David G. Brown - HOW TO REDUCE YOUR RISK IN REAL ESTATE INVESTING

• Subtract your expenses from your investment gain: $6,000 - $2,550 = $3,450. • Divide the figure from step three by the price of your investment. So, if you bought the property for $75,000, then $3,450 ÷ $75,000 = .046 • Finally, turn the figure from step four into a percentage. In this case, 4.5%. This number is your ROI. You need to know what your bottom line is, i.e., how much you want to spend and what your ROI should be. If the price of buying and/or fixing up the property is too high and/or the ROI is too low, it’s time to move on and find another property that better fits your goals.

WHICH HOMES TO BUY

While some investors might look at For Sale By Owner (FSBO) properties, many others focus mostly or completely on purchasing bank-owned properties. Some go to sheriff ’s sales or other auctions. But what type of properties should you be looking for? 1) Distressed properties; 2) foreclosures; 3) short sales; 4) and REO/Bank-Owned properties. Let’s take a look at each of these options in more detail.

Distressed Properties

Owners of distressed properties tend to be pretty desperate to sell, which means investors can often get them for less than market value. For these types of buildings, a popular option for investors is to wholesale them. This means the investors get the home under contract, then market it to other buyers for a higher price than their contract, and ultimately assign the contract to another buyer. The investor ends up with the difference between the new contract with the new buyer and their contract with the seller.

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