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The MARLA formula consists of 5 magic questions that will help you quickly weed out the motivated sellers from the rest of the pack. MARLA is an acronym for Motivation, ARV (After Repair Value), Repairs, Loan balance, Asking price. Here are the 5 magic questions.

1. Why are you selling the house?

2. What’s the market value of the home?

3. Does the property need and fixing up?

4. What is/are the current loan balance(s)?

5. How much do you want for the house? Follow-up: Is that the least you’ll accept?

Let me explain why we’re asking these questions.

The sellers MOTIVATION will be drawn out by the first question. You’ll have to be the judge if the answer indicates whether you’re dealing with a motivated seller or not. The majority of sellers will not be motivated enough to buy their house so don’t get discouraged. It’s a numbers game. Move on to the next one. Don’t waste your time with unmotivated sellers but also be aware that some seller will hide information until they feel comfortable enough to open up so don’t give up in five seconds.

The second question provides an idea of the home’s worth. Sellers generally have a pretty good idea of their home’s market value. For now you can use the sellers number but be sure to do your own due diligence before you close on the house. You may have found a good deal if the seller doesn’t know the home’s market value. Ignorance is expensive. Ask them what they want.

You’ll need to know if the house will require any repairs to bring it up to market condition so ask “Does the house need any repairs?” If yes, find out what needs to be fixed. Ask the seller to give you a repair estimate. They’ll often name a high number that will work to your advantage.

You’ll get information on the existing mortgage from the fourth question. Motivated sellers won’t hesitate to tell you so don’t be timid, just ask. This is an excellent question because unmotivated seller will not want to reveal this information. That’s great. You’ve saved yourself time by quickly eliminating an unnmotivated seller which frees you up to move on to the next seller.

The last piece of information is the seller’s asking price. I always follow-up with something like “Is that your bottom line?” You’ll be amazed at how often the seller will drop several thousand dollars off the asking price just like that.

After asking these 5 questions, you might even have enough information to make an offer, maybe not. But you’ll know if you’ve found a motivated seller or not and you’ll have done it quickly with 5 simple questions. Depending on what you’ve learned from the 5 magic questions, it could be time for some follow-up questions or time to make an offer but those are topics for other articles.

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Investing in real estate has helped thousands of people improve their financial status, but for all its glory it is possible to lose money by being frivolous. There are a few things that newbie investors need to watch out for, especially when working on their first few deals. The quickest ways to lose big money in real estate are:

1. Paying Too Much - Paying way too much for the property is a big mistake that puts investors at a disadvantage right from the start. This often results from failure to research the area, finding truly motivated sellers, and knowing your true costs. Even if the property was bought below market value, investors can still pay too much for repairs, underestimate holding costs, and by not performing the necessary due diligence resulting in extra expenses.

2. Lack of Due Diligence- Experienced investors know the importance of performing due diligence on the property. The purpose of due diligence is to help you realize if the property is a good deal and mitigate risk before you make the purchase. A licensed inspector should inspect the property and it is even better to use an inspector that you trust. The biggest key in the due diligence phase is asking the right questions about the structure, the neighborhood, and the process (permitting, inspections, etc).

3. Lack of an Exit Strategy- Before taking on a new investment property, you must plan out an exit strategy. Seasoned investors know the importance of having more than one exit strategy, and often have a few options open to accommodate for unforeseen events.

To illustrate, imagine yourself in a pitch-black room with one door that illuminates the far side of the room. If that door closes, you will be fumbling around in the dark. Wouldn’t it be much easier if there were two or three doors illuminating the room? Investors that fail to plan exit strategies often become motivated sellers themselves.

When mapping out your plan for the investment, make sure that you have more than one option. If your main goal is to rehab and then flip the property, you should still create a backup plan if you can’t sell it within a reasonable period of time. This second exit strategy will ensure that you do not become a motivated seller or have the property foreclosed on by the lender.

4. Lack of Contingency for Unforeseen Problems - In order to be sure that you are covered, it is important to allow for unforeseen costs in rehabbing real estate properties. Even with proper due diligence and a full inspection, additional problems and costs are bound to come into play. When investing in a property, always budget for unforeseen problems and unexpected costs. This is the best way to ensure that your seemingly good deal doesn’t become a bad deal overnight.

5. Not Knowing What the Market is Doing - It is important to have a grasp on the real estate market in your area. Being too pessimistic or optimistic can hurt you in the long run. Before making an investment, get a handle on where the market is going to be 6 months down the line. You must pay attention to a number of factors and do your research. Across the country, many real estate investors are losing their shirts because they failed to anticipate the decline in the real estate market.

Real estate investing should be approached with a business mindset. It is important to begin each deal with a complete plan of action, a plan that should accommodate for unforeseen costs and also for unexpected turns in the market.

Larry Haines is the president of the New Orleans Real Estate Investors Association and the Managing Partner of Road Home Builders, LLC. To learn more about real estate investing, please email larry@roadhomebuilders.com or visit http://www.roadhomebuilders.com For a look at successful real estate deals, please visit http://www.realestatecasestudies.com

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Finding and then capitalizing on good deals are key to successful real estate investing. The most important thing is to do your research to ensure that you are making an informed and wise decision. Finding good real estate deals can be accomplished by:

1. Looking for Motivated Sellers - The main focus of your search for good real estate deals should be to find motivated sellers. Motivated sellers need to get rid of the property quickly and are willing to sell for less. These types of sellers are motivated by a number of factors that may include divorce, death, bankruptcy, and job loss.

2. Farming the Entire Area -Focus your research on an entire area rather than a specific neighborhood. If everything in the area is going for 50 dollars per square foot and you identify a property that is $20 per square foot, this is a deal that is worth looking into. The key is to learn how to recognize a good deal.

3. Focusing on the Deal Itself - While specific neighborhoods should be considered when searching for good real estate deals, the entire search should not be focused entirely on that one neighborhood. Neighborhoods are not the driving force behind good real estate deals. The deal itself is actually the most important factor.

4. Getting it Under Contract - Successful and seasoned investors know the importance of acting fast when they identify a good deal. It is a very common practice to put a property under contract before even viewing it. This quick action allows successful investors to capitalize on good deal opportunities.

Skeptics and newbie investors view this action as reckless. It’s important to note that the contract should give the investor enough time to perform necessary due diligence with the option to walk away if any problems are found. In order to be sure that your interests are protected, always consult a real estate professional or attorney.

5. Performing the Due Diligence - Once the contract is signed, set your internal clock ticking and arrange to spend the necessary money to determine if it is a good deal. Do the least costly inspections and investigations first with the more costly inspections aft wards. This will save you money throughout the year. Make sure to use a certified inspector to inspect the property. The due diligence phase is a necessary step to ensure that you are making an informed decision in declaring the property a good deal.

Larry Haines is the president of the New Orleans Real Estate Investors Association and the Managing Partner of Road Home Builders, LLC. To learn more about how to become a successful real estate investor, please email larry@roadhomebuilders.com or visit http://www.roadhomebuilders.com To see successful real estate deals first hand please visit http://www.realestatecasestudies.com

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