I work in real estate as a broker in the Southern California area.
The saying I have heard about investing in real estate is that you make your money when you buy not when you sell. This saying goes to your question of valuation.
Valuation is a combination of things: Current inventory of available homes, Average DOM (days on market), Type of sale i.e traditional or distressed (short sale or REO), the home itself and it amenities AND the market outlook.
If inventory is tight and the local economy is at least stable then you can expect that decent properties will be getting multiple offers. That is what is happening here in socal. Investors have a tough time as they have to keep the profit they want to make in mind when putting together an offer while going up against owner occupants who will offer top dollar.
When I value a property I look to see what similar properties have sold for in the last 2, 3, 6 months. This is a fairly straight forward process and will yield a price range for the property. I then will apply the market outlook (are prices steadily going up - down - sideways, are properties getting multiple offers, where are similar properties currently priced etc.) and then I price it. Applying the market outlook is more art then science.
If you are looking to do a flip you would look to see what the property would go for in good condition in the current market. Then determine how much fixing it needs, what profit you want, overruns, and come up with your offer price.
My advice to you would be:
1) Get your financing 100% together to close in less then 30 days, preferably 20. This is big and can put you over the top against a higher offer. Terms are important.
2) Make a decision on what you will do i.e. buy and hold or flip and have appropriate plans for each. Leaving it up to decide when you see the property, especially at this stage of what appears to be the beginning of your investment life, is a recipe for failure.
3) Make a decision on what areas you want to invest in. Do your research. Get the info so you know what is happening in the local market.
4) Find someone to work with. An agent or another investor who has access to sold info and can guide you with regard to pricing a property out.
5) There are guys who are real estate brokers in a variety of areas. Investment brokers who have good knowledge of a bunch of markets and can guide you. Research to find them as they are a small bunch. They will primary be buy and hold guys and not able to help with flips.
Some random thoughts:
Flipping is best done locally so you can control cost, the work crew, develop a relationship with a solid agent to help you sell when work is done.
Decide on a profit margin for flipping. $5k seems small to me. Even if it is under 100k house. Remember, cost overruns come out of your profit in the end.
Gary Keller has some good books on investing and flipping properties, check them out.
This is a numbers game and your offers will get rejected a lot more then accepted. No big deal. Reflect, learn, next.
The motivation of a seller is very important to you. Find out what it is if you can. Someone who does not really need to sell, has put the home on the market to see what will happen and is looking for the highest price is a no go for you. A guy who has a job transfer, has some equity and needs to get out is the kind of motivated seller you want. 'I can close in 20 days and sure you can rent back for a month'.
My opinion is that you may start off flipping to build up cash, however your ultimate goal should be to buy and hold. 1031 into something bigger and work to build up cash flow. Independent lifestyle.
Good luck.
The saying I have heard about investing in real estate is that you make your money when you buy not when you sell. This saying goes to your question of valuation.
Valuation is a combination of things: Current inventory of available homes, Average DOM (days on market), Type of sale i.e traditional or distressed (short sale or REO), the home itself and it amenities AND the market outlook.
If inventory is tight and the local economy is at least stable then you can expect that decent properties will be getting multiple offers. That is what is happening here in socal. Investors have a tough time as they have to keep the profit they want to make in mind when putting together an offer while going up against owner occupants who will offer top dollar.
When I value a property I look to see what similar properties have sold for in the last 2, 3, 6 months. This is a fairly straight forward process and will yield a price range for the property. I then will apply the market outlook (are prices steadily going up - down - sideways, are properties getting multiple offers, where are similar properties currently priced etc.) and then I price it. Applying the market outlook is more art then science.
If you are looking to do a flip you would look to see what the property would go for in good condition in the current market. Then determine how much fixing it needs, what profit you want, overruns, and come up with your offer price.
My advice to you would be:
1) Get your financing 100% together to close in less then 30 days, preferably 20. This is big and can put you over the top against a higher offer. Terms are important.
2) Make a decision on what you will do i.e. buy and hold or flip and have appropriate plans for each. Leaving it up to decide when you see the property, especially at this stage of what appears to be the beginning of your investment life, is a recipe for failure.
3) Make a decision on what areas you want to invest in. Do your research. Get the info so you know what is happening in the local market.
4) Find someone to work with. An agent or another investor who has access to sold info and can guide you with regard to pricing a property out.
5) There are guys who are real estate brokers in a variety of areas. Investment brokers who have good knowledge of a bunch of markets and can guide you. Research to find them as they are a small bunch. They will primary be buy and hold guys and not able to help with flips.
Some random thoughts:
Flipping is best done locally so you can control cost, the work crew, develop a relationship with a solid agent to help you sell when work is done.
Decide on a profit margin for flipping. $5k seems small to me. Even if it is under 100k house. Remember, cost overruns come out of your profit in the end.
Gary Keller has some good books on investing and flipping properties, check them out.
This is a numbers game and your offers will get rejected a lot more then accepted. No big deal. Reflect, learn, next.
The motivation of a seller is very important to you. Find out what it is if you can. Someone who does not really need to sell, has put the home on the market to see what will happen and is looking for the highest price is a no go for you. A guy who has a job transfer, has some equity and needs to get out is the kind of motivated seller you want. 'I can close in 20 days and sure you can rent back for a month'.
My opinion is that you may start off flipping to build up cash, however your ultimate goal should be to buy and hold. 1031 into something bigger and work to build up cash flow. Independent lifestyle.
Good luck.