All Forum Posts by: Asad Malik

I am going through the motions with some dummy numbers today until I am more proficient at estimating repair costs. Tried to get as close to comparable properties as I could this go round. Heres the daily chart....

Given an average sold price of $14,730 and using the MAO formula

1. Find after repair value
2. Multiply after repair value by .5
3. Subtract my profit of $5,000

My max allowable is $2365

I feel like my steps are off somewhere...🧐

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Originally posted by @Bonnie Low:

I don't see repairs factored into your math, above

Thanks so much for taking the time to help out. I was under the impression that the equation above (Find after repair value --> Multiply after repair value by .5 --> Subtract your profit of $5,000 = MAO ) accounts for repair costs. Is that incorrect? And with regard to the book, just ordered on Amazon!

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12/26 Deal Analysis

I use Dealmachine to drive for dollars and on the road I came across a vacant property. Its been vacant so long it looks like a wildlife habitat. Absentee owner. I want to walk into every appointment with a MAO already in the back of my head but I dont trust my skills just yet. Any help is welcome. Torch me if you want - I can take it 🙃

So first, let me make sure I have my MAO math right:

1. I Find after repair value
2. I Multiply after repair value by .5
3. I Subtract your my profit of $5,000

That gives me my maximum allowable offer. Right? Here is where I need help: ARV.

I downloaded and read the document on calculating ARV from somewhere here. Since I dont have any agent friends and thus no access to the MLS, I am using Redfin to track down comps that are:

1. sold in last 3 - 6 months
2. within ½ - 2 miles
3. within 10 years of age
4. within 10% of square footage
5. same number of bedrooms and bathrooms

Here is an abbreviated chart.

So far so good, right?

Now here is where I run into problems: adjusting the ARV of recently sold properties to match that of my vacant subject property. The comps I am using are all in better condition than my subject property, so I have to bring the numbers of those comp properties down to match my subject property's condition. Heres the math I did to achieve that.

Based on the adjusted value of my 3 comps, the average price is $21,358.

So if that average is my ARV, then my MAO would look like this...

21,358 *.5 - 5,000 = $5,679

I dont trust my skills yet, and I want to get good at this without using tools (for right now) so based on your experience do my numbers look accurate? I know real estate is local and price estimates vary wildly, but any insight or advice you could give would be more than welcome.

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This thread is throwing my trust of Propstream into question. Another reason I purchased it was it suggested that finding cash buyers using their system would be easy. Any credibility to that?

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Originally posted by @Lydia R.:

@Asad Malik There are a few things wrong here. 1. You cant use prop stream to get your ARV. You need to use sold MLS comps 2. The general formula is 70% of ARV minus repairs minus wholesale fee. That is a general rule of thumb, not a set in stone formula. 3. You have to have a more accurate way of estimating repairs.

Thank you. I figured something was wrong! Can I use Propstream to get those sold MLS comps, though? And how do you estimate repairs?

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Originally posted by @Will Barnard:

As Derreck stated, money is not going to just fall in your lap or be easy to grab, you have to know what you are doing, bring value to the table and understand the numbers. The formula you provided is not accurate, if everyone used that formula, nobody would ever do a deal as finding a property at half off of value is, well, just about impossible. Be careful using guideline for,uk as and numbers and Never use a price per SF to determine rehab costs. There are no short cuts to evaluating rehab costs, you must know how to price out each repair item properly and that takes research, practice, and some helpful and useful tools found within the threads of BP Nation.

Wait...I found that formula here! So you are saying there is no formula to find a MAO? I have taken several (sometimes confusing) courses, but all of them suggest there is a formula that can be deployed before making an offer.

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Originally posted by @Derreck Wells:

...your first mistake is searching the MLS for properties. Propstream just searches MLS listings, which every flipper can do. If you're trying to wholesale, the only way to actually make any money is to find off market properties, which takes work, which is why flippers are willing to pay you for $5k for that work. It's basically a finder's fee.

I only use Propstream after I have found the property myself, and I use it as an attempt at making an educated guess related to the numbers. I drive for dollars and find abandoned or distressed properties. I then enter the address in Propstream to get some data. Is there a better way I should be doing this?

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Originally posted by @Erik W.:

I'm curious how you got a value of of $51,415? That's an oddly "specific" number. Most people don't value real estate with anything other than "000" in the hundreds position. Example: $51,000. $52,000, etc. Never seen a value like $51,415.87. Does that come from Zillow's "Zestimate"? Most times, those number are crap. Don't rely on assessor's either. They're almost always off: sometimes high, sometimes low.

...Ideally, you need to have superior knowledge of market values for property "as is" and fully repaired properties and be able to support that with comps.

So my advice is get your numbers rock solid. Research your market thoroughly and be able to show values using 3-5 comparable recent sales (<3 months) and actual repair costs using bids from reputable contractors. Long-term survival as a wholesaler depends on you making deals that profit your Buyers as well as you. Make your buyers happy to come back to you again and again. They are your customers. No business survives long if they fail to achieve repeat business.

Thank you for this piece of advice! Question - How do I assess the property value 'as is'? I hunt for distressed properties, and if the house is dilapidated, how would I be able to assess the value of that property? I am always happy to leave plenty of margin for my investors, I just want to get in the game.

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Originally posted by @Kevin Sobilo:

@Asad Malik, I suspect that the ARV you are using is way low. I don't know anywhere a gut remodeled single family home would be $50k.

So, if you used $100k for the ARV your math would be:

$100,000 x .5 - 5,000 - (1400x20 = 28000) = $17,000.

The comparables in my area are about the same. There are no other $100,000 home values nearby for comparable properties, so I have some trust in the number. Is using comps the right way to evaluate my own ARV?

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Ok, for wholesale deals I was taught to use the formula Arv x .5 minus my fee (5k min) and minus repairs = Max allowable offer I can make on a property. Right? Ok. I go into Propstream pro and I find a property.

- The estimated value of the property is $51,415

- The last tax assessment of the property was $34,070

I take the ARV (which is the estimated value of the property, right?) of $51,415

I multiply that by .5

I subtract $5,000

I estimate repairs by taking the square footage (1,400) and multiplying the square foot by $20 (assuming a gut job).

Here is my math:

51,415 x.5 -5,000 - (1400x20 = 28,000) = -$7,292.50

Is that right? So this is a deal I should overlook because I cant make any kind of reasonable offer. Right? I feel like my math is off because ALL 200 properties I have evaluated are coming up a negative number, or too low to offer on. What am I doing wrong?

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All Forum Posts by: Asad Malik

Asad Malik has started 3 posts and replied 11 times.

Post: 30 Day Wholesale Deal Analysis A Day

Post: 30 Day Wholesale Deal Analysis A Day

Post: 30 Day Wholesale Deal Analysis A Day

Post: I dont trust this...what do you all think?

Post: I dont trust this...what do you all think?

Post: I dont trust this...what do you all think?

Post: I dont trust this...what do you all think?

Post: I dont trust this...what do you all think?

Post: I dont trust this...what do you all think?

Post: I dont trust this...what do you all think?