Wholesaling For Newbies: The Correct Math Equation

[Cody Evans]

Hi BP,

I am torn between two wholesale equations. The first being

70% ARV -Repairs- My Profit= Maximum Allowable Offer

OR

ARV – Rehab – B/S/H – Your Profit – Investor Buyer Profit=Maximum Allowable Offer (MAO)

After Repaired ValueMinus

Rehab Costs Minus

Buy/Sell/Hold Costs Minus

Profit EqualsMaximum Allowable Offer

Advice is well appreciated.

[Jack Douglas]

@Cody Evans, Great Post

I use this formula when evaluating investment property.

Maximum purchase price = Sales price - fixed cost - profit - rehab cost.

In order to determine a property's sales price you want to: 1. Pull comps from the mls, (when pulling comps look for: time of sale, location/proximity, age and style, size, condition) 2. Adjusting your comps to add in special features 3. Determine the value of the subject property. 

3 types of fixed cost you want to keep in mind: 1. Purchase costs - Inspection, closing, and lending fees 2. Holding costs - mortgage payments, property taxes, utilities, insurance 3. Selling costs - commissions, closing costs, home warranty, termite letter, listing fees.

Hopefully it helps you out.