The Fail-Proof Formula for Calculating Wholesale Offer Prices

Do you want to make consistent profits as a real estate wholesaler? The key is knowing how to accurately calculate your maximum allowable offer (MAO) price when making offers to motivated sellers. Too many wholesalers miss out on profitable deals because they use the wrong formulas.

In this blog post, I'm going to share the most accurate, fail-proof formula for determining your wholesale offer price.

This comes from Jerry Norton, a highly successful wholesaler who went from broke to millionaire by mastering this formula.

The Wholesale Formula

The formula is simple:

Whatever a Cash Buyer Will Pay - Your Desired Wholesale Fee = Your Max Allowable Offer Price

The most important thing is to understand what cash buyers in your market are currently paying for deals. This determines the first part of the formula.

For example, if you know fix-and-flippers in your area are paying 75% of the after-repair value (ARV) on deals, then you use:

ARV x 0.75 - Repairs - Your Fee = MAO Price

Let's say the ARV is $300,000, repairs are $25,000, and you want a $20,000 assignment fee. Then your calculation is:

$300,000 x 0.75 = $225,000

$225,000 - $25,000 repairs = $200,000

$200,000 - $20,000 fee = $180,000 MAO Price

By knowing what buyers will pay and running the numbers accurately, you can confidently make offers that leave room for profits on both sides of the deal.

How to Know a Market's Buying Criteria

Jerry provides two great tips for knowing your market's buying criteria:

1) Simply ask every cash buyer you talk to: "What is your current buy criteria/formula?"

2) Ask active wholesalers in your market what their cash buyers are paying.

This insider knowledge is crucial for using the correct formula. The criteria can shift over time too - for example, Jerry was using a 65% discount formula during the 2008 market crash when buyers wanted deeper discounts.

The Bottom Line

To be a successful wholesaler, you must understand how to run the numbers accurately based on your buyers' buying criteria. Use the formula:

Whatever Buyers Will Pay - Your Fee = Max Allowable Offer Price

Run the numbers right and you'll stop leaving money on the table from underpricing deals. To make this even easier, get Jerry Norton's free Deal Analyzer tool which has a built-in calculator.

Follow this consistent, proven formula, and watch your consistent wholesaling profits soar!

Let me know if you have any other questions!