few weeks. You will be more sucessful if you do.

Good investing,

|| Bginvestor, 1:34 PM


Very good tips, B - thanks for sharing. Having read basic scripts and doing it myself, it really isn't that hard. Sure, I bumble and fumble my words occasionally, but like anything else it takes practice. I'd even suggest having a friend or spouse play the homeowner and do situation analysis skits. It will help you think quickly when situations arise you haven't thought of before. Another thing worth noting (and maybe you did) is that the VAST majority of calls will be from people who want to sell their homes at retail prices, so don't get discouraged if you get 10 callers and all 10 want you to buy their home for top dollar. Caller #11 will probably be THAT motivated seller you are looking for.
Blogger Steve, at 5:38 AM  

That's right! There's some tire kickers, but if you ask a few questions, you can filter them out quickly.

Good luck w/ marketing

Blogger Bginvestor, at 8:54 AM  

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