How to Kill a Deal While Investing in Real Estate
Finding a new deal today may not be all that difficult, however, turning your new found investment into a solid deal takes a little more effort and diligence. Deals can fall apart as quickly as they come together if you are not doing your homework! I want to share a few tips with you on how to keep your deals together when you are performing any one of the investment strategies I teach. When doing a wholesale, you have to keep a couple things in mind. First of all, you need an escape clause in case it turns out that you can’t find a buyer for the property you put under contract. This creates the need for one small contingency. I always make deals subject to the approval of my partner. This way if I can’t sell the house I can go back to the seller and tell them we need to renegotiate otherwise my partner is not going to approve the sale. If I didn’t do this, then my deal could slip through the cracks and I would be losing out on a lot of potential money. Secondly, you have to have a firm grasp on the amount of money the property needs in repairs so you can estimate how much you can sell the house for and how much you can charge for a fee.
When you are performing a subject-to deal, there is one major deal killer that you must watch out for. This is known as a clouded title. You have to be able to perform a miniature title search. If you are not comfortable with doing this, then hire a professional. Remember, you are going to be assuming the seller’s mortgage and taking over title to the property. This means you are getting whatever is coming with that house on its title. If there is a hidden second mortgage somewhere, you are now responsible to pay it off. Talk about a headache, right? Well, if you follow these simple rules and perform your due diligence this won’t happen to you.
Short sales create a similar scenario as subject-to investing. I always do some preliminary research on these properties and it starts with asking the homeowner if they have any liens on their property that they are aware of. I then go to the city hall and perform a title search. If you make an offer to the bank, you need to include any liens that need to be paid off including mortgages, hospital bills that are now attached too the property, tax liens, etc. You don’t want to receive a phone call a few days before closing informing you that you now owe ten thousand dollars in delinquent taxes because you forgot to include this in your preliminary settlement statement when you made your offer to the bank.
Diligence, research, and proper management will keep your deals going steady without a hitch. You have to always be alert and ready to problem solve. It is an essential part of being a real estate investor.
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