the correct way to find your MAO

I am a little confused I have picked up a few courses on wholesaling and it seems each one has a diffrent method of finding your MAO. Example some say subtract holding cost, closing cost, your fee, sitle search and another says just 70%arv subtract repairs?

Hello, I am a rookie in the wholesaling field and wanted to share this post I came across that may help you out. (POST: http://www.reiclub.com/forums/index.php/topic,43281.0.html)

Example some say subtract holding cost, closing cost, your fee, sitle search and another says just 70%arv subtract repairs?

Nope, nope and nope. MAO is what the flipper will pay for the house. These days I suggest 65% rather than 70% but in your market 70% may work.

So… The flipper pays MAO… And your offer to the seller is MAO minus your fee that you will charge the flipper.
So if the MAO is 35K and you want 5K you tell the flipper I will sell it to you for $35K. You tell the seller I will buy it from you for 30K.

Holding cost is something that the flipper takes on and doesn’t concern you.

Closing is something that comes out of your profit if you are doing a double closing. If you are doing a simultaneous closing or assignment than you keep most if not all of your money.

We use

65%

  • Repairs
  • Wholesale profit
    = MAO (Bread and Butter)

and

60%

  • Repairs
  • Wholesale profit
    = MAO (trash flow houses)

REITVShow has some nice numbers to go by. It is definitely smart to have a couple of different formulas based on the income level of the area you are buying in. As you can not equally compare the two.

Hooch, in the landlord’s valuation formula, where does the wholesaler’s profit factor in?
$
Example given
900 X 30 = $27,000 - $5,000 = $22,000 This is your offer.

I know under the ARV formula locks in the wholesaler’s profit under the MAO

In the landlord formula, I don’t see it. Let’s use the example you gave with rent still at 900. Would it be

900
X 30
= $27,000

  • $5,000 repairs
    = 23,000 (what my landlord buyer would pay for it)
  • $ 3,000 (Assignment fee)
    =$19,000 as my MAO?

Is this right hooch? I’m thinking the 30 represents the amount of months in which a landlord will get back his investment if he paid all cash?

Yes, If you were wholesaling a low income property to a landlord you would take your assignment off what the landlord would pay just as you showed in your example.

I’m thinking the 30 represents the amount of months in which a landlord will get back his investment if he paid all cash?

A little longer than that but it would be somewhere not too far beyond that. You have to consider taxes, monthly maintenance put away for that roof or hot water heater that goes out, etc, etc, etc. Many expenses. WITH a loan they could pay it off in 5 years if they took NO cash flow and made double payments on a 15yr.