Maximum Allowable Offer for Hard Money Deals
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ARV:
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*Costs (30%):
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Repairs:
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MAO:
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Starting MAO (-15%):
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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.
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Costs are as follows:
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Buying Costs (3%)
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Carrying Costs (3%)
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Closing Costs (3%)
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Margin Of Error (1%)
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Equity Or Profit (20%)
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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.
;)
;)
Shouldn't everyone be staying away from Hard Money right now? We are in significant trouble as it is.