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Secret to Identifying a Deal!

Updated December 29, 2007

The Secret to Identifying a Deal

How do you find great deals? First you must find motivated sellers. These are homeowners who are facing challenges and selling their house helps solve that challenge.

Four main things create motivated sellers. It’s what I call the Four Ds:

Death
Divorce
Disaster
Disease

Motivated sellers are the way you find properties to “buy low and sell high”. How you find motivated sellers is another discussion. For now let’s identify
good deals. Knowing that a seller is motivated is the first step to success in making a good deal. Yes, banks can be motivated sellers as well when
they are unloading a foreclosure.

How Much to Pay

In order to profit from a deal, you have to know how much to pay.

The answer is the 70 Percent Rule. This is a formula for how much to pay for any house, in order to make a healthy profit and borrow funds with no money out of pocket. This rule also accounts for repair costs, which can be rolled into the loan so you have fix-up money right off the bat.

The 70 Percent Rule is this: Buy any house at 70 percent or less of the fixed-up market value, minus repair costs. So if you have a house that is worth $100,000 when it is fixed, and the repairs costs are $20,000, the maximum you want to pay for it is $50,000.

The 70 Percent Rule

House value after repairs $100,000

The 70 Percent Rule x 0.7

————–

Subtotal $ 70,000

Repair costs - $ 20,000

————-

Maximum amount to pay $ 50,000

Can you buy a house for $50,000, or 50 cents on the dollar? Absolutely! When you find motivated sellers and you are able to solve their problems, you can buy houses that fit the 70 Percent Rule all day long.

Look for my next email when I tell you how to run the numbers And how to identify what to look for in a good deal.

Armando Montelongo, President
Armando Montelongo Worldwide, Inc.

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