The {real estate|realty|property} market is now in its down cycle with {house|home} {prices|costs|rates} {plummeting|plunging|dropping} and {house|home} {value|worth} {underwater|undersea}. Foreclosures are at record high. {However|Nevertheless}, if you are investing for the long term and {want to|wish to} {create|produce|develop} wealth, this is {the best|the very best} time to {buy|purchase} {undervalued|underestimated} {properties|residential or commercial properties|homes}.

Sir John Templeton, {legendary|famous} {investor|financier} and {founder|creator} of the fidelity funds group {says|states}, "{Buy at|Purchase} the point of pessimism and {sell at|cost} the point of optimism". This is your time to {buy|purchase}, not {just|simply} {buy|purchase} {but|however} {also|likewise} {buy|purchase} right.

If you are {starting out|beginning|starting} as {a beginner|a novice|a newbie} {investor|financier}, you {need|require} to {learn|discover|find out} how to {buy|purchase} {right|best|ideal} {avoiding|preventing} the {mistakes|errors} most {investors|financiers} make. This {article|short article|post} will {help|assist} you {avoid|prevent} such {mistakes|errors} as you {progress|advance} as {an investor|a financier}.

{Real estate investor|Investor} {mindset|frame of mind|state of mind}

The {first|very first} thing you {must|should|need to} do to {buy|purchase} {right|best|ideal} {property|residential or commercial property|home} as {an investor|a financier} is to have {a mindset|a frame of mind|a state of mind} {change|modification}. This is {because|since|due to the fact that} the {processes|procedures} of {buying|purchasing} your {personal|individual} {house|home} vis-à-vis, {buying|purchasing} {an income|an earnings} producing {property|residential or commercial property|home} are parallel to each other.

{An investor|A financier} {buying|purchasing} {a property|a residential or commercial property|a home} is {looking for|searching for|trying to find}; {value|worth} in {a property|a residential or commercial property|a home}, he is {looking for|searching for|trying to find} {income|earnings} and {potential|capacity} for capital {appreciation|gratitude}. On the other, hand {a homeowner|a property owner|a house owner} is {looking to|wanting to|seeking to|aiming to} {buy|purchase}, in {a nice|a good|a great} {neighborhood|community|area} with {good|great|excellent} schools in {a nice|a good|a great} {area|location}. {An investor|A financier} is {looking for|searching for|trying to find} {a property|a residential or commercial property|a home} in {a location|a place|an area} that {attracts|draws in|brings in} {renters|tenants|occupants}; that is within {commuting|travelling} {distance|range} from their work, {close to|near to|near} {shops|stores}, clubs {and so forth|etc}. I hope you {get the picture|understand}.

The {second|2nd} {factor|element|aspect} you {need|require} to have is to have a system for {finding|discovering} the {right|best|ideal} {property|residential or commercial property|home}- your workhorse {value|worth} scout. What is your workhorse {value|worth} scout? They {are like|resemble} your homing radar to {spot|find|identify} the {right|best|ideal} {property|residential or commercial property|home}. They {help|assist} you {assess|evaluate|examine} the {feasibility|expediency} of {an investment|a financial investment} {property|residential or commercial property|home}. The {main|primary} {values|worths} you {need|require} to {evaluate|assess|examine} your {potential|prospective|possible} {investments|financial investments} are the {cost|expense} per square foot and gross {rent|lease} multiplier.

Let's {talk about|discuss|speak about} them in {detail|information}.

{Cost|Expense} per square foot

{Cost|Expense} per square foot is the {average|typical} {cost|expense} per foot you are {paying for|spending for} the {property|residential or commercial property|home}. Here is how to {use|utilize} the {cost|expense} per square foot (CPF).

Let us a take {a property|a residential or commercial property|a home} with an asking {price|cost|rate} of $100,000, a 2 bed, 1 {bathroom|restroom} {property|residential or commercial property|home} with {total|overall} square foot of 2,000 square feet. The {cost|expense} per square foot here is 100,000/ 2,000= $50 per sq foot.

