Evaluating a property’s investment potential just got a lot easier and less expensive.
In the past, evaluating investment potential required extensive legwork and expense that was spent researching a property’s market value and all the debt encumbering the property. But now a few clicks of the mouse on RealtyTrac will get you that same information – included for properties nationwide in a low monthly subscription fee:
You can access this information from any property details page when you’re logged into RealtyTrac. Previously, reports containing this information could cost up to $30 per property, but now we’re including unlimited access to this information as part of our Premier Subscription. If you’re not a premier subscriber, you can upgrade now for just a few dollars more a month. Use these reports on just one property per month, and you’ll recoup the extra subscription cost. And there’s no limit to the number of properties on which you can access these reports – meaning you could save hundreds of dollars or more each month, depending on how many properties you evaluate.
If you’re already a premier subscriber, make sure you take advantage of these crucial property evaluation tools on every property that interests you. These reports quickly let you know if a property has enough equity to make it worth pursuing. And they’ll help you to determine how much you can offer for the property and still get a great bargain.
How to Evaluate Investment Potential
Once you’ve accessed the Comparable Sales and Lien & Loan History,
it takes just a few steps to determine the property’s investment potential.
First, calculate the average price per square foot of all of the comparable
sales. We provide the price per square foot on each comparable sale, so simply
add those up and divide by the total number of comparable sales. Here’s
an example from a property on our website:
| Comp Sales | Price/Square Foot |
|---|---|
| Comp Sale 1 | $158 |
| Comp Sale 2 | $195 |
| Comp Sale 3 | $186 |
| Comp Sale 4 | $119 |
| Comp Sale 5 | $108 |
| Comp Sale 6 | $127 |
| Comp Sale 7 | $172 |
| Comp Sale 8 | $103 |
| Comp Sale 9 | $171 |
| Comp Sale 10 | $125 |
| Comp Sale 11 | $152 |
| Comp Sale 12 | $164 |
| Comp Sale 13 | $161 |
| Comp Sale 14 | $151 |
| Comp Sale 15 | $165 |
| Total | $2,257 |
| Average Price Per Square Foot (Total/15) | $150 |
Next, multiply the average price per square foot by the property’s square footage to determine estimated market value. In this case, the house has 1308 square feet.
$150 x 1308 = $196,200 (estimated market value)
You may want to adjust the estimated market value up or down if you know the house is in really good condition or really bad condition compared to other properties in the neighborhood. Then move on to the Lien & Loan History, where you will need to add up all the outstanding tax liens loans on the property. The loan information can be complicated to understand, so make sure to click on the “Understanding the Loan History” link learn how to tally the total outstanding debt against the property. There usually won’t be more than two outstanding loans against a property, although sometimes you’ll find three. The property in our example has three:
| Loan Date | Loan Amount | Lender |
| 11/30/2000 | $117,320 | First Magnus Financial Corp |
| 2/18/2004 | $25,000 | Bank Of America NA |
| 5/2/2005 | $5,755 | Secretary of HUD |
| Total Loans | $148,075 |
Now subtract the estimated market value from the total loans to come up with the estimated equity.
$196,200 - $148,075 = $48,125 (estimated equity)
This property has a solid amount of equity, enough that you could probably realize a tidy profit by negotiating a deal with the owner during pre-foreclosure. If you waited for the public auction of this property, you might get a better deal because the opening bid at the auction is $117,320, meaning the First Magnus loan is the one that is being foreclosed on. If you’re the highest bidder at the auction (even at just one dollar over the opening bid), you should get the property free and clear of the other loans, since those loans were taken out after the loan in foreclosure.
Don’t be fooled – buying a foreclosure property doesn’t equate to easy money by any means. Once you find properties that have great investment potential, you’ll still need to contact the owners and hash out a purchase agreement or attend the public auction and bid against other investors. But now you won’t have to waste your valuable time pursuing properties that aren’t wise investments.
“While buying a foreclosure property is certainly not without risk, the right examination and due diligence on the part of buyers can significantly improve their ability to make a strong investment,” explains James J. Saccacio, chief executive officer at RealtyTrac, the leading online foreclosure marketplace. “These new property research tools make it more convenient than ever to access information vital to profitable real estate purchases.”