THE EVERYBODY EATS METHOD
The very best Wholesalers in this industry work backwards. Working backwards means you are looking out for the rehabber or the investor first and then you second, this way everyone “eats!” You are happy because you just made your fee, Seller is happy because he received his proceeds, and the Investor is happy because he made his profit after rehabbing the house or is now enjoying great cash flow from the new rental property you assigned to him.
This is the best way to do business in today’s market if you want to be in this business for the long haul! NOW taking care of the Investor does not mean you have to lower your fee or be afraid the buyer won’t like your fee, you can have as big as an assignment fee as you want!
Real seasoned Investors don’t care what you make, they are just concerned about the deal meeting their numbers. What sets all this off is how you low you get the house under contract for. NEGOTIATION is Key! We teach how to get big discounts on your deal with our Wholesale Sales Pack, but that’s a different subject.
Anyways, if you follow our Philosophy, you make your money when you buy, and when you do that, the Investor also makes their money when they buy because you assigned it to them at a good price!
DETERMINING WHAT TO OFFER THE SELLER
What is the maximum allowable offer? There is a calculation in this industry called the MAO which stands for the Maximum Allowable Offer or the 70% Rule which basically means the end buyer (Investor) If it’s a Rehabber, needs the deal at 70% on the dollar after factoring in what it will cost him to fix the house.
This is what it looks like numbers wise and I tweaked it a bit to make it the Wholesale Maximum Allowable Offer:
ARV X .70 – REAPIRS – WHOLESALER FEE = SALES PRICE TO INVESTOR
$400,000 X 70% = $280,000 –$50,000 REPAIRS – $20,000 WHOLESALE FEE = $210,000 SALES PRICE TO INVESTOR
What I just showed you above is the dream deal for all rehabbers. The sad thing is not all deals, especially today, meet the exact 70% rule but there is still money on the table.
DETERMINING THE AFTER-REPAIR VALUE (ARV)
ARV is found by finding 3 or more of apple to apple houses that are built around the same year, within .2 miles of each other, same bedrooms and baths, and same square footage.
Homes also have to have been sold within the last 90 days and are in a clean modernized condition, but even better if they were rehabbed and then resold. Learn More About ARV Here: how do you calculate real estate arv
Repair cost is one of the hardest numbers to 100% get accurate for wholesalers and even the rehabbers. This is how I do it.
CRUNCHING ALL THE NUMBERS FAST AND EASY
Doing all this Math in this blog got my mind spinin! Lol I hated Math after 7th grade! After we moved into Algebra and Quadratic Formulas I had to tap out! I had to copy my friend in class lol just kidding, or not . Now I just use spreadsheets and website systems to get the job done ASAP so I can send 5 offers per day minimum.