MAO as a percent 💯of ARV 🏠

[Dominic B.]

Dear BP Community,

In your experiences does your percent of ARV to which you'll make your MAO differ by location? I think it depends on things such as light repairs, the county and weather the market is a buyer one or seller one. Could you give me some examples of trends you have noticed through the years? For example, flippers in California will usually offer about 70%, while investors in Texas might offer around 80%.

Thank you for taking the times out of your busy schedules to read and respond to my post!🙌

[Rick Albert]

There isn't a set rule, even on location because everyone's goals are different.

For example some are okay with tighter margins because it is harder to find deals, and something is better than nothing. It is also more expensive to build in California than other states like Texas. Flippers in Texas might be able to do tighter margins because they don't have state income tax. My mentor told me never to make a business decision based on taxes, but it may be something to think about and why some states have different "rules of thumbs".

What I wouldn't do is bank on appreciation. Look at comps in real time and go based on that. Any appreciation is just a win later on.

I also wouldn't look at trends over the last few years. That was a low inventory/low interest rate market. Buyers today are acting different than before.