myEmpirePROI want to share the 2 pieces of information you need to find in order to estimate and secure your profits in wholesale real estate and investing.
1 – Market Value
This is determined by finding the 6 months average sales price of similar properties within 1 miles distance radius of the subject property.
That’s called comparable or comps for short.
This is the best source for comps.
Let’s go over that…
You need to determine the average sales price within the last 6 months.
And the comparable sales need to be similar properties.
They all must be within a mile radius.
So this is the number that gives you an idea of speculation tolerance.
The further away from 6 months and 1 mile you are in determining the market value, the higher the risk.
Depending on your location and market, the market value you come up with needs to be multiplied by 65% to 85%.
Here is a cool ARV Calculator.
This is called the wholesale adjusting ratio (WAR).
And if there are lots of flipping activity in that market, the WAR would be higher.
The lower competition is, the lower the WAR needs to be.
So multiplying the market value by the WAR ratio results in the adjusted wholesale value (the AWV).
2 – Repair Estimate
Secondly as a measure of the condition of the property,
You need to figure out an estimate of the repairs needed to make the property sell-able in retail condition.
So when you deduct the repair estimate from the AWV, that becomes your maximum allowable offer (the MAO).
As long your offer is within + or – 5% of the MAO subject to the accuracy of the market value and repair estimate, profits are secured.
Conclusion
In the game of real estate investing, you will here ARV or after repair value virtually every day or every deal you encounter.
Its the major why to ever do a deal… it’s essentially where you start making money which is when you buy.