New wholesaler question about fee calculations

[Bart Shirley]

Hi there!

So, I understand the notion of MAO pretty well, I believe. MAO = ARV - Rehab - Wholesaler fee, and the MAO is the maximum the wholesaler can get a property under contract with the listing agent. Please correct me if I'm wrong.

What I don't understand, though, is the variable nature of the wholesaler fee. I have heard the number $10,000/deal thrown around as a sort of industry average, but there seems to be a negotiation/variable piece that I'm missing. Some Youtubers claim to have made amounts far in excess of the 10k figure, but I have no idea how one would arrive at such a payout or, conversely, a payout lower than average.

If anyone could clear that up (and, if necessary, anything I'm missing about MAO), I'd greatly appreciate it. I still haven't started my work in this yet, but I want to spin up sometime in the next few months.

*Please note: I am reposting this from the Starting Out forum because I didn't see this forum until afterward. If a mod needs to delete the first version, please do so.

[Joseph Hendershot]

Hey Bart! 

Your MAO calculation is almost right but you're missing a few things.

MAO = ARV - Desired Profit - Rehab Costs - Fixed Costs - Holding Costs - Wholesale Fee.

Desired profit = the profit a flipper will want to make (N/A if going straight to retail buyers)

 Fixed costs = Closing costs, agent fees, etc (varies greatly if it's on or off market and can be negotiated with the seller).

 Holding costs = The monthly cost of the flipper holding the property until it sells.

 This calculation will vary dependent on if up are wholesaling to a flipper, long term holder, or retail buyer. But it's important to understand all of the costs.

As for the variable nature of the wholesale fee, it depends on how good of a deal you can lock up.

 If the investor is willing to pay $200,000 and you lock it up for $195,000 you would get $5,000.

 If the investor is willing to pay $200,000 and you lock it up for $100,000 you would get $100,000.

 Hopefully this helps! Let me know if you have any other questions.