In this instructional video, the presenter explains how wholesalers can accurately calculate the Max Allowable Offer (MAO) for a property to ensure profitability while remaining attractive to investors. The process begins with determining the After Repair Value (ARV) by analyzing recent sales of comparable, similarly sized and aged homes in the neighborhood. Next, repair costs are estimated using a square‑footage based table that differentiates between light cosmetic updates (e.g., paint and flooring) and full renovations, with suggested per‑square‑foot rates. The presenter then outlines additional costs that must be deducted from the ARV: seller‑side and buyer‑side closing costs (typically 3% + 3% + 2% for agents and general closing fees), the investor’s expected profit (10‑15% of ARV or at least $25,000), and holding costs derived from hard‑money loan interest (10‑12% annual, applied for about four months). After subtracting these items, a personal assignment fee—targeted at $20,000—is removed, and the remaining figure is the MAO, the highest price the wholesaler should offer the seller. A concrete example is provided: a property with a $300,000 ARV and $40,000 rehab costs yields an MAO of $167,000 and a projected disposition price of $187,000. The presenter emphasizes conservative estimates, market‑specific nuances, and the blend of art and science in underwriting. The video concludes with a call to action to join the Wholesaling 101 program and a request for likes, shares, and comments.
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One of the most important things to learn about wholesaling real estate is how to determine the highest price you can offer someone for their property, so you have the best chance of getting the deal while also leaving enough room on the table for you to assign the property and still make money yourself. We call this price the MAO, or max allowable offer. Your MAO is going to take into account several important factors. What are other similar properties selling for? You will need to look around at what other similar properties are selling for in the neighborhood. And when I say similar properties, I mean properties that are roughly the same size, size, type, and year built. You do not want to compare a 1,200-square-foot house to a 2,000-square-foot house, or a single-family residential house to a condo, or a house built in 2020 to a house built in 1920. Look around and find what recently remodeled similar houses are selling for. If you see that all the other houses that look like they've been remodeled in the past 2 or 3 years are selling for, let's say, $200,000, then you can reasonably expect that your subject property will sell for $200K after it's been remodeled. How much work is the property gonna need? A lot of beginners get really overwhelmed when it comes to estimating repair costs, and that's why I have this table right here that is gonna give you a good baseline for what different levels of remodels will cost. It's all based on the square footage of the property. So in this example right here, we are looking at a 1,200-square-foot property. And if all you have to do to the property is redo the flooring and the paint, it's gonna cost about $15 per square foot, or $18,000 total. However, if it's a full renovation where you will need to be repainting the interior and exterior, cleaning up the landscaping, redoing the flooring throughout, redoing the kitchen, redoing the bathrooms, it's gonna cost about $60 a square foot, which would cost you about $72,000. It's important to pay attention to what upgrades all the other similar remodeled properties have so you can accurately estimate repairs. If when you look around all the other houses just have new paint and floors, then you should estimate for that. but if all the other houses look like they're fully remodeled with new kitchens and bathrooms, you will need to estimate for a higher level of repair. Now, these costs will vary from market to market, but this is a good general baseline we can make educated assumptions with. It's always better to be more conservative by overestimating repair costs, as this will ensure you get a deal that you can actually sell. Another thing you must take into account is how much it's going to cost the end buyer to sell this home when they flip it. Remember, after a flipper has remodeled the property, 9 times out of 10, they're going to list it market with a realtor, which comes with its own set of costs. Typically, they're going to pay 3% to the seller's agent, 3% to the buyer's agent, and then we estimate for another 2% in general closing costs. Which brings us to the next point of accounting, which is the closing costs on the buy side, or when they buy the property from you. Most wholesalers are offering their sellers to pay all the closing costs, but it's not the wholesaler that actually pays for this. It's actually the end buyer who ends up picking up the tab. So you need to account for this in your underwriting. How much money will the end buyers expect to make themselves after they flip the property is another super important metric to take into account. Obviously, people aren't out here flipping houses for free, and we need to account for some money for them to take home. We typically estimate about 10 to 15% of the property's ARV for this, but at the very minimum, at least $25,000. One thing to note is that as the level of repair goes up, the amount of expected profits should also go up. If the rehab is going to cost $100,000, you need to underwrite for a higher profit to the investor. Another thing people always forget to include in their costs is the holding costs, or the interest payments, the flipper's going to be responsible for. The people we are wholesaling our deals to are typically buying them using hard money loans. On these hard money loans, they are normally charged 10-12% interest. We account for several months of these interest payments in our underwriting, typically 4 months for a standard flip. The last number we have to take out now is my personal favorite, and that is our assignment fee. This is the amount we expect to make on the deal. Now, I'm always shooting for at least a $20,000 assignment fee. So after we have found the ARV, subtracted closing costs on the buy side and the sell side, the repair costs, the investor's profit, and the holding costs, we then subtracted final $20,000, and this number is our MAO. This is the most highest number we are willing to pay the seller for their property. Now, I've included an example from my calculator here to give you a good look of what this actually looks like. If we found a property that had an ARV of $300,000 and it needed a full interior remodel, that's going to cost the flipper about $40,000. Our MAO would need to be $167,000 and we would try to dispo it at $187,000. When you calculate your MAO like this, you get a much more accurate number than any other wholesalers who use something like multiplying the ARV by 70% and subtracting repairs. It's also going to make it so easy to sell your deals to an investor because you can show them these calculations and you paint them a story of how by buying your property, they stand to make almost $40,000. Now, my final note about underwriting is that it's much more of an art than it is a science. Every market has different nuances and every single real estate investor is going to have different opinions about ARV and repair costs. Trust. This is something that's going to take time to learn and become a master of. Now, with that being said, if you have any questions about underwriting or finding your MAO, make sure to leave a comment. Now, if you want access to all the tools I use in my business, like the calculator you've seen in this video and much, much more, you need to look into joining Wholesaling 101. Wholesaling 101 is a program dedicated to helping individuals get their first deal by providing them with everything they need to succeed. You can learn more at wholesaling101.io. If you found this video helpful, please give it a like and share it with a friend who could also benefit from seeing it as well. And as always, thank you for watching and we will see you on the next one.
