Success in real estate isn’t just all about the number of deals you get and the amount of profit you receive. It’s also about recognizing whether a property is a good catch for you or not. It won’t matter if you have less deals than others. If your deals prove to be better than theirs, you can certainly surpass their profit margins even if they have more properties.

But what makes an ideal real estate deal? The key word is “ideal.”

I – Income

D- Depreciation

E – Equity build-up

A – Appreciation

L – Leverage

The income refers to either your present income or a future retirement income. In any case, you’re in it for the money, so the income should be one of the center points when looking out for a good deal. Depreciation is a tax write-off or loss on the accounts, but it is actually a tax benefit to real estate. Equity build-up is gaining equity as you pay your debt on the property. You can also opt to force equity on the property by fixing and remodeling it. Appreciation involves raising the value of real estate over time. Lastly, leverage is putting in an investment to get a worthwhile return. Leverage is basically one of the key benefits in real estate. Basically, it’s a dollar-for-dollar basis wherein when the stock market goes up, your returns will go up too.

Determine Risk and Upside Potential

With every deal comes risks and the possibility of having an upside potential. Taking risks is common in the real estate market. There are almost always risks. The less the leverage, the greater the risks. The more you owe, the bigger the risks.

Risks are something that every real estate investor has to be seriously considering about. This is because when you lose in a deal, you do not just lose your money. You also lose the amount of time you spent working hard on that deal, and you also lose your some of your credibility in the field. Your time and effort used in that deal would have been put to waste.

Determining whether the deal has an upside potential is also important. There are actually a lot of properties out there that can be developed and creatively altered to increase its attractiveness and appeal to the buyers.

Risk, upside potential, and IDEAL are basically what will guide you in recognizing a great real estate deal. These will also help in telling you which real estate deals have a big probability of flopping, and therefore give you an early sign to avoid that kind of deal.

Move Out of a Bad Deal!

There are times when we notice too late that we’ve made a bad deal. We may have neglected to check on some things that could prove to be the cause of the problems with the deal. When this happens, it is important not to drag the deal longer than necessary as it will only provide a loss for you. When you’re already in a deal before you realized that it will only cost you more than give you gains, the best move is to negotiate yourself out of that deal.

Add to the criteria (IDEAL, risk, and upside potential) the need for knowledge and research, you will be able to realize at least at an early stage that you have to move out of the deal as soon as possible. Knowledge is a known powerhouse of real estate. The more knowledge you possess, the less risks there are.

Even experienced real estate investors make mistakes sometimes. Real estate investing is such that you grow and learn something in every deal you make. Of course, as time goes by and as you take in more deals, you should be able to have learned from your past mistakes and not do it again.

As experienced as you may be, mistakes are still common. Beware though, because some mistakes can be very damaging to your portfolio and career.

5 Mistakes of Experienced Real Estate Investors

1. Failure to Check the Balance Sheet

In any type of business, the balance sheet shows just about all the operational finances that would show you how to best optimize and utilize your assets. It may not show your cash flows, but it shows the growth of your assets, equity, different expenses, and tax benefits.

Hiring an accountant or having your accounts checked is great, but you have to make sure that you yourself aren’t ignoring your balance sheet. If you cannot understand how to analyze the balance sheet, you can always ask for help from an accountant.

2. Getting Bad Deals and Working With Bad Partners

You should learn how to spot an unprofitable property when you see one. As your experience builds up, you should become increasingly aware of the type of deals that will bring a profit and those that are a loss.

This “bad deal” includes only those properties that will require huge amounts of payments that would only end up swallowing you whole. Properties that only have minor problems like rehab and staging are potentially good. You must learn how to calculate the amount of fixtures and expenses of a property before deciding whether you’ll take the deal or not.

Sometimes, the problem isn’t the property but the people. Being comfortable and trusting your partners is important in making great deals. Make sure you hire people who you can completely rely on to make a good job. Make sure that terms and conditions are entirely agreeable to the both of you, too. Work out any problems before shaking hands upon a deal.

3. Jumping Ahead Without Any Knowledge

One thing that all successful real estate investors have in common is their never ending search for more information on the real estate market. They know that knowledge is important.

It’s not just knowledge, too. Effort and perseverance is also needed. Do not just jump into a deal where you have no idea on how to fix, market, and sell. Make sure you have targeted the type of niche that you would be into, and in what area. Knowing your area well will certainly allow you to gain more opportunities and leads.

Once you’ve mastered all there is to know on one specific thing, or a niche, then you can broaden your horizons and attack another area that you can target, study, and get deals from.

4. Holding On To Properties Incurs Expenses and Don’t Give Much Profit

Sometimes a real estate investor comes into a situation wherein he or she has got more land than he or she can handle. This is basically what happens when you combine the first three mistakes above and hold on to the properties still.

Look over your list of assets, find out which ones are only incurring costs. Look for further improvements that can be made to the properties to make them profitable. Dump the properties that only gives problems and focus more on the properties that are worth your effort and money.

5. Not Using Your Knowledge On the Local Market

While the internet, magazines, and media all talk of real estate, be aware that it generally refers to the national state of the real estate market. Knowing what goes on with it is good, but you should focus more on the local market you’re in.

