Understanding how to approach an asking price is one of the most important aspects of making an offer on single family real estate. Many Americans have the false belief that an asking price is the same amount that the house is worth. If they get $5,000 below the asking price they feel like master negotiators. On the other hand, if a property really is worth $100,000, inexperienced investors feel the need to get even less. Real estate investors strive to get properties at a discount for the most cash flow and equity capture, so the asking price means little to them.

So if not by the asking price how do you determine how much a property is worth or how much you should offer? The way you do this is by pulling the comps (comparable sales) of other similar properties in the neighborhood. By looking at the prices of other houses that are similar and have sold recently, you can find the most accurate market value of the prospective property. You should ideally compare the house with six other properties and gather this information yourself through the Multiple Listing Service. However, if you are unable to gain access to MLS, ask a Realtor for an unfiltered report to review.

The next step is to calculate rehab expenses. This means deciding how much it will cost to make the property perfect. Foundations, air conditioning- anything you will need to fix within the next five years, fix now, and input it into the equation. If you don’t have enough room for these rehab costs, then lower your offer. If the seller is unwilling to lower the asking price, no big deal- move on. There are plenty of properties out there, there’s no reason to waste time on a deal that doesn’t work for you. You should also consult your mortgage broker to factor in the transaction expenses associated with buying the property- you need enough room for these as well.

After that, figure out how much equity capture you’d be comfortable with gaining by the end of the deal. When you buy property at a discount, equity capture is the difference between how much the property is worth and how much you paid for it. Many investors invest purely for cash flow, so this number is not as important to them- they’re perfectly happy with $10,000. Others require $20,000 equity capture for the deal to be worth it. This is a decision you must make as investor. Once you’ve made it, real estate investing will be a lot easier because you’ll know what properties to pursue.

Other factors you must consider are market rent and monthly expenses. Once you’ve evaluated all these things you’ll be able to determine if the property is worth it for you, and purchase your first single family property!

The tax incentive for new home buyers has become an attractive option for many home buyers. The FHA is helping people with bad credit get into a home without a large down payment and mediocre credit score of 580-620. While the tax incentive is attractive, many people are getting into homes that they really cannot afford. Home loans with bad credit may sound wise, but they may not help your financial position if you have a lot of credit card debt and other payment obligations.

Sure a home loan allows you to purchase a home now, but the difficulties you may see in the future may cause you a lot of heartache and financial problems. There will always be mortgage loans out there that will offer you the money you need to purchase a home, but the interest rates are undoubtedly going to be higher on the loan. Although the government-backed FHA Home loans will offer lower interest rates to new home buyers from bank lenders, you can get in over your head with debt. To help you figure out if your can afford a new home, take the following into consideration:

1. Do I have any money for a down payment? You need to have at least 3.5% to put down on a new home to secure the loan. With a traditional loan you must have 20% to put down on the new home.
2. Can you pay the closing costs? Some sellers will require buyers to pay all or some of the closing costs, which can become quite expensive.
3. How much is the mortgage loan insurance?
4. What is your credit score currently at? Do you have secured credit cards that are helping you improve your credit rating?
5. Are there any fines or penalties for repaying the mortgage loan early?

D your homework and you will be just fine.

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