It’s easy to get lost in all the numbers when you are looking at a major real estate investment.  Simply follow a basic plan when calculating your discounts to find out how much money you are willing to invest in a property.

Property investment is a numbers business.  As a real estate investor you’ll need to pay close attention to your numbers when purchasing a property in order to make money.  Every investor develops their own basic plan for purchasing property to make a profit. 

Those just starting out can get confused with all the suggested rates of return that you need to aim for, but each property purchase needs its own specific discount for you to make a good profit. 

Start with the Minimum
A basic plan is to start by taking 10% off the asking price or the mortgage of a property you are working with the homeowner to purchase.  This can be called your profits or your basic earnings.

From there you’ll continue to lower the amount of money you are willing to pay for that property based on certain negative factors associated with the home.  This can be fact that the property doesn’t have a basement or it needs a new roof.  You can negotiate a discount for many different problem areas with the bank.  Just calculate the costs of these repairs or how much less a buyer would be willing to pay for it and you’ll get the additional discount you need to ask for on the sale price of this property.

Examples of negative issues associated with a property;

• Disrepair; needs new roof, new heater, etc.
• No appliances or old appliances
• No basement
• Only one bathroom for multi-bedroom house
• Economically depressed area
• Lot of other properties for sale around the home
• General shabby look, needs lawn care, new paint job, etc.

When you finish the calculations on discounts you’ll ask for, you’ll have your minimum discount, your additional discount and your total discount.  That determines what you’ll be willing to pay for a property.  As long as you approach the seller or the bank with proof of these negative issues, you stand a good chance of getting your discounted price.

This method of calculating will allow you to remain true to your financial plan for real estate investing, and also not end up getting into trouble by paying too much for a property. 

You can make money real estate investing in a high-priced area.  All it takes is a little more effort and a willingness to hold onto property until it appreciates.

A lot of people are interested in real estate investment, but they also live out west in very expensive areas.  These are places where the average family style ranch may cost up to half a million dollars and the cost of living is very high.  The tendency for these potential real estate investors is to say; sure this works for people in cheaper areas of the country but the market here is so expensive it’s just not worth our while. 

It is very possible to make a return on your real estate investments out west and a good profit.  Even though the prices are higher, the process of property investment is still all about the numbers. 

You may have to work a little harder to find those properties at a price that matches what you’ll need to pay in order to make a return.  You may even spend more time in short sales and note purchase discussions with the banks to pick up properties that have little or no equity built up in them.  Yet, it is more than possible to make a profitable return on your investments.

What Rate of Return Should You Look For?
Since the properties out west have been known to sell for outrageous prices you may even be able to get yourself a very big return every once in a while.  However, there’s nothing wrong with a basic 10 to 15% rate of return on your real estate investments out west either.  Just add a couple of zeros to the numbers when you estimate how much money with which you’ll be working, since prices are a little bit higher.

Also when you work on real estate investments in places like California, you may wish to consider taking a minimum discount of only 5%.  The properties out here tend to appreciate in leaps and bounds.  Even if you are only taking the 5% rate of return on a property deal, you’ll still end up making more of a return in appreciation of your property.

It is possible to make a profit in the more expensive properties in a higher priced market.  You may have to take less of a return on each deal, but if you hold onto the properties for a little while they tend to appreciate in high cost areas and you’ll make more profit on the resale of that property.