Fixed Costs and MAO Calculation

[Josh Rogers]

When figuring out a MAO, where do I get an idea of the buyers fixed costs? I know each buyer may have special agreements that may make his or her fixed costs different, so how do I go about getting this figure from a buyer who I may not have met yet?

[Marvin McTaw]

@Josh Rogers - neither way is right or wrong, they are just different. When wholesaling contracts for properties, we don't need to know the exact cost to renovate a property but as a developer, you definitely should. If you are planning to rehab the property, I would certainly suggest you follow the fixed cost method. I would also think that the fixed cost method is probably more accurate but takes longer to compute.There are more variables to consider and get wrong. 

The big reason I suggest the simpler method is because every buyer's renovation costs are different. They have their personal situations and different exit strategies. For example, it may make sense to do a house addition which changes so many variables like the holding cost and renovation budget.