making a good offer

Bird Dogs, Wholesaling
1

I have a problem with knowing what a good offer is.
Through reading books about what a good offer would be.
I have come across the following formula.
Max allowable offer =(arv x .65) - repairs - af
Is this the rule or can it be overlooked because profit is profit.
What I mean to say is. Would you walk away from a deal
because it will only make (I’ll use this as an example)

A profit for my investor of 20000 compared to $25000.
Especially if the repairs could be done in 2weeks and sold retail quickly.

It seems to me that the quicker you can profit with not much work is the simplest way to go.

Then you could get next project going.

Can anyone help me with the problem thank you.

2

Howdy rtrp:

A profit is a profit but potential profit is not profit yet, only equity. The highest offer you want to make depends on several factors.
Financing being used: Hard money , cash, credit card debt, seller financing etc
Exit strategy: Keeping for rental, fixing and flipping, wholesaling to investor, wholesaling to homeowner and others
If you are planning on keeping for instance you may be able to pay 80% instead of the 65% in your example and still have a good deal with cash flow. Even the 65% above may be too low if you have your own cash to do the deal.
The time it takes to exit should play an important in your offer too. I did one however that took 10 months to sell and lost $10K on the deal and I almost got a job after that deal. It was a major set back emotionally and financially.
The idea is to have a plan on what you are going to do and implement it as soon as possible.

3

Sorry to hear about your setback.

but I would just be wholesaling to my investor and he wanted better deal for him.
maybe I could lower my fee.

or better yet maybe look for other investors that want quantity not quality.

Just a quick thought while I was typing that.
Maybe I need both.

Thanks.

4

The basic rule of buying rehabs is 70% of ARV - repairs = Maximum Allowable Offer (MAO).

If you are planning on wholesaling, then you need to be under that 70% by whatever you intend on making.

$20K potential profit is not the same as real profit, and it is also different depending on the complete numbers.

A potential $20K profit on a ARV of $90-100K isn’t great, but should work for at least an experienced investor. However, if you’re offering a $20K profit on a ARV of $200-300K, then there really is no profit there as $20K would be eat up in negotiations on the resale.

Another point on wholesaling, especially since you mentioned quantity over quality. A wholesaler works in quantity. You want to leave as much potential profit on the table for the rehabber as possible. If you get a deal under contract for 50% of value, you don’t try to sell it for 70%. Offer it at 60%, and get a buyer for life.

Raj