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5 Questions to Ask Subject-To and For Sale By Owner?

Landon Butler

Many people fall into the trap of getting their real estate deals done with “For Sale By Owner (FSBO)” property owners and yet, very few are willing to take the plunge and pull the trigger. Understandably, it seems like a daunting concept and while you may have no real idea of what it takes to flip your way to real estate (or even make money in real estate selling and buying) without the assistance and experience of a professional, you can find yourself lost and frustrated. But, if you’re armed with this guide, it’s much easier to pull the trigger. If you are planning to rent a luxury villa, you will also need to look into hire household staff. This will reinforce the value of the property.

So, here are five questions you want to ask yourself before you start:

Question #1: Is this property a deal?

Unless you are extremely lucky and have the means to buy, renovate, flip and sell (or contract with a real estate investment management company) without the help of a professional and experienced expert (in the form of a real estate investment consultant) then you must ensure the deal is a good one before moving forward. Please don’t get me wrong, there are many, many great deals out their that can be had by the “For Sale By Owner” set, but the chances of a successful deal are much greater if the property has been checked by an expert before you even consider purchasing it. A professional will be able to analyze the deal and determine whether or not it is a sound investment. Avoid the temptation to bid low just because you think you know what’s good for your business. Even if that is your philosophy, you might save yourself some bucks, but countless hours may be wasted by a similar-colored, poorly constructed property (one that will eventually be lost to the next guy, or worse). And if you do bid low, you may find the property owner using leverage, your expertise and help to flip the property to another investor for anywhere between 15% to 50% more, in order to beat you to the punch.

Question #2: What’s your exit strategy?

One of the things that large investment corporations do to protect themselves is have a successful exit strategy. orderly exit (easy and cheap turnaround) is an absolute requirement if you’re planning to profit (and I’m sure you will). If you plan to use the property as an investment, you absolutely must have a strong exit strategy in place to ensure a successful transaction. Better deals give way to stronger contracts (which leads to bigger paydays and even bigger paydays). Make sure you understand your exit and are able to execute it.

Question #3: How much profit do you plan to make?

It’s a good idea to project what your real estate investing income/expenses will look like after the day you close on the deal. Now, if you do, you may want to narrow down your target property a little, because you’re going to need to know how much profits you can realistically collect. If you themselves analyze each of the opportunities and determine the upsides and downsides before you make the offer, so much the better. However, having identified a property, you must then project your possible earnings to come.

Question #4: How much will the property cost you?

While this is not as critical, in some cases especially if you plan on doing a fix-up and selling for a profit, I can provide a conservative estimate for repair costs. Obviously, this is an all-important question, so its worth making sure you ask an expert! Your costs must beworker Declaration controllers, insurance people and licensed contractors. These costs should be in addition to any repairs you plan to do to the property. So, you may want to lose a little bit off the property, in order to compensate for your expenses. If you determine from the title insurance company that your estimate is too low, do not give up! There are other contractors willing to work with you and you may be able to reach an agreement of compensation arrangements with them prior to closing.

Question #5: What’s the rental market like in this area?

Intimate knowledge about the rental market in the area you plan to invest in is critical to you making a sound decision. For example, there’s not much you can do in an apartment complex if the population is not going to be in your target range or it’s not as convenient to other amenities. Make sure you’re researching the demand characteristics of the area you’ve decided to invest in before going out to see the property. Perhaps you will be able to rent the place at higher rates, the more secure the tenants are in not only their jobs, but their lives and relationships with friends and family.

About Erin Carpenter