November 30, 2015 in Videos
Here is the short answer; if it's a good deal you won't have any problem selling the property. Seasoned investors are always looking for a great deal.
The problem a lot of newbie investors run into is that they aren't sure what a good deal is. What do I mean by that? I mean that when you are new you may pay more for the house than you should. It's a common rookie mistake.
Don't Be Tempted to Do “Eraser Math”
Brand new investors like to do what I call “eraser math”. That is when you try to make the deal work even if the numbers aren't right. What commonly happens is after they have the repair estimates, new investors (and even sometimes seasoned investors) get the eraser out and lower those estimates. Or, they might use an ARV that is much higher than is reasonable in an attempt to make the deal work.
I can tell you from experience this is a big mistake. An investor that can't sell their wholesale deal probably didn't “let the numbers do the talking”. Most often when an investor can't sell their wholesale deal, they simply paid too much for the house. One thing you have to remember is that this business is all about the numbers.
Making Offers the Right Way
When it comes to making offers, investors often have different starting points. However there is a common formula that is used and it goes something like this:
Take 70% of the after repaired value (ARV), subtract the repairs and any wholesale fee (if you are wholesaling the propery), and that leaves you with a number called the “MAO”. MAO stands for maximum allowable offer.
What Are Some Other Reasons the Deal Won't Sell?
If the price isn't the reason, then it might be the area. When you start to build your cash buyer's list, one of the first questions you need to know the answer to is where these folks like to buy property. Most investors have preferred areas they buy in. What's the best way to find out? Just ask them.
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