In reality, all real estate is local. The value of the properties is, after all, determined by the local market conditions and rates. Local markets may also have their own pace and trends. Being successful in your market means to always gather information about your market and anticipate new trends and developments.

The housing market is still slowing down. There doesn’t seem to be a stop sign to the recession ahead. But recession or not, as a real estate investor, you’re still going to have to sell that house.

In the state that the housing market is in nowadays, people would consider it lucky enough when you’ve lowered the price just to hove sold the property. And you might be thinking: Is this the only way?

The answer is no. You can always sell it. Just sell it. No need to lower the price. Just sell it.

5 Tips In Selling the Property

1. Create a Listing That Is Credible and Great!

When you’ve got an agent who wants to scan the list of properties you have at hand, engaging his or her attention will be important. Catch their interest by taking charge of your MLS listing and making it look great! Don’t just depend on the real estate brokers to create the listing for you.

Most MLS listings can be very boring to look at. To capture the attention of your clients, make your listing more lively. Print pictures that display the appealing parts of your property. Make sure the pictures are clear and well-photoshopped. Take pictures of the property in its most desirable form.

2. Directional Signs

You have to make sure that your property can easily be located by your clients. Use lots of directional signs to avoid misunderstandings on the location. This is especially helpful for properties that are far from the main roads.

3. Put up a Professional Sign In Front.

You can give out a sense of credibility and professionalism through putting up a professional sign in front of your property. As much as possible, do not use cheap signs where you have to roll up your flyer. A sign that has an attached flyer holder will instead be preferable, making it easier for people to pull out your flier when they pass by.

You can also encourage interested prospects to take a peek in the house by putting up the flyer box on the stoop of the home. All you have to do is place an arrow with a “More Information” phrase on your sign to direct them into your house.

4. Not Just an Ordinary Flyer

Many people wouldn’t pay much attention to flyers. This is because almost all flyers are basically boring. Most investors would sometimes just print flyers in black and white. With a boring flyer, how could you possibly expect someone to notice it?

For starters, a flyer will catch a person’s attention if it’s in color. Lots of clear pictures will also add to the trick. Another concern about flyers is that they mostly focus on facts. Information alone won’t get a person to be interested in your property. Focus on showing pictures of your property in the fliers. Remember, you’re selling the house.

5. Give that “Push”

Most sellers would be contented by having prospects take a look at the property and leaving them to make up their minds. This, though, will not be enough to make that sale.

Many prospective buyers are actually already ready to buy a house. They’re just not sure which house. In order for that house to be your house, you have to give the seller a little push to consider your property.

Always be ready with a contract. Try to get the buyer to leave you a deposit check, even if it is refundable. You never know he or she might really go along with buying the property. Get as much commitment as you can.

In real estate, contracts are a must. But what can sometimes be surprising is that despite the fact that it is a common requirement for deals and investments, only a little of it is understood. Nevertheless, it doesn’t matter if you’re beginner or an expert in real estate investing. You have to be equipped with contracts when working on your deals.

As real estate contracts are based on common law principles, it is naturally important that real estate investors understand the general flow of contract law: offer, counteroffer, and then acceptance. Although there are some differences in the contract law of each state, generally all contracts come down to a center point: mutual agreement between the parties.

Basically, the contract is initially drafted and serves as the “offer.” If the seller wants to add to the contract (another condition or a clause), then the seller is making his counteroffer. If the seller agrees to the terms of the contract, then there is “acceptance.” The result would be a mutual agreement between the two parties, making the contract binding.

Unilateral and Bilateral Contracts

A real estate contract can either be unilateral or bilateral depending on the kind of deal you’re making. If you are involved with a sales deal, for example, the contract would have to be bilateral. This means that it’s a two-way agreement wherein the seller agrees to sell and the buyer agrees to buy. The bilateral contract is most often used in real estate, since almost all the deals require the assent of both parties.

If you’re involved with options, however, a unilateral agreement is appropriate since in this kind of deal the seller is obligated to sell but the buyer is not obligated to buy.

Basic Requirements Of a Contract

Each state has its own standards and criteria for the real estate contracts. But all contracts more or less have most legal requirements in common.

Written and In Print: Verbal agreement is not enough when it comes to real estate deals. Real estate contracts have to be in writing for it to be enforceable.

Identification of Both Parties: The contract must clearly state the identification of both parties. It may not be really legally required, but full names and middle initials helps to avoid possible mistaken identities or misunderstandings.

The Property: The property to be sold and bought should of course be written down, along with a legal description and location.

Purchase Price: The purchase price of the property must also be written in the contract. If the purchase price has not yet been determined, you can state a reasonably ascertainable figure in the contract.

Mutual Assent: Mutual agreement is the most important criteria in a contract to be binding. This is especially important as almost all real estate contracts are bilateral and can only be enforced with both the parties’ agreement.

Signatures: For the contract to be enforceable, it has to be signed by both parties. The law requires both parties signing to be of legal sound and mind, of course. A facsimile signature is acceptable as long as it is stated in the contract that facsimile signatures are valid.

Consideration: Consideration is what induces a promise. It is something of value or interest bargained for in exchange of the property. It binds a contract and makes the contract enforceable. The amount won’t really matter, as long as there is a consideration. Money is the most common form of consideration, but another property, a promise to perform, or something else in value is acceptable.