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In this post Mr. Foreclosure Aiden Win explains the four fundamental factors for making big money in real estate. Another great article by Aiden.

Everything in real estate investing is about having an advantage of
some type. The four types of advantages that are most significant
are:

- Price – how much you have to pay for a property
- Terms – how you pay for the property you buy
- Urgency – the level of motivation to “deal” that exists in the
buyer or seller
- Information
- knowing strategically important information about
an opportunity

(Find Great Deals)

Here are some simple examples of what I mean:

Advantage: Price

The most obvious advantage you can receive in real estate investingis buying a property at a great price. If a piece of land is
legitimately worth $200,000 and you are able to buy it for $50,000
then you’ve clearly got a huge advantage.

Advantage: Terms

When is it a good deal for you to pay $250,000 for a property only
worth $200,000?

You may be tempted to say “never”, but that wouldn’t be correct.
Imagine that I own a home that you know is worth $200,000. But I’m
an “emotional” home owner, and my attachment to the property makes me think it’s worth far more – a whopping $250,000. And I won’t take a single penny less than that.

This puts you in a precarious position, until you come up with this
great idea. You say to me: “John, I’ll pay your price of $250,000
like this: Every month for the next 30 years, I’ll pay you $700
every month. And when you add it up, you’ll see that I’m actually
paying you a total of $252,000, which is $2,000 more than you’re
asking!”

Hmmmmmmm. Why would anyone do such a thing?

It’s simple, really.

Just compare the total cost of your paying me “only” $200,000 by
getting a regular interest-bearing loan at 6% versus the total cost
your paying me the “premium” price of $250,000 at zero interest.
The difference? Paying $250,000 at zero interest would obviously
cost $250,000. But paying $200,000 at (the attractive) rate of 6%
would cost you $431,676 – a whopping difference of $181,676!
(Note: I believe that this advantage is the one that is easiest to
work in your favor, as you’ll soon see…)

Advantage: Urgency

In real estate investing, as in much of the business world, the
party who is able to “walk away” from a deal is usually the party
that will get the best deal. Here’s what I mean:

Imagine a home owner in the unfortunate situation of
pre-foreclosure (this is the period immediately before a lender
repossesses the home from the borrower). This home owner wants – and desperately needs – to do something to improve his situation. The truth is, he’d rather not be facing the problem at all, but his situation demands that he respond, or face some rather serious problems.

And then there’s you: The well-informed investor who knows about the home owner facing the pre-foreclosure situation. You know some things that can help the home owner and help yourself in the process.

Your solutions, while effective and ultimately beneficial
for the home owner, certainly aren’t the home owner’s ideal choices. But the fact is that there is a strong sense of urgency with that home owner. He must do something to improve his situation or else he’ll lose his home, his credit rating and a lot of his dignity in the process.

You, on the other hand, don’t have to do anything. You’re in a
position of strength, because the seller is a “motivated seller”, but you’re not a “motivated buyer”.

Clearly, your objective is to always act from a position of strength.

Advantage: Information

This one is easy to understand. Imagine a person who owns a house in a developing rural area…

…You know something that he doesn’t. You discover (somehow) that Walmart is going to make a bid to buy his land so they can construct a Super-center at the location.

Is this valuable information? You bet it is. And it’s a huge advantage if you know about it, and the home owner doesn’t.

Aiden Win

Mr. Foreclosure

P.S. Get the best of deals available for Price, Terms, Urgency,
Information from our database goldmine of the latest pre-foreclosure listings

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You may have welcomed a real estate appraiser into your home and forked over a significant amount of cash for your property to be appraised…

…but do you really know what a real estate appraisal is?

There are many reasons why you might need a real estate appraisal.
A recent real estate appraisal may be necessary to demonstrate why your property taxes should be reduced. Appraisals may be required for probates, estate planning or divorce settlements.

The most common reason for an appraisal is to obtain a mortgage.
Federal and state laws, along with current banking regulations, require that lenders obtain an appraisal for most loans secured by real estate.

Still, if you’re like I was, you’re probably clueless as to how a real estate appraisal actually works! I would routinely grow frustrated with appraisers coming in low on value – thinking that if I put $15,000 into my house, surely the value should be $15,000 higher, right? Not necessarily.

(Find Great Canadian Deals)

What is an Appraisal?

An appraisal is an objective supported opinion of value of an adequately described piece of property. The appraiser is expected to have sufficient knowledge, training and experience to accurately estimate property value. In this detailed and time consuming report, appraisers use comparable sales together with information about the property being appraised, its neighborhood and community along with the local and national economy, to support the appraised value.

You should remember that an appraiser looks objectively and not subjectively.

An appraiser will most likely look at the house as if empty: four walls, floors and a roof. Very little attention is paid to current owners’ furniture and decor when it comes to determining value. Your immaculate housecleaning, plush furniture and plasma television may make a room look nice and hip but these things do nothing for the value!

Important Tip!

If you are buying a house with the owner carrying the paper (loan), it is well worth the cost to hire an appraiser to make sure you don’t pay more than it is worth. For your protection many real estate agents will write in a purchase contract: this contract is contingent upon the property appraising for the sales price.

How is Value Established?

The value of a house is based upon recent sales of the similar neighboring homes in the market as well as rentals and listing data. Ideally, appraisers want to use sales of properties of the same size, age, room count, condition and with similar amenities and external influences. This rarely happens though, so adjustments have to be made, based on what people will pay extra for.

