8. Running the Numbers – MAO by tooladmin | Feb 27, 2018 | Podcast | 7 comments Running the numbers MAO formula MAO = (ARV * .7) – repair costs – assignment fee Formula used by house flippers and wholesalers www.pauldavidthompson.com 7 Comments Gary on February 28, 2018 at 10:13 pm Best podcast I’ve heard on a while! Very very good info Reply tooladmin on March 7, 2018 at 2:09 pm Thanks Gary. Let me know if you have any specific topics you’d like me to cover. I’m here to help! Reply Amanda on July 16, 2018 at 8:07 pm Hi Paul, I heard your podcast on the BP forum. When you make a three part offer, you mentioned that you make the cash offer about 65% of ARV, is that right? What are your proportions for the principle only and interest only version? Reply tooladmin on July 17, 2018 at 4:27 pm When making an all Cash offer I use the MAO formula which is the maximum allowable offer. That equation is MAO = After Repaired Value (ARV) * .7 – repairs – wholesale fee (optional) For an interest-only offer I usually go 80-85% of ARV For Principle only offer I usually go 95-100% of ARV (notice this is another way of saying 0% interest) Reply Amanda on July 20, 2018 at 12:45 pm Exactly what I needed. Thanks, Paul. Reply Amanda on July 20, 2018 at 1:08 pm Ok, now I’m working my numbers… 80-85% straight ARV? Not ARV -repairs? Check my logic? Using 100k ARV, 20 k repairs Cash MOA = 50k Interest only- say, 10% down at 6%, for 5 years, $60k, $6k down, $3,240 interest for 3 payments, then a balloon of $57,240 the last year? Principle only- 10% down, using 95% ARV, gives $76k, $7,600 down, 1,140/month for 60 months? (or 950/mo for 72, etc) Reply tooladmin on July 26, 2018 at 8:41 pm You would do (80-85% – repairs). However, when you’re running the blind 3 letter offer of intent to properties that are listed for sale as FSBO or for rent you can reasonably assume they’re already in pretty good shape. This is a marketing method to send mass amounts to offers to people who may not necessarily be actively considering selling or haven’t considered owner financing. So the house is often in very good shape as compared to a distressed situation. I hope that helps Reply Submit a Comment Cancel reply Your email address will not be published. Required fields are marked *Comment Name * Email * Website Notify me of follow-up comments by email. Notify me of new posts by email.