So I actually have a few questions about this particular matter. Im a new wholesaler currently preparing to launch my first marketing campaign. However, I'm still hesitant to start because even after reading almost every book that exist on wholesale real estate, I'm still confused on a few things. I think it might have a lot to do with the fact that many investors that I've listened to have offered slightly different advice on the wholesale strategy. However, there are still bits of information that seems consistent for the most part. Let's take the MOA formula for instance. Based on my reading and self-training, I know that you calculate MAO using the following formula:
(ARV x 70%) - repair cost - wholesale profit = Maximum Allowable Offer
However, after further reading articles and responses concerning Fixed Cost, this cost should be considered when making your MAO. This proved to be confusing considering the fact that all of the YouTube videos that I've watched and the many books I've read, the professional wholesalers who swear by the above formula fail to mention the Fixed Cost into there MAO. Well most not all wholesalers, to be sure, there are in fact some out there that mention fixed cost when considering the MAO formula. My main question is this, when im on the phone with a motivated seller engaged in a discussion about the subject property, when asked to make an offer over the phone should I use the following formula:
(ARV x 70%) - repair cost - wholesale profit - fixed cost = Maximum Allowable Offer
And if so, how do I find fixed cost for the San Antonio area when put on the spot to make a quick ballpark offer?
In this article, (https://www.biggerpockets.com/blog/2010/03/17/calc...) J Scott breaks down Fixed Cost into 3 categories
- Purchase Costs
- Holding Costs
- Selling Costs
He continues further explaining the fees associated with each category:
Purchase Cost:
- Inspection Cost - Since I intend to wholesale future subject properties to rehabbers... should i consider the cost of inspection? Or should I leave this task to the rehabber to do on their own?
- Closing Cost - He mentions the fees associated with closing.. (title search, attorney fees, courier fees, recording fees, state taxes, document review fees, etc) My question is this, what are the closing fees that I should concern my self with (as a wholesaler) and how do I find these fees in order to consider in my analysis?
- Lender fees - Im not sure if this applies to me since ill be dealing mostly in Cash transactions... So should this also be considered in my Purchase Cost total?
Holding Cost:
It is my understanding that holding cost are the cost that the rehabber is responsible for while the property is in their possession during the rehab process.
- Mortgage payments - Again, this seems like something the rehabber has to worry about when they choose to use a lender to finance the property they intend to buy from me (the wholesaler).... is this something I should consider in the total Fixed Cost figure for calculating my MAO (as a wholesaler) or should I leave this to the rehabber?
- Property taxes - how do I find out what the property taxes are on a property that I intend to wholesale to a rehabber?
- Utilities - the above question can also be applied to utilities... who do I ask, what should I google search, to find out the utilities associated with the subject property
- Insurance - same question for insurance
Selling cost:
Its my understanding that selling cost are the cost the rehabber is responsible for when they are ready to sell the property that they bought from me (the wholesaler) after fixing and bringing the property back up to excellent condition. As the wholesaler should I concern my self with the following selling cost when calculating the MAO with a motivated seller:
- Commissions
- Closing Cost
- Home warranty
- Termite letter
- MLS fees
So altogether, it's seems that there are some cost to include in the fixed cost total while the others are for the rehabber to worry about after purchasing the property from me (the wholesaler). Atleast that's my understanding, I know I could be wrong but that's why I'm writing this in the first place. If I'm suppose to consider fixed cost into my MAO formula, how do I find, what should I search or who should I ask, in order to get actual fixed cost figures for the San Antonio area, in order to properly analyze a deal
Or
Is fixed cost figures something I should worry about after the initial phone conversation with the motivated seller, later in the transaction
Again I ask if fixed cost is something I should figure into my MAO formula when I have to make an offer over the phone... how do I go about finding this info prior to the phone conversation?
I know this was lengthy, so please read with patience and understanding for I am new to this and I’m attempting to wholesale my first deal without a mentor (since mentors/coaching is expensive) and I’m having a hard time finding a wholesaler who would be willing to work with a newbie. Thank you for your time.
