Epic Real Estate Investing - How to Know if Your Deal is Good | 755

Episode Date: August 25, 2019

Matt explains a quick and dirt math formula that will help you to determine if your deal is good. Tune in and learn the equation through an example that we share with you today! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. Success in real estate has nothing to do with shiny objects. It has everything to do with mastering the basics. The three pillars of real estate investing. Attract, convert, exit. Matt Terrio has been helping real estate investors do just that for more than a decade now. If you want to make money in real estate, keep listening. If you want it faster, visit R-E-I-A's dot com.

Here's Matt. Today, what I want to talk to you about is how to know if your deal is a good one. Matt Terry here, by the way, from Epic Real Estate. And, yeah, I want to talk about how to know the difference between a good deal and a bad one, or if you've got one that you're looking at. How do you know if it's a good one and have the confidence that's required for you to take the next step? You know, because this time last week, just like six, seven days ago, we launched four new RIEIA's clients, real estate investment.

businesses through our REIA's implementation summit. And this question came up a few times this week. You know, their first week into the business, their first week out there talking and generating leads and talking to sellers and assessing values. And this question comes up a lot. And it came up in many different ways. But it's essentially, hey, Matt, can you take a look at this for me and let me know if this is a good deal?

And I totally get it. I mean, people don't want to buy a bad one, especially in the beginning. you're a little nervous and the contract is a little scary and, you know, it's a sense of commitment to it. So you want to make sure you're looking at a good one. And that totally makes sense. But here's the deal. There's just really one quick and dirty math formula that you need to know.

And it doesn't change regardless of the situation, regardless of the story. So, you know, everyone's got a different thing. Hey, I'm looking at this property at an auction and is it a good deal. Or I'm talking to this sweet little old lady that has, you know, she owes $100,000 on her mortgage. Is this a good deal? Or, hey, I just talk to a wholesaler and they're selling me this. Is it a good deal?

And it doesn't matter the source of the deal, right? So you just need to know this quick and dirty math formula and run it through the exact same protocol. Every single deal you come across the exact same way. So let me show you what that looks like. All right. So here's your quick and dirty math formula, right? So you've got, you have this house. Okay.

and let's say it's worth $100,000. Okay, that's the value. You've ran the comps. You've got four other houses in the last, say, 90 days, right? And they all average out to $100,000. So that's enough to go on. So you start with your fair market value, $100,000. Okay.

And then you're going to multiply that by a percentage. And we'll talk about that in just a second. then what you're going to do is you're going to subtract the repairs. So you need to know to assess if you got a good deal or not, you got to look at the fair market value, and then you have to know the condition of the property, right? So you have to assess the repairs, and then what you're going to do is you're going to minus your profit.

And that right there is going to equal your cash offer. So the fair market value, that's based off of market data. And we want to look at just what has. has sold in the last, I don't know, 60 and 90 days if you can. If you can get more than four, fantastic, you can get a more accurate number. But if you can get three or four, that's going to give you enough for this quick and dirty math equation to, that's going to give you enough to go on. So we've got $100,000 bucks, so that goes right here. Now your repairs, your condition.

How do you assess that? Well, we've got a quick formula, quick and dirty formula of we'll do $10 a square foot, $15 a square foot. and then $20 plus a square foot, right? Square foot. So this $10 a square foot is going to be for light rehab. This 15 is going to be for medium rehab. There's $20 up. It would be heavy rehab.

Okay. And this is just for rent ready. Just for rent ready. And this is just an estimate. What's important with this initial formula is that you're just taken, you're taken into account in your calculation for the condition of the property. Right? So there's that.

And then your profit. So what is the profit? Well, this is how much money you want to make. And you get to decide how much it is that you want to make. So your profit, if you want to make $5,000 on a deal, if you're going to wholesale this, if you're going to flip it really fast, then you might want to factor in somewhere to $7,000 to $10,000 for your profit. So you got a little bit of room to negotiate.

But your profit, that's entirely up to you. Okay. So that is you, how much you want to make to put in there. Now, let's get back to over here to this right here, this variable. So what this variable is, is how much meat you're going to leave on the bone for your next buyer. If you're going to assume that you're going to flip this property. And in the beginning, that's probably the best thing to do, put some money in your pocket and kind of strengthen up your reserve so you can support your business. So this number right here, it could be anywhere from 70% to even 90% of a discount.

And that's going to slide up and down based on the value of the properties, the price point. So at 100K, 100 to 150K, 70% is probably a decent number. And if you go to, say, 250 to 350 up in there, you might want to do around 80%, 75% to 80%. If you're up above 500k plus, you could probably do 85%. And the reason being is, if you take 70% off of $100,000, that's $30,000, right? If you take 70% off of $500, that's what, $150K. That's a huge discount. And a seller might not be down for that.

So if you just do the sliding scale, because whether you make $30K on $100,000 property or $30K on a $500,000 property, does it really matter to you? Right? It's still $30K. It's still a big win. So that's why the scale kind of slides and you have to make a little bit of adjustment for your market. But that's a good rule of thumb. So all of this is just your quick and dirty math.

This is enough to get into a contract. Now you can go back and you can confirm all these numbers later with the actual details. You can do your research, do your due diligence. But once you got under contract, you want to lock it up so no one can sneak in and take the property from you. The seller can't change their mind because they're locked them via the contract. And then this is basically going to be your offer. So if you get your property and you present this and you get it under contract for somewhere in the ballpark of what you've got right here after your equation, then yeah, it's a good deal. And that doesn't matter whether you bought this property at an auction or you're buying it from a realtor or you're buying it directly from the seller.

This doesn't change. It still has to be a good deal to you to make sure that you get your profit. All righty. So that's what makes a good deal. So those are some of the variables in play, but the equation never changed. changes. And if you'd like some help with your real estate investing, whether starting new or you're restarting or maybe you want to tighten up your existing business, then you might like a brand new training video that I just put together. I created this for this specific reason. You can head

over to R-EI-Aase.com. You can take a look over there. And if you like what you see, there's some very, very simple instructions. Anyone could follow so simple, a caveman could do it on what there is to do next. All righty. So thanks for watching. God bless to your success. I'm Matt Terrio, living the dream. Take care. Yeah, yeah, we got the cash flow. You didn't know home for us, we got the dash low. This podcast is a part of the C-suite Radio Network.

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