Examples: extra square footage, bedrooms, fireplace, upgrading, parking facilities, swimming pool, lot size, location and so on. This helps paint a better overall picture. This information is entered on a form, a value for differences is established and comparisons are made to the subject property. Typically a minimum of three verified closed sales with photos are required to establish a value.

Properties appraise for more when they are:

- Well maintained inside and out.
- Located in a good school district.
- Additions are done with the proper building permits.
- Additions conform with and fit well into the existing house.
- Properties throughout the neighborhood are well maintained.
- Not over improved or the largest house on the block.
- Style of the house conforms to those in the neighborhood.
- Zoning changes are not expected or there is not a mixed use.

Remember: Location, location, location!!! You can change everything about a house except it’s location.

What classifies a poor location?

- Located on a feeder street.
- Under an airport flight path.
- In or near a gang territory.
- Center of nightlife activities.
- In a rundown block or neighborhood.
- Next to a school or school yard playground.
- Next to apartments or commercial property.
- In close proximity to a freeway, expressway or railroad.
- Next to a gas station, near municipal garbage or toxic waste dumps.
- Odors from factories, farms and processing plants are routinely noticed.
- The city is affected by the closing of a major employer.

It’s important to THINK about SELLING when you are BUYING!!!!
Location is a big factor in a home’s appraised value. This is most notably felt at the time you sell or refinance. What seems like a bargain when you buy might turn into a real headache when you try to sell. Drive around the neighborhood and note any adverse conditions. You may think you can live with something adverse for the price, but when it’s time to sell you might find buyers won’t.

Important Tip!

Adding onto your house = Always obtain a building permit. A 600 square foot addition built without a permit is given no value on an appraisal. When it is time to sell or refinance, the frustrations of the building permit process will be worth it. Always save copies of the final permit sign offs and keep with your house papers.

Buying a house with an addition? Verify that it was built with a permit prior to closing the sale. Don’t just accept the seller’s word. Get copies of the permits before final sign off. Should you want to refinance or sell at a later date, and the appraiser cannot verify the addition being permitted, no value should be given. The result: no new loan or worse . . . no sale.

Tip!

A one bedroom house or condominium doesn’t appreciate as well and is harder to sell.

You should always try to work with an agent!!! An advantage of
working with a real estate agent is that they can provide you with sales information of similar properties to better guide you on how much to offer. Your agent can provide recent sales “comps” for similar homes in the neighborhood. Finding the list prices is also important. Comparing the list prices with the sale prices tells you exactly what percentage of the list price sellers are getting.

A local real estate agent typically will be more accurate what a home is likely to sell for in a specific neighborhood location.

The bottom line is we are all guilty of occasionally overestimating the value of a property. Especially when a lot of money, hard work and time is put into rehabbing a property, with the hopes of justifying a higher resale price and profiting from flipping the house. I can’t tell you how many times I’ve been frustrated over a lower than
anticipated value.

Just keep in mind that an appraised value is subject to other neighborhood factors beyond the condition of your home or improvements you’ve made to the property. Just revert back to this guide whenever you are going through the appraisal process.

To Your Success!

Aiden Win

Mr. Foreclosure

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P.S. Remember to check out the Foreclosure Insiders Club to access a list of pre-foreclosures in your area that could be yours for considerably less than their actual market value! Join the Foreclosure Insiders Club to access a list of distressed properties in your area that could be available at bargain by owners looking to avoid bank foreclosure!

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There are two ways to make serious money by focusing on “price” in your real estate investing.

(Find Great Deals)

- Front-End Price – when you buy a property for 50 cents on
the dollar, you’ve already won. You’ve made your money on the “front end” of the deal by buying very, very cheaply.

- Back-End Value – if you bought a piece of property 15 years
ago for $100,000 and today it’s worth $200,000 then you’ve still made great income on the basis of price/value – even if $100,000 was the market value of the property at the time you bought it.

Basically it comes down to two things: Buy property cheap right now and/or allow your properties to massively appreciate.
How can these be done?

“Buying On The Cheap”

Let’s cut through the fluff. There are a LOT of sources for buying property at a low price. Here are just a few of them:

- Pre-Foreclosures
- For Sale By Owners
- Estate Sales
- Fixer-Uppers
- I could keep the list going, but the point is this:

There is no lack of opportunity for buying property at a great price.

The fact is this: If you want to buy property cheaply, there is plenty of it. And very soon, I’m going to share with you everything you’ll need to find those properties and buy them.

Just imagine: What is it going to be like for you when you are able to buy 5 more properties every single year – each of which increase your wealth by $40,000. Won’t that be helpful to you? Of course it will – and we’ll get into that here in The Real Estate Strategist very soon.

“Appreciation: Skyrocketing Values”

Okay, I’m going to be as honest as I know how. I’ve always been far more focused on generating real, spendable cash in the immediate near term. And because of that, I’m not going to tell you a whole lot about buying for the sake of appreciation…

But for me – I’ll say it like this: With few exceptions, I’d rather make a $25,000 cash profit right now rather than a $100,000 cash profit in 5 years from now.

Why? It’s easier to make $25,000 than it is to make $100,000 my time is to valuable. And it’s truly easy to turn $25,000 into $100,000 in a risk free way.

Should you buy property for long term appreciation? I’m not going to be so arrogant to tell you not to do this, because you can, and probably will, make money from that strategy. But it’s not for me…

…Instead, I’m going to teach you to make money TODAY.

Aiden Win

Mr. Foreclosure

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