How to Analyze a Luxury Home Deal

Let's talk about luxury homes for a minute as I get a lot of inquiries about investing in them. A luxury home by definition will vary depending on the area. In Orange County, California where the median priced home is almost $800,000.00, a luxury home would have to be at least several million dollars to be classified as a luxury home in my opinion.

Where as in my area the median priced home is in the $200,000 range then a luxury home would be anything around $1,000,000.

Many investors, especially new investors, call me or email me with a luxury home deal that they have found and are real excited about because they think it's a real good deal. For example, I had someone recently email me a deal that was worth $1,000,000 and they could buy it for $800,000.

Even though it looks like there is $200,000 in profit to be made I want you to realize that with these types of homes you must buy them at a larger discount simply because the values fluctuate so much. I've seen the value from appraisal to appraisal change as much as 20%. In the example above... there goes ALL of your profit.

My solution, which I actually learned from expert Frank McKinney, is that you need to be able to buy a this type of property at no more than 50% of its value to make a good profit on it. This is because there is less of a market for these types of homes which makes them harder to sell and because of this they can vary in price quite a bit. Please keep this in mind and don't get too excited when you can find a house at a 20% discount.

That's a good place to start but you need a better deal than that. Don't think that you can't buy this type of home at 80% and retail it and make money on it. That's not what I am saying at all because there are more things that also come into play here.

If you are in a hot market and you know you can sell the property fast at retail and you are totally comfortable with the appraised value then you can make money on an 80% deal. Just remember luxury home values can change fast and there are fewer buyers for them.

Your Blueprint to Success in Real Estate Investing

Real Estate Investing is now and will always be one of the ways that the "Average Joe" can excel to great heights regardless of one's education, financial level, credit level, or upbringing.

There's a right way and a wrong way to get started, so in an effort to prevent you from making some of the same mistakes I've made, I've designed a simple "Blueprint to Success" that anyone can use, and if taken and applied, these steps can lead the "average" person to a lifetime of wealth and freedom.

Step I: Get your Education - Real Estate Investing is comprised of so many different options and techniques, and there are learning curves for each. It's imperative that you get at least a "general overview" of the different real estate investing techniques and strategies so that you can learn what "fits" with you and what you enjoy. There are countless ways to become extremely wealthy through Real Estate, but it helps if you enjoy what you do, so be sure that you get your education from others that are successful in the business. While you're learning about the different strategies and trying to keep the risks minimal, I strongly recommend that you begin your learning by doing, which leads me to the next step in the Blueprint.

Step II: Learn by Wholesaling - Wholesaling is a way that you can Learn to Invest in Real Estate while you're actually doing deals at the same time. It's a way that you can earn "chunks of cash" virtually risk-free, and begin to understand the more complex features and options available to you in your Investing career. I strongly recommend that everyone, regardless of their financial situation, begin investing because it is a way that will prevent you from incurring tons of liability or needless loss of money while you continue your education process.

Step III: Build a Foundation - In this portion of the blueprint, ideally you will have become an "expert wholesaler" and have reinvested the proceeds back into your business for education, marketing, as well as stocking up cash so that you're ready for emergencies as your business grows. Spend your time both learning through books, courses, audio, mentors, snd experts as well as taking the actions necessary to continue building your expertise in the "hands-on" world and you will soon get a feel for the "Real Estate Ballgame" and for where you want to fit in the grand scheme of things. It's important that you focus strongly a portion of cash aside as it's easy to miss this point, and can be fatal if you ignore this step!

Step IV: Chunks of Cash - By this point, you will continue to do wholesale type deals, as well as other "deals" that provide you with chunks of cash. Chunks of cash are important because it gives you a buffer and the freedom to breathe. Before you move to the next step, it's extremely important for you to get to a point where you are automating the cash generation AND have developed a good "wad" of cash that is set aside for emergencies during the cash-flow building process.

Step V: Continuing Cashflow - Cashflow is what leads to freedom as it enables you to live without working if you want to, but developing the cashflow typically provides a greater risk, so it's important to continue creating chunks of cash and setting a portion of it aside for the emergencies. When you've reached the point where you start developing cashflow, it's important that you keep setting cash aside and concentrating hard on your education. While this is the road to freedom, it is also the point where you've got to be sure that you're doing the right thing because of the liabilities and risks involved. It's important that you don't ever consider yourself "above" knowledge. Many investors assume that they know everything when they reach this point, and often, that's their downfall. If you're "always a student" and continue your learning process always, and take action, then your long-term success is within close reach!

Step VI: Freedom by Automation - This is the "supreme" level of Real Estate Investing. It's the point where you've set plenty of cash aside for "emergencies" and have established a monthly cashflow that is greater than the amount that you need to live on. The important thing about getting to this level is to take "you" out of the equation. You don't want to do an excessive amount of work to merely work yourself into a "job". While I believe that work is a needed thing, I believe it's important to have the choice to be able to determine when, where, and how much you work. Working is more fun when it's not something that you have to do, so if you structure your business where you're able to be outside the business and it still runs profitably without your presence, then you have truly worked your way to your freedom!

There you go. Follow this blueprint that I've laid out and you virtually insure yourself a life of wealth, freedom and choices or you can ignore it, and you might as well go buy a lotto ticket and cross your fingers. While you may have some short-term successes, you'll either work yourself into a "job" or fail long-term in Real Estate if you ignore these!

Profit From Investing In Real Estate

If you are looking to invest your money, consider putting it in real estate. The value of real estate can only rise over time so it's practically a fail-proof investment. What's more, you can depend on real estate to be a primary source of income.

In terms of advantages, one benefit of buying real estate is that it helps diversify your investment portfolio. These days, you can't just rely on stocks, bonds, and mutual funds. An excellent financial planner also invests in real estate as part of his fixed-income investments.

Investing in real property however does not end with the purchase of the property alone. In fact, real estate investing also includes the ownership and management of the property, whether you decide to rent it out or resell it at a profit. As with any type of investment, investing in real estate will involve a bit of business acumen on your part. To begin with, you can't just buy any property that suits your fancy. You have to be able to zero in on a property that has potential to become profitable in the next few years.

To do this, you have to search, ask, and negotiate. It's only after you have practiced these three steps that you can work on closing the deal.

Before you even begin your search, you must already have a clear purpose for the property. Determine in advance what you would like to do with the property. Do you want to rent it out? Are you planning to re-sell it in a few years? There are the things that you have to think about as they can affect your choice of location and the amount you may be willing to pay for the property

To avoid extra expenses in the acquisition of the property, it's best to look for properties that are being offered for sale by the owner himself. Apart from doing away with the agent's commission, you will have a better chance of bringing down the price of the property during your negotiations with the owner.

To get the best location, schedule a property viewing with the owner. Once you get there, observe the property's surroundings and make a checklist. Make sure that there are important establishments such as hospitals, schools, and recreation centers nearby. Check the availability of public transportation. Inquire about the population of the area and whether or not there are immediate plans for development. These are factors that further add value to the property.

Remember that investing in real estate property may cost money but with hard work and a little bit of luck, you may be able to recover you investment before you even know it. After that, everything is just profit.