Table of Contents
What is the maximum allowable offer formula?
The general idea of calculating the Maximum Allowed Offer is to estimate the After Repair Value (ARV), deduct the fixed costs and rehab cost, and deduct the profit (or equity)* you plan to make. The resulting number, then, is the Maximum Allowed Offer.
What is the Mao in real estate?
The Maximum Allowable Offer (MAO) is a tried-and-true calculation real estate investors use to determine the price they would like to offer on a particular investment property. It is an equation that ensures investors maintain the desired profit while considering expected fixed and rehab costs.
How do you calculate Mao wholesaling?
MAO = (ARV x 0.70) – fixed costs – RE – investor’s profit – wholesaling fee
- Lender and financing fees.
- Closing costs.
- Inspections.
- Taxes and insurance.
- Home warranty.
- Advertising and MLS fees.
- Commissions.
How do you calculate an ARV?
The after repair value formula is:
- ARV = Property’s Current Value + Value of Renovations.
- Maximum Purchase Target = ARV x 70\% – Estimated Repair Costs.
- Maximum Purchase Target = $200,000 x 70\% – $30,000.
- Maximum Purchase Target = $110,000.
How do you calculate real estate deals?
To calculate it, simply divide the property’s price by its potential gross annual income. For example, if you’re eyeing a real estate deal with a purchase price of $100,000 that rents for $24,000 a year, then your GRM would be 4 – as in, the purchase price is 4x the rent.
What is the 40 rule in real estate?
The real danger emerges when you break this rule to buy an even more expensive home. For example, spending 40\% of your monthly $50,000 gross income on a mortgage still leaves you with $30,000 in gross income.
What is the 70 rule in real estate?
The 70\% rule helps home flippers determine the maximum price they should pay for an investment property. Basically, they should spend no more than 70\% of the home’s after-repair value minus the costs of renovating the property.
What is the maximum allowable offer (Mao)?
Maximum Allowable Offer or MAO is a term used by real estate investors to reference the highest amount they can pay for a property and realistically expect to make a profit when the property is sold or leased to tenants. How to Calculate the Maximum Allowable Offer
What is the maximum allowable offer in real estate?
The maximum allowable offer in real estate is the highest purchase price that you’re able to pay for the property. Factors such as market value, estimated repairs, holding costs, and desired profit margin affect the formula.
How do you calculate maximum allowed offer on a house?
The general idea of calculating the Maximum Allowed Offer is to estimate the After Repair Value (ARV), deduct the fixed costs and rehab cost, and deduct the profit (or equity)* you plan to make. The resulting number, then, is the Maximum Allowed Offer. ARV – Fixed Costs – Rehab Costs – Profit / Equity = MOA.