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The Simplest Way to Calculate Your Offer Price for Maximum Profit

The Simplest Way to Calculate Your Offer Price for Maximum Profit

The Simplest Way to Calculate Your Offer Price for Maximum Profit

Price your offers too high and you lose money on house flips or wholesale deals. Cap your offers too low and you miss out on profitable deals. 

Flipping or wholesaling real estate doesn’t require advanced calculus. You just need to know a few basic numbers in order to start making offers. 

To make it even easier, REsimpli has a built-in calculator to run the numbers and determine your maximum allowable offer (MAO). 

Calculating Your Offer Price

You can use REsimpli’s flipping and real estate wholesaling calculator for specific leads by clicking on a lead in your account, and then navigating to the Calculator tab. 

You only need a few numbers to determine your maximum allowable offer. But if you do want a more advanced calculator, breaking down all closing costs, lender fees, holding costs, and selling costs, our Advanced Calculator lets you get granular with these as well. 

After-Repair Value (ARV)

To know how much you can afford to offer, you must know the after-repair value of the property. 

You must, must get the ARV right, or else you can overpay and lose money on the flip or wholesale deal. Make sure you know the market well, running accurate and recent comps (comparable property sales). 

The comps provide a range of values that your prospective property could sell for. Take the absolute bottom end of this range to plug into the calculator for the ARV.

% Rule

Using the REsimpli calculator, you can determine how much margin you want between your total costs and the ARV. As a general rule of thumb, flippers and wholesalers typically follow the 70% Rule: their total purchase and repair costs shouldn’t exceed 70% of the ARV. 

When in doubt, follow the 70% Rule. If you want to be extra conservative, enter 65%. 

Repair Costs

The wholesaling calculator lets you enter either a dollar amount for repair costs or a percentage of the ARV. 

The more precisely you can estimate this number, the more likely you are to earn a profit on your deal. Remember to add in a buffer for unforeseen expenses and delays. 

Maximum Allowable Offer (MAO)

Your MAO differs depending on whether you plan to wholesale the property or flip it yourself. 

MAO for Wholesalers

If you plan to wholesale the property, enter your desired wholesaler fee — in the field mysteriously labeled “Wholesale Fee.”

That will subtract that from your maximum allowable offer, leaving you with a ceiling offer amount. 

MAO for Flippers

If you plan to flip the house yourself, simply leave the Wholesale Fee field at $0. 

The calculator spits out the Fix and Flip MAO amount whether you enter a wholesale fee or not. This is how much a flipper can afford to pay for the property, while following the percent rule you entered in the beginning. 

Final Thoughts

The lower the price you negotiate with the seller, the more you stand to earn. You can keep a larger wholesale fee for yourself, or earn a tidier profit flipping the property. 

Alternatively, you can find a buyer faster and more easily by offering a lower price for them to step in and take over the contract. 

Stay disciplined, and never offer more than your MAO — no matter how much you like a property or deal.