Is It A Deal? Getting The Info You Need To Decide

Working with tens of thousands of real estate investors, I get more than my fair share of e-mails giving me some very basic information about a property and asking me if it is a deal. The challenge I often have is that people do not give me nearly enough information to even comment on whether it is or is not a deal.

For example, let’s look at the latest e-mail I received. The investor who e-mailed me said that he is looking at a package of townhouses that are bank owned. He tells me that the previous owner is being investigated for fraud. There are 5-10 of these townhouses in the package and they are asking $45,000 each for them, but they are short sales. They are currently rented for $700 each. The investor asks: should I pursue these? The investor has not shared anything more about the deal with me including the area of the country, what other similar properties are selling for, or anything about their ability to get financing or buy them for cash.

First of all, I don’t know anything about the investor’s situation and what he intends to do with these properties – so it is extremely difficult to weigh in on their status as deals for him.

Second, if there are tons of deals selling for 50 cents on the dollar in your market right now, why would deals that are selling for more than that be a great deal? Without any information about this market’s particular conditions, then there is no way to evaluate the quality of this deal.

Third, without actually running the numbers AND having other deals you’ve run the numbers on to compare it to, you or I will never know how good of a deal it is (or isn’t).

Fourth, some people buy for equity (the amount of discount from what it is worth) while some buy for income (the amount of money the property generates each month above its expenses). You simply need enough info either about what they are worth and/or what the full income and expense numbers look like to make a decision on whether or not it’s a deal.

So, without running full numbers and having the context of lots of other properties to compare it to, it is terribly difficult to give feedback of this nature.

Until my next post,

James

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