Special offer

What is the Maximum Allowable Offer for Hard Money

By
Mortgage and Lending with Firstrust Bank 391784

Maximum Allowable Offer for Hard Money Deals

  

 

 

 

 

 

 

 

 

 

 

 

 

ARV:

 

 

 

 

 

*Costs (30%):

 

 

 

 

 

Repairs:

 

 

 

 

 

MAO:

 

 

 

 

 

Starting MAO (-15%):

 

 

 

Formula: ARV - 30% - Repairs = MAO

 

Terms:

  

ARV - After Repair Value.  This number is derived from Comps, CMA's, and other appraisal tools.

 

Costs - These are the costs to get into (and sometimes out of) the property.  The table below depicts the cost breakdown.

 

Costs are as follows:

Buying Costs      (3%)

Carrying Costs   (3%)

Closing Costs    (3%)

Margin Of Error (1%)

Equity Or Profit (20%)

 

Repairs - These are the estimated repairs.  Use the supplied Rehab Worksheet to get your initial estimate.

 

MAO - Maximum Allowable Offer. This is the theoretical maximum you can pay and NOT leave any of your money in the deal after refinancing.  This is NOT a requirement to do a deal, however what is acceptable to leave in will be different for everyone depending on your own cash flow and financial ability.

 

Starting MAO - Get this number by subtracting another 15% from your MAO.  This is a decent starting point to begin your negotiations.  If you get no counter offers at starting MAO, you will need to increase your initial offer.  Market conditions will always impact starting MAO.

 

 

Comments (4)

Heather Fitzgerald
REALTY WORLD-Harbert Company, Inc. - Greenwood, IN
REALTOR Greenwood Indiana Real Estate

Shouldn't everyone be staying away from Hard Money right now?  We are in significant trouble as it is.

Jul 29, 2008 09:32 AM
Joseph V. Scorese
Firstrust Bank - Philadelphia, PA
Banker

Hi Heather,

 

We are in the best times for a savvy investor that does there homework and pick the right deals to pull the trigger on using hard money. If due dilegence is conducted properly hard money for commercial and residential properties is a excellant option.

Joseph V. Scorese

MAC Investment Company, LLC.

joemacinvest@yahoo.com

http://activerain.com/action/referrals/joemacinvest

Toll Free - 877-263-4881

Office - 484-221-9277

Direct - 908-967-4064

Fax - 610-351-0903

 

Jul 29, 2008 01:23 PM
Mike Hogan
The Hogan Group at Keller Williams Realty - Mechanicsville, VA
MBA

I would have to agree with Joe- hard money is the only money in some cases. Private equity serves a valuable purpose in a credit restricted market.

Aug 22, 2008 02:31 PM
Sharon Harris
Keller Williams Keystone Realty - Hanover, PA
Realtor

Good post. I have a friend that has an offer on a property in MD. An old gas station. The offer was way low . I have them looking into a hard money loan to be able to offer her a fair offer .

Aug 26, 2008 01:15 PM