We speak with a lot of real estate investors looking to buy real estate investment properties in Dallas and Fort Worth Texas and the surrounding areas. Some of them know what they’re doing when it comes to evaluating real estate investment deals in Dallas Fort Worth… and some of them are still in the learning process.
But, since our entire business is finding great deals at deep discounts… and often passing those deals onto real estate investors like you… I thought it would be a great idea to share with you some resources to use for evaluating real estate investment deals. This works in any market including Dallas Fort Worth, surrounding areas, Texas, and any other states across the country.
When you really boil it down… evaluating a real estate investment deal is a pretty simple process. If you’re looking to buy real estate as an investment, wholesale properties, hold them for rent… whatever, one of the most important parts is “buying it right” (i.e. – not overpaying).
So let’s dive in.
Evaluating Real Estate Investment Deals In Dallas Fort Worth
What Goes Into Evaluating A Real Estate Deal – (for single family homes)
There are just a few main elements when you’re evaluating a deal.
- Cost of repairs needed to get it back up to good condition based on your exit strategy i.e. Fix-N-Flip or hold.
- The after repair value (ARV) of the property (what it’s worth and what can it sell for today once it’s fixed up)
- If you’re going to buy and hold for a rental… you need to know what you can rent it for and what your “debt service” (mortgage payment) will be. Knowing this is critical to ensure you’re buying a property that cash-flows each month.
There are other things you can (and should) look at too… but those 3 are the main important things to look at first.
One thing you must do when you are looking at a property is to determine how much it’ll cost you to fix it up. Based on your exit strategy i.e. buy & hold, or flip, what will it take to put it in great shape. In other words, the cost of repairs. This could be a new roof if it needs it, foundation adjustment, carpet, paint, a new kitchen, appliances, yard, maybe even more.
To get a good estimate of the cost of repairs, the best advice is to get to know a local contractor or two in your area and have them walk through the properties with you the first few times… have them quote out the repair cost… and build that into your offer. If you are investing in the North Texas market feel free to reach out to TMC Property Solutions for a recommendation.
Here’s a cool free tool for helping you evaluate your repair costs as well as prepare a Private Lender package called RehabValuator. Check it out and see what you think… it’s free.
After Repair Value (ARV)
This is simple, but many investors get stuck on this part. This is essentially what you could sell the property for today… after you repaired it and brought it up to a great condition. This is found by finding out what other similar houses in the same area are actually selling for. NOTE: Don’t look at the “Listing” price… look at what houses similar to yours have actually SOLD for in the past 3 – 6 months. This helps you determine how much you could actually sell that house for if you had to… right now. You never want to overpay to a point where you can’t sell it for a profit in the next 3 months.
How do you determine the true value? Well, the best comps come from the MLS system which is accessible to realtors and appraisers. If you do not have access to MLS talk to a Realtor that you know… or an appraiser. Heck, if you don’t know one… call up a few today… tell them you have a property that you’re potentially going to sell in the near future… and ask them what they think it should sell for. The problem here is you are controlled by the realtor’s time and when they are available to pull comps for you.
Better yet, if you are investing in Texas you can also pull your own MLS comps using the following service. This is our preferred tool and we use it every day and recommend you do as well. They don’t give you to access MLS however, they pull comps data from MLS and the system presents the COMPS to you and are “MUST-HAVE” tools for your REI business. Learn more below.
In order to pull true values of recently SOLD homes, you need access to the Multiple Listing Service (MLS) for your area or subscribe to a paid service that provides MLS data. MLS COMPS are critical to your success and making offers on houses. At the time of this post I do not have a company recommendation but am working on one for you. Feel free to reach out to us for an update to see if we have a recommendation for you.
Buy And Hold Properties For Rentals
So, you’re going to buy and hold properties for rental? Great! You don’t need to worry about what it’ll sell for right away. What you need to know is if it’ll pencil out on a month-to-month basis. You know… cash flow.
So, talk to a mortgage broker (or a private lender) and find out what the monthly mortgage payment will be for that specific property.
Then find out what you can rent the property out for on a monthly basis.
Then, you work backward… and find out at what purchase price your mortgage payment will be low enough so you can make the monthly cash flow you need to make on the property. Be sure to figure in other expenses too like property taxes, maintenance/repairs expenses, property management fees, and keeping money in reserves for future repairs and vacancies which is typically 10-12%.
So, your offer price here should be:
Simple enough right?
The cool thing is, the more you’re bringing into the deal in cash… the lower your mortgage will be.
Making An Offer That Gets Accepted
We’ve been talking about how to look at the numbers and analyze a real estate deal up to this point. What’s next?
From there, just make an offer. Many times the properties we let you know about will already be so deeply discounted that we get multiple offers… often above our asking price so we recommend you move FAST if interested.
So, if you really want a property… find out what is the bare max you could buy the property at… and offer that. Otherwise, you may lose the deal because someone else is likely making an offer too. IMPORTANT – You MUST do your due diligence and you MUST be comfortable with the price and your offer. Don’t make the offer just because you feel pressured. Many wholesalers will try to get you to move too quickly.
With that said, the golden rule in real estate is to never overpay for a property. That’s why our own deal analyzing criteria is so darn strict… and why our buyers (like you) get such great deals.
Other things to consider when making an offer where there may be multiple offers being considered, consider increasing your earnest money deposit, shortening the Option period, and close FAST as long as you are in a position to do so.
I hope this little tutorial has helped you sharpen up your real estate deal analyzing skills… and we really look forward to working with you in the near future.
If you have any questions at all… don’t hesitate to contact us anytime for anything.
If you’re looking to get started with House Flipping in the Dallas Fort Worth area, we might be able to help you out. We buy properties in Dallas Fort Worth TX and would be happy to see if there’s a property that might work for your flipping needs. Just click here and enter your information or pick up the phone and call (817) 550-5069 Opt# 8 TODAY!
Google TMC Property Solutions to see what others have to say about us and our services or our customer review here.
P.S. Are you an active real estate investor in Texas? Come network, learn, & do more deals by joining our West DFW REI Group, the “Watering Hole” for North Texas Real Estate Investors. We also have an “Online Only” membership as well if you’re not local to Fort Worth.
Feel free to reach out HERE if we can help you.
To Your Success!