I hope everyone is having a wonderful holiday season. I know my last blog post was about wholesaling properties, but, we’ve had so many people wanting to learn about wholesaling properties in the MA area, I felt like I had to revisit the topic. I will recap what I wrote previously regarding remembering that everyone wants to get paid. Remember that when you are formulating your MAO. After that, I will cover the most asked question…”How do you find deals? “.
There are a few ways to look at deals when you are trying to determine your Maximum Allowable Offer (MAO).
First you can use a percentage minus the rehab costs to get a ball park figure. Some folks use 65% of the ARV minus the rehab costs to get you MAO. Some folks use 70%. It really depends on the market you are working in. The thought process is that 30-35% of the ARV will cover all costs and leave enough money for everyone to get paid. Here’s an example using 65% –
ARV – $300K X 65% = $195K – Rehab costs – $75k; MAO = $120K
However, I prefer to work my way backwards to reach my MAO. Using the same numbers from above, this is how it will look:
ARV $300K, Rehab costs $75k, Hard Money Costs $35k (will vary dependent on lender), Broker fees (5% typically) $15k, Holding costs $5k, Legal Fees $5k, Contingency $10k, Wholesale fee $10k, Rehabber profit $50k, MAO – $95K
Working your way backwards is more accurate, will CYA and leaves room in the deal for everyone to make money. Newer wholesalers usually forget the rehabber wants to make money. Typically, they would send me the same deal listed above and excitedly tell me they have the property under contract for $160k and can I help them find a buyer. This is what I receive:
ARV – $300k, Rehab costs $75k, Legal fees – $5k, Holding costs $5k, Broker fees (5%) $15k, Asking price $160k
Invariably, I have to get back with them and explain they need to add hard money costs, some type of contingency/oops money and oh by the way, the rehabber is going to want to make at least $50k on this project. If you can get the asking price down to $95k or $100k, then I will present it to my buyers list.
So, wholesalers, when you are out there looking for properties and putting them under contract, remember to include all the costs because just like you, everyone wants to get paid. Download Brownstone’s repair estimate calculator to help you out with your rehab numbers.
How does one find deals in and around the Boston area? You can do direct mail. Typically that has a 1% success rate. You can do driving for dollars looking for broken down properties that look abandoned. But, most of the deals you find are going to be while you are out and about networking. And, I don’t necessarily mean networking at the real estate investors associations (although, you can find deals there too). I mean “think outside the box” networking.
Go to and join the local Chamber of Commerce meeting and introduce yourself as an investor who wants to buy distressed properties and help families out of bad situations. When you are consistent, over time, you will build your name as someone people can know, like and trust.
Go to and join alocal BNI meeting. BNI or Business Networking International, has several groups in MA, NH, RI, CT, etc…all around the country. For MA, the website is www.BNImass.com . There are meetings early morning and some at lunchtime. Chances are, you will find 5-10 viable groups to go to around your area. The best part about BNI is that you are able to build YOUR power team while you are training a group of sales people to look for exactly what you want so they can pass the referral to you. You pay a yearly fee. It’s somewhere around $600 for the year. Before you balk at the price, think about it, for $600, you just hired an entire team of people who will be looking for off market deals for you. As your power team, every group has a Real Estate Attorney, Mortgage Broker, Estate Planning Attorney, Realtor, P&C Insurance, Life Insurance, etc. So, this serves more than one purpose, which is great. It also helps you learn to speak in public and develop your elevator speach.
Go to meetup.com and join groups that have activities that interest you. Like hiking? Join a hiking group and then start doing what you love and network with the people you are hiking with. They will ask, “What do you do?” and then you can give them your elevator speach in a relaxed fashion. Next time they hear of someone who is in a distressed real estate situation, they may say, “Hey, I know someone who can help.”
Think outside the box when you are networking and have some fun doing things you love while you are out there. You never know which referral partner your next deal will come from.
For those looking for wholesaling training, I recommend Brownstone Building and Redevlopments program because it covers all the bases from finding deals to contracts to scripts to work with sellers. Check it out at WHOLESALING FOR QUICK CASH
Also, be sure to come to our meeting on Saturday the 15th. Expert Wholesaling Attorney Christa Emerson will be covering wholesaling and contracts. Check out out the details here!
Be sure to check out our upcoming events and we will see you at rehab tour in the near future.
Bernadette Trafton, Boston AREIA Chief Connector