7 Tips For Buying A House In A Down Market

by Tim Krulia – Private Money Blueprint CFO

As part of our quest here at PMBP to give you the single best resource on the financial aspects of growing your real estate investing business (aka, we help people find private money quickly, easily, and abundantly)… here’s an article I found that will help you sharpen up on buying in a down market.

The article is a “basic” buy in a down market summary… but, it goes to show one extra thing that I’ll summarize it here for ya to save you some time

Basic… But Profound Tips To Buying In A Down Market (or any market for that matter)

This fantastic (simple but true) article brings up some dynamite points to remember when searching for your next deal… in ANY real estate market. While I’m not going to go over the whole article and all “7 Tips” for you (you can check out the full article over at Investopedia).. I’ll go over a couple of the ones that are more noteworthy for us investors.

Do Your Homework Upfront… It Saves You Hardwork On The Back

The article says to, “#1 Do your Homework!”

For me, the bulk of my time when acquiring a new property is in the due diligence phase.

Before I buy, I want to see the comparable sales of neighboring properties.  (we have a great 75 minute full tutorial in our PMBP members area for our students on A-Z analyzing deals and finding comparables… good stuff. If you’re not a member… learn how to become one here).

On the MLS you can look at the houses that sold with similar sizes and characteristics of your target property.  You need to check out the MLS’s pictures of the interior and exterior of the comparable properties because there is a strong likelihood you’ll want to renovate your acquisition to meet the standard of the neighborhood.  Also, the pictures (and a drive by) will show you what “style” of house it is.  “Style” can mean a big price difference between two houses that are otherwise pretty much the same #’s wise.

Housing Styles In Brief

For instance, in our part of the country people really like “Craftsman” and “Ranch” style homes (as bread and butter homes that sell fast).  So, those will be more popular and get a bit higher price… then lets say… a Victorian may in our area with the same basic house specs.  So, learn what styles are the most popular in your area… because they’ll need to go into your comparables analysis.

Here’s a cool article that does a run down of “housing styles” so you can save that for future reference.

Crunch The Numbers

Before you make an offer, for heaven sakes crunch the numbers first!  Know what your profits and ROIs are going to be as a worst case scenario for the different exit strategies you have in mind for the property.  Always have a maximum amount you are willing to pay for the property and if you can’t get it for that number…….walk away, don’t look back and find the next deal.

Once you can get to a point in your business where all of your property acquisitions are 100% #’s based (no emotion) and you set specific buying criteria that you MUST meet or you walk… you’re life will be much easier and you’ll never have to agonize over negotiations.  If you hit your number… awesome… it’s a deal. If you don’t, no biggie… onto the next one.

Get Your Ducks In A Row

The article’s second bullet point is to “Get Your Ducks in a Row!”  If you are following the Private Money Blue Print course, you are already going to be in great shape to have the cash you need to POUNCE on the smokin’ hot deals the second they pop up.

Great deals tend to have a short shelf life.  If you have your financing solution ready, you’ll be light years ahead of your REI competitors to win the super deals that you may have otherwise lost using SLOW traditional methods of money getting like using banks that can take 30 days to close a deal (IF you can even get qualified with a bank at all)!!

So, that was a quick short primer on buying… especially in a down market.  The rest of the article on Investopedia goes over it a bit more… but I just wanted to highlight the “#’s” side of it since that’s what my position is in our real estate division.

So, enjoy… let me know your comments below!

- Tim

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