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Proven Home Buying Techniques That True Real Estate Investors Follow

By Diane Hofflander

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Home Buyers have been in the home-buying business longer than most people have thought of real-estate investing. With real estate's current turn of events, experienced home buyers are realizing even greater returns than it did in the up market, but with far stricter set of buying rules... here's how true professional home buyers make it work so well. One of these reasons is because of their strong necessity to place their investment criteria in writing, on the office board and in front of their teams faces daily.

Following are four reasons why investors place such a strong emphasis on their investment criteria and how they realize such HUGE profits when most everyone else are making pennies, breaking even or losing money:

Reason #1 - Educate Yourself By having specific investment criteria, investors are able to sharpen their focus which leads to the likelihood of finding great deals all the more easy. Great deals are attracted towards investors because sellers, fellow investors, agents and banks understand what parameters they need to fall within. By letting your selling teams know exactly what your criteria are from the beginning - it sets you in first position for deals and responsiveness.

Reason #2 - Utilize Detailed Cost Analysis Spread Sheets While many novice investors may stew over a concoction of minimal diligence, "what does my buddies or fellow investor acquaintance say" mentality, and lack of market condition valuations, experienced investors use specific investment criteria spread sheets, because it helps them immediately determine if a potential investment fits or does not fit within their cash-buy criteria. By doing so, it will save a tremendous amount of time on determining which deals to "go" and which deals to "throw".

Reason #3 - Be honest and Professional At All Costs By quickly becoming a market leader, our reputation has created a presence that has catapulted others word of mouth from individual home sellers, Realtors™, fellow investors to Asset managers. They are aware of our buying criteria, ethics and prowess. Even content sellers are beginning to spread the word to friends and family of how we were able to help them (or someone they know) out of a bad situation. All of this is directly attributed from following the first three steps mentioned above.

Reason #4: Be Firm Yet Flexible A seasoned investor is able to evolve their investment criteria with the fluctuations within the market place, even down to the nuances of certain geographical locations. This "eagle-eye" approach gives them the leading advantage in buying right, selling right and realizing the maximum potential of profitability. It doesn't take much for an area to drop a few points due to an REO bulk sale, of say 100 homes, taking a chunk from your profits or increasing your hold time... so keep a close eye on your buying market.

While there remains a strict rule of thumb that predicates investor strategies and investment criteria, we would also like to tie-in a more personal approach in the way that true investors evaluate additional investment criteria.

Following are proven investors investment criteria: 1. If he doesn't understand the investment, he doesn't make the investment, period.

2. Invest only in areas where the advantage in making a superior ROI equates with minimal time, effort and energy being realized. This lowers risk, magnifies returns, and saves time and effort.

3. Don't put lots of capital at risk. If he is going to put money into a deal, he makes sure it is a low risk deal. He is never comfortable taking a high risk position with his money or his capital investors funds. Certain Master Criteria are never overlooked though; such as the LTV never exceeding 70% of current "conservative" valuations.

4. When a low risk is in a deal, expect healthy cash on cash returns, conservatively 25%, aggressively 40-60% or higher annual rate of return on investment depending on the degree of risk.

5. The game has to be worth playing. This means that if the deal isn't big enough, why bother? Every deal requires due diligence of some sort. Deals where funds are put at risk or take on personal liability have the highest need for due diligence. When the return is not there, obviously the upside is not there on the whole. This equates to the "go or throw" criteria that an experienced investor employs.

After reviewing a cost/profit analysis spread sheet and when a large profit is neither feasible nor obtainable, not just as a rate of return, but in terms of total profit in a deal, investors don't bother taking the next step - but simply looks at the next property.

Here is an analogy: The effort put forth in preparing a gourmet dish from scratch or driving to a 5 star restaurant is the same. Be it, the effort in preparing that meal is the same irrespective of who prepared it. Investors prefer to drive to the area it was prepared instead of lamenting over working hard and not smart.

6. Investors also looks to ways to better other individual situations. Many times, they offer credit repair for those homes he buys on short sale, since the seller cannot receive any cash benefit from the sale. Likewise, by offering Seller Financing and creating cash flow to those whose credit has been destroyed and can't move into a new home, it's like a new lease on life. As Bruckner says, "the better good for all will prevail in the winds of uncertainty for years to come." To your success.

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