Example: ARV=$250,000; Profit Margin (PM)=$30,000;

assignment fee = greatest(6000,3%*ARV,15%*PM)
= greatest(6000,3%*250000,15%*30000)
= greatest(6000,7500,4500)
= 7500

They have a detail spreadsheet for entering all of your rehab costs, like a checklist. Just walk thru the house with your general contractor (GC) and go down the checklist. Your GC will estimate the repair cost of each item and you enter it into the spreadsheet (on your laptop or on a printed copy).

Then you will use one of the other two spreadsheets, the “buy-and-sell” or the “buy-and-hold” spreadsheet. Enter the repair costs from the detail sheet onto the next sheet, then enter the remaining values (like market rent, mortgage payment, taxes, insurance, closing costs, etc.). The spreadsheet calculates the offer. Seems more complicated than it really is.

I use my own very abbreviated spreadsheet that follows my formula above. I get the repair costs from my own estimates or GC.

My assignment fee is generally the greatest of: 3% ARV, 15% profit margin, or $6,000. Just plug that number into my formula to calculate the maximum offer.

The MaxOffer formula rarely results in an accepted offer, which is as it should be. If all of your offers are being accepted, then you’re offering too much. If all of your offers are being declined, then you’re not offering enough. You’ll need to make adjustments to your offers according to the current market conditions, and make adjustments to how you are finding sellers (maybe they aren’t motivated enough).

Without showing the profit margin, it’s important to show the motivated seller how an investor arrives at the offer. That’s why I start with the ARV, subtract profit and assignment fee to calculate my “total investment to value” (ITV). The ITV is the most that I will invest in the property. Then I subtract the “entry costs” (the hard costs to acquire, carry, repair the property) and the “exit costs” (the soft costs to sell to a retail buyer). Hard costs are costs that require cash. Soft costs are costs deducted at the closing with the retail buyer. I have to charge my soft costs to the seller, or I must pay the soft costs from my profit margin.

By showing the ITV, entry and exit costs, the seller simply cannot argue with the math. It’s not about emotion. It’s about the numbers. I don’t show profit margin, because it’s non-negotiable. The seller cannot argue with my costs, because the seller doesn’t have his own numbers to show. My offer is what the *property* can afford to pay. No emotion. It’s not personal. It’s only business.

MaxOffer = ARV-profit-assignment-entryCosts-exitCosts

Your insight, knowledge and delivery of the information you provide is both eye opening and refreshing. You have a way of sharing real time info in a few short paragraphs that investors can use right away. In my humble opinion, your site and what it contains is one of the best things to come along since sliced bread, and I for one appreciate you and all your efforts.

Keep up the good work, I’m sure it will come back to you a thousand times over!

Kindest Regards

Calvin Hayden

I just wanted to take a minute to thank you for the never ending info you send out to everyone- everyday! You truly seem to care about us “other” investors and you don’t seem to hold anything back. As a “newbie” I for one certainly do appreiciate all the helpful hints and guidance you give out so freely!

Ron LeGrand never gave me such help, and I spent $$$$ with him! If you ever make it out to So. CA., I would love to meet you and buy you lunch sometime. Just let me know!

Thanks again!

Steve Hendren

Thank you for your very kind words, Steve! I really appreciate what you’ve said! — Bryan Ellis