Theres different formulas and I want to know which formula do I use when dealing with the seller directly and what formula should I use when dealing with the seller agent?
ARV (after repaired value) x 70% - Repair Cost= MAO. As they say, “Never pay MAO!” MAO is hopefully the approximate price you will sell for. Subtract the amount you think you can make on the deal, and thats what you offer of lower.
After using that formula, then compare your offer to what is for sale around the subject property. Assuming you’re wholesaling it, and If there is a foreclosure down the street, your sales price needs to be lower than the foreclosure. YOu must be the lowest property in the area.
You can use Zillow to look at current listings around your prospect.
I would adjust the formula above so the cost of purchase and sale is included. Also all holding costs should be factored in. Otherwise the missing costs could tip the deal from being profitable to being a dog. It is hard to wholesale a dog
I use this formula
ARV * 60% - repair cost - wholesale profit = MAO
You can play around with it depending on how much profit you can stand to make.
Formula?? Don’t get caught up in using to many formulas, because regardless of what your formula answer may be if properties aren’t selling for what your formula answer may be then you still have to go in and adjust your numbers.
Align yourself with Realtors in your area, who are investor friendly and build a rapport with them. Being able to have access to the MLS allows you to know where your purchase price needs to be at. If your search leads you to believe that properties are selling in that particular area for 40K comparable to yours, then you as a wholesaler can’t pay no more than 30-32K for the property. C’mon folks lets not make this technical or harder than it really is. Wholesaling is as simple as your ABC’s!
To your success! :smile