This number {is important|is essential|is very important|is necessary} {because|since|due to the fact that} you can compare the {average|typical} {cost|expense} per square foot in your {target market|target audience}. You can get this {information|info|details} from your {local|regional} county {property|residential or commercial property|home} appraiser or land {property|residential or commercial property|home} registrar in some {countries|nations}. You are {looking to|wanting to|seeking to|aiming to} {buy|purchase} {properties|residential or commercial properties|homes} that are {below|listed below} the {average|typical} or near the {average|typical} CPF.If you compare this number with the {average|typical} {cost|expense} per square foot and it is above the {average|typical} then you {might|may} be {overpaying|paying too much}, {hence|thus|for this reason} you can renegotiate.

A word of {caution|care} here, in {using|utilizing} the {cost|expense} per square foot, {always|constantly} compares "apples for apples and not oranges for apples". What do I {mean|imply|indicate|suggest}, compare {properties|residential or commercial properties|homes} with {similar|comparable} size and in the {same|exact same|very same} {area|location}, {for example|for instance} a 2 {bedroom|bed room} 1 bath {property|residential or commercial property|home} to a 2 {bedroom|bed room} 1 bath {apartment|house|apartment or condo|home}, not 3 bed 2 bath to 2 {bedroom|bed room} 1 bath {property|residential or commercial property|home}.

The next {value|worth} you {need|require} to {use|utilize} is the ...

Gross {rent|lease} multiplier

The gross {rent|lease} multiplier is another {value|worth} you can {use|utilize} to see if {a property|a residential or commercial property|a home} is over or under priced. It is not {a precise|an accurate|an exact} tool {but|however} this can {give|provide|offer} you {a quick|a fast} {indication|indicator|sign} whether you {a buying|a purchasing} a loss maker. The GRM {calculated|determined|computed}, by dividing the {average|typical} {price|cost|rate} of {recently|just recently} {purchased|bought|acquired} or {sold|offered} {house|home} by the {annual|yearly} {gross income|gross earnings} from {renting|leasing} {a comparable|a similar|an equivalent} {house|home} in the {area|location}.

Gross {rent|lease} multiplier = {market value|market price} {recently|just recently} {sold|offered} {property|residential or commercial property|home}/ {annual|yearly} gross rental {income|earnings}

Let's {use|utilize} an example: {A property|A residential or commercial property|A home} that {recently|just recently} {sold|offered} in your {target market|target audience} for $100000 with gross {annual|yearly} {rent|lease} of $5000 has a GRM of 20.

The GRM is {just|simply} a guide to {estimate|approximate} the approximate {value|worth}.

Here is my own experience of {using|utilizing} this {two|2} work scout {values|worths} ... I {generally|typically|normally|usually} tend to {offer|provide|use} around 25 percent {below|listed below} the {cost|expense} per square foot and 75 percent of the GRM. There are other {factors|elements|aspects}, I {consider|think about} such as; {cost|expense} of {financing|funding}; {vacancy|job} rate and the condition of the {building|structure}. When you {find|discover} {potentially|possibly} {promising|appealing} {properties|residential or commercial properties|homes}, you can then do your due diligence on the {properties|residential or commercial properties|homes} and {select|choose|pick} {the best|the very best} {property|residential or commercial property|home} that will yield {positive|favorable} {cash flow|capital}.

The {key|secret} to success as {a real estate investor|an investor} is to {buy|purchase} {value|worth} {properties|residential or commercial properties|homes} at {a discount|a discount rate}, and to {achieve|accomplish|attain} this you {must|should|need to} have the {mindset|frame of mind|state of mind} of {an investor|a financier}. You {also|likewise} {need|require} to have a system to asses {value|worth} and {buy|purchase} right.

These {two|2} {parameters|specifications|criteria}, the {cost|expense} per square foot and gross multiplier will {help|assist} you {achieve|accomplish|attain} your {objectives|goals}.