It’s all about finding quality over quantity. You want to work with the “real” players in the market…the guys who are buying deals month in and month out. Establish those relationships by being yourself, setting yourself apart from your competition and by doing what you say you are going to do (bringing them great deals). Find out what these buyers are buying, where they are buying, how much they can spend, how many deals they can handle at once, etc, etc. Once all this is established, you can go shopping for exactly what these buyers are looking for. Start marketing to motivated sellers with direct mail, SEO, and PPC. Analyze your leads carefully, negotiate a great deal and put the property under contract.
Remember the MAO (Maximum Allowable Offer) formula…
ARV (After repair value – what the property would sell for fixed up in top condition)
x .70 (this number can go up or down depending on competition and if it’s a sellers or buyers market)
Minus your assignment fee (what you want to make on the deal)
= Your Maximum Allowable Offer!
So…if my ARV is 200k. I multiply that by .70 and that equals 140k. Let’s say my repairs estimate is 30k. Now I am at 110k. Let’s say I want to make 10k on this deal, I subtract my fee to get a maximum allowable offer offer of 100k.
The MAO Formula is a guide that can help you to quickly calculate what you can offer for a property. There are more detailed calculators available and you can find them on the internet. However, this formula works just as well when you know your market and your numbers. Memorize it, study it, use it!
*I get a lot of students who ask me how to assess repairs. The key here is practice. Go out on a few appointments with a couple rehabbers or speak to some local contractors to get your numbers together. Attend your local REIA or Meetup.com and bring up the topic. Immerse yourself in the process. Start with the entry level type house in your market and learn the most common repair items first. For example: roof, windows, boiler or furnace, paint, flooring, kitchen update, bath updates etc. It won’t be long before you have this down to a science.
Cash Buyers are the secret weapon to your success and will help you work smarter not harder – Dave Brown
Typically, most investors look to secure properties and market to motivated sellers right out the gate. This can pose a real problem, especially if you are new. If you happen to get a property under contract what are y0u going to do to move it? Who are you going to sell the contract to?
Traditionally someone would get a deal under contract with a seller and then they would then have to hustle and scramble to find a buyer for it. This can be very stressful, especially when the clock is ticking to get the deal done.
It’s easier to find a house for a buyer than to find a buyer for a house. Remember that! – Dave Brown
Reverse wholesaling just makes more sense. It doesn’t work all the time but it works most of the time. You’ll have a lot more confidence knowing you already have a buyer when you go negotiating with a motivated seller you want to get under contract.
Build your buyer’s list first. Seek out the investors and rehabbers in your area who are closing on deals each month and get them on our VIP Buyer’s list. Screen them to find out what and where they are buying, then go out secure exactly that. Take and fill orders…it’s that simple.
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