| How to Accelerate Makeing Money Using Hard Money | | | | repair cost over-runs, or hold on to the property |
| Loans! | | | | longer than you had anticipated. |
| 03rd April 2007 | | | | Remember, every day that the property is not sold |
| Author: Jim Olivero | | | | or rented comes right off your bottom line. The |
| I would likt to talk to you about different standards | | | | interest, taxes, insurance, and utility bills compound |
| and strategies that real estate investors use when | | | | each day. Buying the property at the right price will |
| evaluating properties. | | | | protect you from Murphy's Law. |
| In order for us to get involved with a property, the | | | | Our Funding formula: |
| following standards are judged for the worthiness of | | | | 1) Establish an after repair value for your |
| any rehab project: | | | | property.(ARV) |
| "You should look for the worst house on a decent | | | | (Get "area comps" and view each one. Pick out the |
| block" | | | | property that has a street that is most similar to |
| 1) Whether your strategy is to "flip" properties, or to | | | | your house's street, and a structure that is closest to |
| hold them for their rental cash flow, it's important to | | | | your house's structure, then compare the square |
| be able to draw potential buyers, or strong potential | | | | footage, amount of bedrooms and bathrooms that |
| tenants, as quickly as possible. With this in mind, you | | | | are all listed on the "comps." This will help establish a |
| should look at properties on streets that are | | | | real fair market value for your property). |
| maintained properly. This does not limit you to higher | | | | 2) Multiply the ARV x .65 (After Repaire Value) |
| end homes. There are many "blue collar" areas that | | | | (This will give you 65% of the ARV). |
| properly maintain the condition of their homes and | | | | Here is a quick example: You are able to purchase a |
| yards. However, a street that has poorly maintained | | | | property for $20,000. You run the comps and find |
| properties or many vacancies do not lend themselves | | | | the property will sell for $100,000 this is the after |
| to fast turn around sales or well suited tenants. | | | | repair value. In this example you could get a hard |
| Always remember that this is an investment. You | | | | money loan for $65,000. |
| take on a large risk, and a lot of work as a rehabber. | | | | 3) Establish a comprehensive and accurate list of |
| No matter how much loving care you put into your | | | | repairs that you plan to do to the property, and |
| property, you can do nothing about the condition of | | | | estimate the costs for each repair. |
| your neighbor's property. | | | | (This is important. If you are knowledgeable and |
| 2) Make certain that there is no structural damage to | | | | experienced in doing repair work, you may not need |
| the property. This could be a fatal blow to your | | | | help. If you are not experienced or skilled in this, find |
| investment! | | | | someone who is and have them draw up a plan. |
| "You make your money when you buy a property, | | | | Even if it costs you a little money to get them out |
| not when you sell it!" | | | | there, this could save you thousands of dollars). |
| Purchasing Formula | | | | 4) Subtract the cost of repairs from the 65% value |
| There are many formulas used for the successful | | | | of the ARV.(After Repair Value) |
| purchase of a rehab project. It's important to use | | | | This should be the maximum price that you pay for |
| one. There must always be a comfortable cushion | | | | the property! This is a conservative formula, and it |
| between the purchase price and the selling price of | | | | usually works well. Remember, anyone can buy a |
| investment property. This cushion price will help you | | | | property at close to fair market value, but with your |
| achieve a successful investment, even if you have | | | | costs and risks, you must do better! |