How do I know when real estate is priced right?

 This question has come up several times recently so here is the answer. Be sure to read all the real estate articles and the real estate syndication articles to familiarize yourself with all the ins and outs involved.

How much to pay? That depends! Her are some general rules of thumb.

For single family homes you pay no more then 100 times the monthly rent that you can easily charge. Or ten times the annual net income (do not count mortgage payments). Net profit is the rent received minus taxes, insurance, a small repair allowance, and anything else you provide such as garbage pick up, or association fess etc. Single family homes have value as homes and as shelter. Thus they tend to cost more then apartments. Thus they are less profitable buy then again they are easier to sell and they appreciate faster.

When I buy single family homes I am looking for long term holds (five or more years) or I am buying fixer uppers at half the appraised value.

For other income producing property (apartments, offices ant the like) the normal way to figure the properties value is net annual income times ten (do not forget to charge a 5% management fee as an expense). If the property is a very nice and very well maintained property in a very nice area with a very high occupancy you might pay twelve times annual net.

The rules of thumb tell you you have a likely candidate. Here is what the professional will do. Using the same numbers the professional will make his offer conditional on the due diligence and property condition report. The final offer will be for the ten times the current (verified) net income less any and all repairs needed (repairs are always at licensed contractor prices). If you can get the property for less then that you have a super bargain.

After the professional gets the property they make all the needed repairs, spruce up the over all appearance of the property, get rid of the problem tenets and reposition the property for higher rents. Every dollar of increased net income adds ten dollars to the properties value.

Read all the articles about real estate on this here on towardswealth.com and you will learn all the ricks used by professional to build multi million dollar fortunes starting with just one house or duplex and working their way up to millions of dollars. I have properties that make me as little as $100 a month and properties that bring me thousands of dollars every month.