New wholesaler question about fee calculations

Member since 2024 · 6 posts · 5 votes

1y

Hey Bart, you can't do MAO= ARV- Repairs - Wholesale fee only since you're not including your buyer's profit and all their costs with the project. That's why we use a multiplier to factor that in.

Since you're starting out, I'd aim for 70% of the ARV. Down the road you'll be able to factor in a higher multiplier for major markets.

so it's basically MAO= ARV x .70 - repairs - your fee. That's why way you're getting the property discounted enough to make it a deal.

And regarding how much your fee should be is relative. It depends on how much you're putting into marketing and time.

I personally don't want to lose a deal if I will make $5k on it, but I aim for $10k/$15k that's the average and what you should aim for. But again, depends on what you're spending with marketing.

2 Reply

Joseph Hendershot

Member since 2025 · 4 posts · 5 votes

1y

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.

3 Reply

Bart Shirley

OP

Katy, TX · Member since 2025 · 9 posts · 3 votes

1y

Thank you for your response. I knew something didn't look right.

I guess my question, though, is when does negotiation about your fee happen, if at all?

In other words, is it just some arbitrary number I quote? Who decides the size of it, and how? I see a post on my list of recommends that mentions closing a $31,200 wholesale deal...so how does someone negotiate a fee like that? Is it all in the relationship with the cash buyer, or something else?

I'm just trying to get where the calculation for the fee itself comes into play, and at what stage.

0 Reply

Joseph Hendershot
Member since 2025 · 4 posts · 5 votes
1y
@Bart Shirley The wholesale fee is simply the difference between what you got the seller to sell for and the buyer to buy for.

Once the buyer agrees to the price you will write down the difference as your fee in the assignment agreement.
1 Reply

Bart Shirley

OP

Katy, TX · Member since 2025 · 9 posts · 3 votes

1y

Thanks, @Joseph Hendershot. That makes more sense.

0 Reply

Bart Shirley

OP

Katy, TX · Member since 2025 · 9 posts · 3 votes

1y

Quote from @Juan Fernandez:

Quote from @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.

Hey there Bart!!!

I have been wholesaling full time solo for going on 11 years... there is a way to do this.. but NOT the way the 'gurus' say to. They haven't picked up a phone in over 7 years! They have employees that do that... I am cold calling daily myself and close my own deals monthly. I am consistently getting a signed deal weekly so there is an art to this and a ton of psychology behind it! Would actually like to offer you a one on one with me! To chat and go over some questions you have still!

There is a lot to calculating fee's , or running comps on deals!! it'll take some explaining to do!!

six zero two eight six nine nine four eight five

That's very kind of you, Juan. I'll give you a call this week, if that's alright.

0 Reply

Juan Fernandez

Member since 2024 · 39 posts · 1 vote

1y

For sure, just let me know when!

0 Reply

Dylan Robinson

Kansas City · Member since 2025 · 25 posts · 9 votes

1y

You've asked one of the most important questions in wholesaling, and your understanding of the MAO formula is pretty solid.

You are correct that MAO is the maximum an end buyer (like a flipper) is willing to pay for a property. A simplified version of the formula for a flipper is often:

MAO=(ARV×0.70)−RehabCosts

This is known as the "70% rule" and is a common baseline. The flipper's profit and all their other costs (closing, holding, etc.) are built into that 30% margin.

Now, let's address the variable wholesale fee. You are right to notice it's not a fixed number. The wholesale fee isn't a "cost" in the same way that a rehab is. Instead, it's the difference between what you get the property under contract for and what your end buyer is willing to pay.

Here's the full picture:

The Flipper's MAO: The flipper runs their numbers and determines the most they can pay. Let's say, based on their formula, their MAO is $150,000.
Your Negotiation: Your job as a wholesaler is to get the property under contract with the seller for as low as possible. You're not going to offer the full $150,000. You'll likely start lower, maybe at $100,000 or $120,000, and negotiate with the seller based on their motivation and needs.
The Wholesale Fee: The fee is the gap you create.
- If you get the property under contract for $140,000, your fee is $10,000 ($150,000 - $140,000).
- If you're a great negotiator and get it for $110,000, your fee is $40,000 ($150,000 - $110,000).

This is why you hear of people making fees far in excess of $10,000. It's because they secured a deal with a very motivated seller at a rock-bottom price, leaving a huge amount of room between their contract price and the end buyer's MAO.

In simple terms: Your wholesale fee is the result of a good negotiation, not a line item in a formula.

The more you can get a property for below market value, the more money you make on the assignment. This is why sourcing great deals is the most important skill in wholesaling. The $10,000 figure is a good average to shoot for on many deals, but it is by no means a hard and fast rule.

Hope this helps clarify things as you get ready to start!

0 Reply

James McGovern

Flipper/Rehabber · Bloomfield CT · Member since 2020 · 1k+ posts · 408 votes

1y

Try nap = arv * 0.70 -rehab for a more correct formula

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New wholesaler question about fee calculations

New wholesaler question about fee calculations

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