One of the many reasons you need a mentor is so that they can teach you how to properly evaluate a potential deal. Early on in my real estate investing career I was foolish and did not get a mentor for several months. I probably lost thousands of dollars because I did not know that a short sale or subject-to opportunity was staring me in the face.
To determine a deal, the first thing you need is a seller evaluation form. My students use my 21 question form which answers questions such as property address, number of bedrooms, number of baths, mortgage balance, monthly payment, etc. Make sure the form you are using is detailed enough to get a good amount of information, but not so detailed that you have 100 questions to ask, because you will not be able to keep a seller on the phone that long. Once a seller has called you and you have completely filled out your form, you need to run comps on the property to see what it will sell for TODAY.
After your comps are run, see if there is enough equity in the property to wholesale or pay all cash for the property. When paying cash you will purchase the property at 70% of ARV at the very most. If you run the comps on the property and there is not enough equity to pay 70% or less, then this will not be a wholesale or cash deal.
Next, go to www.rentometer.com and determine the market rent for the property. In order for the deal to be a subject-to or lease option, the property needs to cash flow. If the seller's monthly payment is $1,800, but the market rent is $1,400, then you cannot do a sub-2 or lease option. In today's real estate market many leads end up being short sale deals. You know you have a short sale deal when the property has no equity and it will not cash flow.
In the beginning it will take you a while to evaluate deals. Once you get comfortable, you will be able to determine within five minutes if a property is worth pursuing. So with every property determine if you can pay all cash or take over the payments and make the property cash flow.