The 7 factors The DM uses to evaluate real estate deals

I get people asking me all the time, "Hey DM, how do I know if a real estate deal is a good investment or not?"

Every investor will put together their own list but it's important to see how successful investors evaluate deals. I learned from my mentor how to evaluate deals and I'm sharing my list with my students so you can learn, too.

The 7 factors The DM uses to evaluate real estate deals
(And it’s not 70% of LTV because that is not the ONLY way to do a deal… )

Here's a list I use (keep reading after this list to learn even more about how I use this list):

  1. Can I work this deal virtually?
  2. Can I buy the deal for less than the market value of comparable properties?
  3. Does the deal have the potential to generate daily cash into my bank account?
  4. How much estimated Trifecta Profits can I earn from this deal?
  5. What is my exit strategy?
  6. What risks do I need to be aware of?
  7. Do I have a buyer for this deal right now or am I keeping this for long term, or do I need to find buyer-investors for this deal?

Good advice from someone who should know! :)

How to use the list effectively

You've just read the list I use. But it's not just a simple matter of answering the 7 questions and coming up with a "yes" or a "no". (Some people have a formula they use to arrive at a single number that determines whether or not they move forward with the deal. I don't have a formula). The answers I get from these 7 items SOMETIMES will make or break a deal, but they are a guideline to help me evaluate the opportunity.

Maybe the answers to these 7 questions reveal that it's a great deal I need to jump on right away. Or maybe the answers to these 7 questions reveal that it's not the right deal for me... but perhaps there's something else I can do with the deal if I don't think it's right for me.

Here's an example: If it's a deal I can do virtually, I'll explore it further. If it's not a deal I can do virtually, I might consider sharing it with someone who is interested in doing the deal locally. I earn some quick and easy money for bringing the deal to them this could be simply by tying up the deal and wholesaling it to al local investor.

Here's another example: The risks I identify in step 6 won't necessarily kill the deal. All deals have some type of risk. But by thinking about what those risks are, I can decide whether or not I want to take on those risks in exchange for the rewards I outlined in the earlier questions.

Create your own list

I got a list from my mentor and I augmented it to the list you see here today. You can take my list to use for your deals but you might have different goals and ways to evaluate deals, so you might change this list to suit your real estate business.

In the comments below, list some of the criteria you include in your list to evaluate real estate deals. Share with the other readers of this blog to let everyone know some of your best evaluation advice.

Your friend and mentor,

Mark Evans DM,DN

PS, Don't forget to leave your comments below. Let us know what criteria you use to evaluate your deals.

Related Posts

Leave a Reply

Logged in as theadmin. Log out?