Be Certain You Understand How to Really Read Financial Statements From Properties You Are Considering

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I mentioned the results of not doing a proficient job by really taking a look at and analyzing your financial statement. The most horrible thing that can happen is to get caught with a dog project when you were led to believe that it was going to be a massive cash flow generator.

1. Realize to look for inconsistencies in expenses and rental income.

Make sure you look for a REALISTIC upside as well. The majority of you have heard my stories regarding investors purchasing properties for tens of thousands of dollars less than what that property was really worth.

In fact I just worked with an investor that bought a $510,000 property and the appraisal came in at $550,000. Why? The investor knew what they were looking for in the numbers and knew that there was realistic upside that the seller was leaving on the table - a thousand of dollars of upside.

OK - two main questions:

a) Why would a seller dump all this cash on the closing table?

Much of the time they have no idea they are doing it. They get some bad advice or feel that they really know how much the property is worth - when sometimes it is worth more than they believe. Also, Poor Management and lazy ownership. In other words landlords or managers knowing that they need to increase rents, cut operating costs, do improvements, etc. But just don't. Ultimately leaving money on the table.

b) Where do you locate these properties?

OK - Its not like an infomercial where you begin looking Monday and have a project under contract on Tuesday morning with $50,000 cash coming to you at closing. Truthfully the majority of properties out there do not have the capacity to make money for the buyer at the closing table, i.e., the property will appraise for the purchase price.

So, it gets back to looking meticulously at all of the financial and condition of the property you are looking at to understand if you have located one - also, if you are working with someone that knows what they are doing they can call you and tell you that you have an opportunity to make some good money at closing. So, it takes some fortitude and an alliance with someone who knows what you are looking for and what you are doing.

Article Source: http://depositarticles.com/

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