Establishing Your Max Allowable Offer

4 Replies

Hello BP Members,

Currently I am looking to start wholesaling in the Sacramento, CA area and was wondering does anyone know what the investor discount is there? I know a good baseline in determining your MAO is by using the formula MAO = (ARV x Investor Discount) - Repairs -Closing Cost - Assignment Fee. I know that in some markets the investor discount is around 25% or .75. However, this is subject to change depending on which market you operate in. For example i'm sure all would agree that the investor discount in San Francisco is a whopping 0% haha. Any insights or suggestions will be much appreciated.

Thanks,

Daniel 

@Daniel Banks

As someone well experienced with flipping properties in the area, 70-75% is fine for your numbers.

Obviously you want to start at 65% or so (or basically get the property for as cheap as you can) but 75% is probably a safe ceiling for determining your MAO in the Sacramento market.

More importantly, if you're new you better be damn sure of your ARV. That's the number that's totally going to screw you if you get it wrong.

@Wes Blackwell Thanks for your reply!! In addition to understanding ARVs I have implemented some fantastic software for my company that has all the built in metrics that allows me to create ARV reports in a snap. This has been an amazing resource!. Do you know of any investor friendly agents in the Sacramento Area? I would love to connect with them!

Best,

Daniel 

Originally posted by :

Do you know of any investor friendly agents in the Sacramento Area?

*raises hand* ;-)

The average flip in the area is going to have a profit of $15-30k. So being off by $10k on ARV value can be a reaaaaally big problem. Maybe not for you, but burn one or two beginning investors and word will get around about your deals and valuations.

I would strongly suggest doing manual ARV's first, and then maybe checking your numbers with the automated model, and go with whichever number is lower.

This may just be my own opinion, but I would NEVER trust the ARV of a wholesaler who told me the valuation was automated. I might as well use Zillow's zestimates at that point (within 10% of accurate value, and on a $300k home there goes your whole profit if it's wrong).