My latest flip

[Erin Legler]

Hello everyone,

For anyone that doesn't know me, I'm an agent/investor in the Central Orlando area.  A lot of people have been asking how my latest flip turned out so I thought I would share it with all of you.

Picked up at the auction for $112,100.00

Paid cash

Rehab $32,546.23

Closing costs, realtor fees and carrying costs $8,664.57

Sold in 3 days over asking at $199,000.00

Profit $45,689.20

Wish I would of taken before pictures.  I get so excited that I just want to start the rehab right away.  Will do before and after photos for my next one.  If anyone wants to see more of the after photos click here http://bit.ly/1N3O6Lt

If anyone has any questions feel free to reach out to me.

[Larry Turowski]

@Erin Legler Nice job!

All you new investors, this is a good lesson on how to buy and the MAO formula (maximum allowable offer). The general rule of thumb is MAO is 70% of ARV (after repair value) minus repairs. This is a good example of MAO just being a rule of thumb because this deal didn't meet those standards and was still a great deal.

Erin thought the ARV was $185K. She said repairs were over $32K but let's assume she only budgeted $30K and just went over.

The MAO formula would dictate $185K * 0.7 - $30K = $129.5K - $30K = $99.5K.

If Erin had said, "Nope, doesn't meet MAO", she would have missed out on a great deal. She bought at $112,100. Let's do a reverse calculation to see what percent she bought at. Let X be the percent multiplier (typically 70% for MAO). OFFER = ARV * X - $30K = $112,100. So, X = ($112,100 + $30K) / $185K = 0.77 (77% !!!).

If she had actually sold at $185K her profit would have been $14K less ($185K - $199K = -$14K).  That's $45,689.20 - $14,000 = $31,689.20.  Not too bad!

And I'm sure she knew she was comping out low to be safe and there was a potential upside.

So you see, her MAO was 77% ARV minus repairs. Maybe there were other investors who thought that was too much and missed the deal. Again, nice job Erin!