Real Estate Investing – How to Avoid Losing Money
If you’re just getting started with real estate investing, you’ll want to avoid purchasing rehabs. Rehabs are very risky investments. You might see a house with a lot of potential, but there might be something you don’t see. Which would inevitably lead to underestimating repairs and causing you to lose money. Don’t lose money by making other easily avoidable mistakes.
However, if you’re in the business of pretty homes, the risks are minimal. The only way you lose money on a pretty home is if you overestimate the value of the house. This can be done by paying $300,000 on a home when its market value is only $250,000.
How to use Comps to Avoid Losing Money
First things first, what are comps?
They are comparable homes that have been recently sold near the house you’re looking to purchase.
Now that you know what comps are, it’s time to utilize them in real estate investing, so you do not lose money.
In order to determine the fair market value (FMV) of a home, you will need to look at similar properties that have been sold in the area. To do this, you’ll want to use the following criteria to determine which comps will help determine the market value of the house:
- Square footage
- Number of bedrooms
- Number of bathrooms
- Lot size
- Vicinity to subject property and sold recently (Do not look at comps from a year ago)
You might be asking, how does one find this information? You can find this data on the MLS and on ProfitGrabber.
Find Comps Using the MLS and ProfitGrabber for Real Estate Investing
If you’re not familiar with what the MLS is, it is short of Multiple Listing Service. You can gain access to this by either becoming a realtor or asking a realtor for the information.
ProfitGrabber is a software we own that provides data on homes that will not appear on the MLS. Such as homes that have been sold by the owner, sold at auction, and more.
The MLS, unlike ProfitGrabber, will include descriptions of the property. This information can be useful to determine why some homes have sold for more or for less than comparable properties. However, you’ll want to use both in order to paint a clear picture to understand the true fair market value of the home you’re looking to purchase. This will prevent you from overpaying and losing money on your investments.
Now that you know how to find comps, what applications/software to use, you are now ready to invest in real estate.