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Technology and data analytics have taken over every industry and are revolutionizing the traditional way of doing things.
Therefore, it’s only prudent that real estate investors use such technology to their advantage.
One of these innovations in the real estate industry is deal evaluation tools.
How do these work?
In the past, it was hard for investors to find real estate investment deals that would provide the best return on investment. They solely relied on their networks and instincts.
This was limiting, especially to beginner real estate investors who felt they still didn’t have enough experience and built powerful networks yet. Until real estate deal evaluation tools came and changed the game.
Now, real estate investors can access a lot of information and statistics about a certain property or market. This enables them to make informed decisions based on the data provided.
They are also able to understand market trends, which are vital in any real estate transaction.
Most importantly, real estate investors can lower the financial risk involved with purchasing any property. Typically as an investor, you want to find investments with the lowest risks. Deal evaluation tools help with this because it makes all data about the property available.
This is the topic of today’s article. We’re going to see how real estate deal evaluation tools help you manage cash flow financing risks. Stick around.
1. Property Valuation
Surprises are some of the things you want to avoid as an investor. Sadly, the real estate market is never short of them. If you’re looking for a reason to use real estate deal evaluation tools, this is it.
For starters, deal evaluation tools help in determining a property’s value in the market. This is what we call property evaluation. It’s the process where you seek to find the real value of the property, other than what the seller is asking for.
In short, deal evaluation tools help you to avoid receiving the short end of the stick in the deal.
Always have in mind that the property’s marked price is not its true economic value. What do we mean by this?
Suppose you buy a rental unit at a certain price, then realize the rental income it generates might not make economic sense? You want to be aware of this before diving headfirst into the deal.
With real estate deal evaluation tools, you’ll know what the real value of the property in the market is.
The tools don’t always have to help you realize that the deal is a scam. In some instances, the seller might be making a distress sale, therefore selling a throwaway price. With real estate deal tools, you’ll utilize the chance to make a profit in the long term.
The tools help you manage cash flow risks by providing accurate property evaluation to avoid making deal mistakes.
2. Appreciation and Depreciation
These are vital factors that every investor should consider when investing in any property.
In most cases, you won’t be able to give any future projections of the market by yourself. If it’s a rental property, you don’t know whether vacancy rates can be affected by external factors, such as future government projects.
As a real estate investor using deal evaluation tools, you can tell how your property will perform in the future. These tools are able to do this by using factors such as inflation, tax legislations, and housing trends.
Your instincts may arouse your interest in a certain deal, but deal evaluation tools will tell you otherwise.
For example, if you’re a fix and flip investor, deal evaluation tools will help you know your property’s market value after you’ve run repairs. You’ll know by what percentage your property will appreciate then decide if you’ll invest in the deal.
You won’t need to hire an exorbitant contractor to know if running such repairs will be financially feasible and how they’ll affect your cash flow in the future.
3. Access to Financing
You might not believe it, but real estate deal evaluation tools help you gain access to financing options. How?
Banks and lending institutions also use real estate analytics. The primary reason for this is to know the amount of risk your property poses to them.
In financial lending, the higher the risk, the lower your chances of getting financing. Even if you qualify, the loan interest and terms of repayment may not be favorable. The lower the risk, the higher your chances.
So, why not be shrewd and use deal evaluation tools before you even contact your lending institution?
It’s better to use these analytics and determine property with the highest return potential so that banks will be more than willing to finance you.
Conclusion
Real estate investors are equipped to make result-driven investment decisions now more than ever. Deal evaluation tools provide predictive analysis that no other tool has been able to provide in the past.
Go forth and make informed investment decisions!
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