Posted by JB on July 27, 2003 at 14:31:38:
A good formula to use when buying wholesale is: 70% of ARV (after repair value)- repair cost.This formula is known as MAO or( max allowable offer). In your case fire damage property which needs to be completely gutted could be very expensive. I would get some bids on the work before you can really get an idea of what to offer. Rehabbers usually expect 20%. So for example on $100,000 house (ARV) X 70% = $70,000- 15,000 (repairs) = 55k MAO. By the way you always want to offer under MAO and work your way up to MAO if you have to, but never go over that or else you will compromise your % return.