ARV
7 Replies
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Tony Rosa from Oxford, Pennsylvania
posted over 3 years agoHello ,stilling learning and reading the REI ,I'm a little confused on the percentage you have to use when making a deal for a wholesale.Does it depends on how much the property is worth?
Lonnie Pickard Wholesaler from Brighton, Iowa
replied over 3 years agoARVx70%-Repairs-your fee=MAO (Maximum Allowable Offer)
For example...you find a property that's worth $100,000 after repairs.
It needs $15,000 in repairs.
You want to make a $5,000 wholesale fee.
Your formula would look like this... $100,000 x 70% - $15,000 - $5,000 = your maximum offer of $50,000.
Although, 70% is a rule of thumb, I usually start at 60 - 65%
Tony Rosa from Oxford, Pennsylvania
replied over 3 years agoSo it always 70% or can I use 75%
Tony Rosa from Oxford, Pennsylvania
replied over 3 years agoSo it always 70% or can I use 65%
Mark Vejnar Investor from Simpsonville, South Carolina
replied over 3 years agoIn general it's probably a good idea to widen your margin of safety. As we all know, before the downturn many novice investors banked on appreciation trusting market forces to give them their margin over time - but the market went the other way. I saw many investors go belly up - some going as far as to ask appraisers to fudge a value so they could refi out of hard money. Ben Graham advocates a 25% margin of safety. 30% or more is prudent. The wider the better IMO.
Tony Rosa from Oxford, Pennsylvania
replied over 3 years agoThanks for the info Lonnie and Mark
Amanda Finney from Memphis, Tennessee
replied 2 months ago@Lonnie Pickard So you have calculated a MAO of $50,000. What do you apply that too? Im new to this and I have my first house under contract. I need to get a better understanding of the numbers... Thanks so much.
Lonnie Pickard Wholesaler from Brighton, Iowa
replied 2 months agoBased on the example I used, $50,000 would be the most I could pay for the property.
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