How to Find Maximum Allowable Offers Easy and Fast!
If you’re a new real estate investor, the task of coming up with an offer to present to the seller is probably a little bit intimidating. You may fear that you’re going to offer too much and not be able to sell the property. Or Maybe you’re afraid to get punched in the nose when you come out with a “low-ball” offer. Never fear!
Finding the maximum allowable offer is easier than you think. It’s a simple formula that you can memorize in 2 minutes. The downside is that you usually need a calculator to find MAO relatively quickly. UNTIL NOW. I’ve created this super cool maximum allowable offer CHEAT SHEET!! You can download it, keep it on your iPad, or in your pocket (if you’re still a dinosaur) and whip it out when you’re trying to find MAO quickly.
There’s a simple formula on how to calculate maximum allowable offers (also called MAO – and pronounced “mayo”). Typically, we take the After Repaired Value (a.k.a. ARV) and multiply it by 65% and then subtract the estimated repairs. Since finding the maximum allowable offer is an art and not a science, then your MAO may be slightly different then someone else’s MAO.
The reason your Maximum Allowable Offer may be different than your BUYER’s MAO, is for 2 reasons.
1.You may estimate repairs at $10,000 – and your fellow investor may estimate them at $15,000.00, causing your formula to be different.
2. You may determine that ARV is $200,000, and your fellow investor may determine that ARV is $195,000.00
Watch this video and find out how to calculate MAO
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You’re negotiating with a seller. His price is too high. Your price is too low. You’re hungry for a deal. What do you do?
Knowing your limit on the offer is essential to creating and sustaining a profitable real estate business. Newbies make the mistake all the time of paying more than they should for a house in hopes that they can make a few bucks.
The better strategy is to KNOW YOUR NUMBERS before you ever enter into negotiations with the seller, and know when to stop. You should never pay more than MAO [Maximum Allowable Offer] and this free download will teach you why.