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A guide to finding a good deal in real estate
Feb 21, 2024
10 min read
Finding a good deal in real estate is crucial for your investing strategy. A good deal is a deal that makes you money in any market, good or bad. It has some key traits that are hidden, and you must uncover these traits, study them, and analyze them before deciding on a deal.
The above is easier said than done. Therefore, we prepared this guide. In this guide, we have listed all the activities and due diligence you must perform before you zero down on a deal.
Your investment goal is your general direction in the purchase. Without a goal, you will be spending too much time analyzing a deal that, in the end, you don't buy simply because that is not your investment goal.
Your real estate investment goal should be clear, concise, and rememberable without you reading them now and then. Following are some such goals:
- I will own a condo in this year (owning makes you feel better).
- I will make 8% ROI with my money.
- I will make 300k in margin in 5 years with my purchase.
and so on.
The above one-liner goals are simple and to the point and create momentum when you read them. They can move someone in an actionable direction, and later, you will learn how these goals help you choose your deal.
Once you have thought out your goal, it is time to draw down your purchase criteria. The criteria must be in line with your goal. Good criteria will help your agent find the right investment opportunities for you.
Your criteria must specify your preferred location, your budget for the purchase, your preferred type of property, number of bedrooms, minimum and maximum size, and acceptable age of the property. This is not a complete list but a guiding list for you to start with. You can add more items to the criteria that help you narrow down the search and help your agent find the right property for you.
Broadly, your criteria should be able to communicate "What you must have?" and "What you don't care?" in your real estate deal.
You must have read this before, "The real estate investment is all about location, location, and location." It is true for our good deal, too.
If you find out that your future investment is located near a prestigious school, an MRT, an upcoming tourist spot, or a shopping mall with many amenities, then you know it is the right prospect in terms of location.
In contrast, if you find out that the area faces a noisy highway, lacks amenities, has no nearby transportation, and has no nearby schools, then you should not explore this prospect. Such locations do not attract buyers and tenants. Renting out such homes is more challenging, and selling has no bargaining power.
Once you have identified a handful of locations, it's time to shortlist real estate projects. These, according to your budget, could be condominiums, cluster housing, landed properties, etc.
You can find a good deal on any project. However, it is not always easy. Some projects may attract higher gains and rents than others in the same area for many reasons; one could be purely buyers' sentimental and online reputation of the project. So, you should filter out these projects with low rental yields and ROI (return on investment) from your investment project list.
Now, Rental yields and ROI are a lot of math you must do for each of your prospective projects and deals. There are many online and offline tools freely available for you to achieve this task. We recommend using Sginsite's Tools list, which has two valuable calculators: Price Analysis and Rental Income. These tools are specially designed for the Singapore market analysis, and they do rental data augmentation, too. That means you do not need to look for rentals and prices anywhere to calculate Rental Income; Rentals are taken from IRAS rental contract data and added to the calculations for every transaction. You just need to add the purchase price, and all the calculations are done in seconds.
To learn more, visit: https://sginsite.com/
To check your price break down visit Price Analysis
To check your free cashflow visit Rental Income Analysis
An excellent investment has many more certainties than many un-certainties. Certainties are when you are sure what you will get from the deal. On the other hang, un-certainties are mainly your speculations. For instance, you can certainly get a fixed amount of rent for a reasonably long fixed period of time. However, you are never sure that the price of your investment will be appreciated in a fixed period of time.
Buying any property based on speculations or uncertainties can lead to heavy losses in most cases. You should avoid that trap if you invest for a purpose in life. Your purpose may not be fulfilled if these uncertainties hit you and have losses. The best deals give you fixed profits. To identify uncertainties, you need practice and help.
Following are some examples of uncertainties and certainties in a real estate investment:
You can calculate your budget with the money that you can borrow from your bank and the free cash in your hand, as well as the CPF if you have it.
This is the last and the most crucial step you don't want to get wrong. Once you have everything done as described above, now you are ready to find listings that fit your budget, criteria, location, and your goal.
You can visit property listing websites like PropertyGuru, 99, etc, and review the listings by applying your criteria. The listing price is usually just the asking price; do not believe that this is what you have to pay for your purchase. Now, you can use the Rental Income Analysis on Sginsite.com to check if a property at a specific price will generate a positive cash flow. If yes, that is the price point you want to pay for the property. And, yes! You have found a good deal if the seller is ready to sell at that price point.
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