How To Evaluate Deals

I get asked all of the time … What formula do you use for making offers.

For some reason this is a huge hurdle for new investors.

Here is a simple formula that you can use to make offers on properties. Its called the MAO formula or the maximum allowable offer formula it will help you determine your offer price very quickly.

Here is how the MAO formula works -

You choose a percentage of what you want to buy houses at. So for example if your wholesaling the property and you know your buyer will pay 70% of the true market value minus repairs you will need t be under that to make a profit.

So you would use 60% or 65% as your number. Then you would multiply that by the market value and then take away any repairs costs the house needs. That would give you your maximum allowable offer

Here is an example

House value is $100,000 and needs 10k in repairs and you want to buy it at 60 cents on the dollar and resell it for 70 cents.

$100,000

x        60%

- $10,000 in repair

——————————–

$50,000 is your maximum allowable offer or what you could offer.

If you have a buyer that will pay more or will pay less you can change the 60% to what ever you want.

Now you can quickly and accurately figure out offers on properties. Its really that simple.

***One last thing before I end this post:

You want to make sure before you choose your MAO that you know what your buyers are willing to pay. Ask the people on your buyers list and potential buyers that way you make the most you can and it will also help you in certain situations when you have a seller that is stuck on a higher price maybe 65 or 70% if you know your buyers will pay 80% you still have a deal.

This will really help you and will also allow you to get more deals.

To Your Success,

Brian Haskins

 

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