To properly analyze the value of a potential flip it is a good idea to have a time-proven formula with which to work.

Adopting a successful formula and following it can help minimize the chances of being surprised by unexpected costs that eat into your net profit and turn a great deal into a money pit.

Far too often, an inexperienced investor will try to analyze a flip by taking the cost of the property he or she has purchased and adding the repairs and carrying costs to arrive at a projected re-sale value.

However, the re-sale price is not arbitrarily based on the amount of money that is invested in the property plus a sizeable profit. On the contrary, the re-sale price is based on comparable sales in the neighborhood that take into account the size of the property, its condition and amenities.

Here is an easy-to-understand formula that works for us:

Realistic Re-sale Value (RRSV)

minus Seller Closing Costs (SCC)
minus Debt Service (DS)
minus Repair Costs (RC)
minus Minimum Acceptable Profit (MAP)
minus Buyer Closing Costs (BCC)

= The X-factor: Maximum Property Purchase Price (MPPP)

We call this the Foreclosure.com Flip Formula for Success. Write it down and keep it in a safe spot, because you will need it one day soon.

In our next post, we will explain this formula in more detail and also tell you how it can keep you on track and under budget.

Whether it’s jumping off the high diving board or out of an airplane, these thrilling activities can create a sense of fear and anxiety. At the same time, however, they can also produce an incredible adrenaline rush that makes you want to do it over and over again.

Buying your first home or real estate investment is no different.

The process can seem daunting at first because of all the little things you need to know. But, the end result can be very rewarding both financially and personally.

Here are the three key ingredients to help allay your fear of the unknown and to ensure success in the real estate market:

• Preparation
• Investigation
• Education

Naturally, before you jump into the pool, it is a good idea to check the depth of the water so you don’t break your neck. Likewise, before you buy your first piece of property, you need to do your homework.

Surround yourself with knowledgeable people. Find an experienced local real estate agent to provide you with comparable sales in the area or do your own research with online resources such as Zillow.com.

Next, reach out to an experienced mortgage specialist who can explain all the different types of loan programs available to you. To make sure that you are not going to end up investing in a money pit,

Whether you are a first-time homebuyer with limited resources, or an experienced investor looking for new avenues to increase your return on investment, the foreclosure market represents a great opportunity for people at all skill levels to be successful in real estate.

However, a general lack of confidence and knowledge in how to maximize this potential investment opportunity often keeps many would-be investors on the sidelines.

For these folks, we offer the following advice:

• Get smart. Familiarize yourself with what type of properties are available in your price range. While you may be focused on a particular neighborhood, it may be financially prudent to consider a nearby community to get a better deal. In addition, perform research online or at the local library to learn more about the foreclosure laws and guidelines in your state.
• Attend a few auctions. Before actually bidding on a property, it is a good idea to first familiarize yourself with the auction process. It’s quite an experience, and it can be overwhelming and intimidating if you don’t know what to expect. You can find the dates and times of nearby public foreclosure auctions in the local newspaper, at the courthouse or on Foreclosure.com.
• Try and buy before auction. There are risks associated with purchasing a foreclosure, which you can minimize altogether by making a homeowner an offer during preforeclosure. This will also enable you to inspect the property and negotiate a fair deal one-on-one with a motivated seller without the pressure and complexity of bidding at auction.
• Get an agent. Real estate professionals can help you verify whether or not a foreclosed home has any liens such as unpaid property taxes or any other headaches that could become your responsibility as the buyer.
• Inspect the property. While many foreclosures may be in perfectly-good shape, some may need extensive repairs and may not represent the best investment option. Never purchase a property sight unseen.
• Prepare to move quickly. Because the foreclosure market is highly competitive, be ready to hit the ground running and move fast when you find a good deal. Check your credit report and pre-qualify for a mortgage.

The first step is to learn how the foreclosure process works and research the types of opportunities available in your own backyard. Virtually every type of real estate transaction is complex, but given the opportunities for savings within the foreclosure market, it’s worth the time for you to get online and get educated.

Using the latest data from Foreclosure.com, the St. Paul Pioneer Press plotted a detailed map of 2,360 foreclosures throughout Minnesota from January 2005 to August 30, 2006.

This visual representation is just one of the many ways in which media outlets and others are using Foreclosure.com data to better help them understand the growing foreclosure problem in many areas.

According to the article, a “toxic stew

In our last post, we briefly discussed the various home improvement programs on television that are creating a few misconceptions. Primarily, that it is easy to flip a home. That all depends, of course, on your level of experience.

If you are new to foreclosures, then we want to point out a few more things.

First, renovation expenses almost always run over budget. And that means in the real world investors sometimes run out of money to cover additional repair expenses and a couple extra mortgage payments.

To avoid this situation, build in a little extra cash in your budget just in case issues emerge midway through a renovation project. This way, if problems arise, you’ll be ready. And if they don’t, you’ll come in under budget.

Second, purchasing, rehabbing, marketing and selling a property in 30 days is almost impossible — even if you have years of experience under your belt. Whether the kitchen cabinets you want to install are on back order or the repair crew you hire gets stuck on another job, something unexpected will usually pop up.

So, set a reasonable project schedule and always be prepared to expect the unexpected.

Third, don’t expect to receive positive responses from all of the potential buyers who visit the completed project. Expect to hear comments like “It’s a little pricey for the neighborhood