In this episode, I want to share the 2 pieces of information you need to find in order to estimate and secure your profits in wholesale real estate investing.
1 - Market Value
This is determined by finding the 6 months average sales price of similar properties within 1 miles distance radius of the subject property.
Let’s go over that…
You need to determine the average sales price within the last 6 months. The comparable sales need to be similar properties. They all must be within a mile radius.
This is the number that gives you an idea of speculation tolerance. The further away from 6 months and 1 mile you are in determining the market value, the higher the risk.
Depending on your location and market, the market value you come up with needs to be multiplied by 65% to 85%. This is called the wholesale adjusting ratio (WAR).
If there are lots of flipping activity in that market, the WAR would be higher. The lower competition is, the lower the WAR needs to be.
Multiplying the market value by the WAR ratio results in the adjusted wholesale value (the AWV).
2 - Repair Estimate
Secondly as a measure of the condition of the property, you need to figure out an estimate of the repairs needed to make the property sellable in retail condition.
When you deduct the repair estimate from the AWV, that becomes your maximum allowable offer (the MAO). As long your offer is within + or - 5% of the MAO subject to the accuracy of the market value and repair estimate, profits are secured.
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ABOUT YOUR HOST ::::|
Ola "Tux" Abitogun is the Creator of myEmpirePRO and author of Smart Real Estate Wholesaling. He became a FULL TIME entrepreneur in October 2006.
He is a computer engineer and an engineering management graduate from New Jersey Institute of Technology; (NJIT) class of 2004/5. He was born in Dallas Texas and raised in Nigeria by his Nigerian parents. He considers himself a proud Nigerian American.
Today, he is a marketing addict, trainer, marketing and business consultant, real estate investor and all around serial entrepreneur. Most importantly, he is husband and a father. The professional work he is mostly proud of is personally helping 1,000+ entrepreneurs around the world reach greater heights in their careers.
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