How to Analyze a Wholesale Real Estate Deal Before You Make an Offer

Understanding the Wholesale Formula

Wholesaling is essentially a business of finding deep discounts and passing them to cash buyers. To do this, you must understand exactly how end buyers (flippers or landlords) evaluate a property.

If your numbers are wrong, your buyer won't buy. If your ARV is too high, or your repair estimate is too low, the deal falls apart.

Step 1: Determine the ARV

The After Repair Value is the absolute maximum a property can sell for once fully renovated to market standards. Use a reliable ARV Calculator and pull recent comps (sales within the last 6 months, within 1 mile, with similar square footage and features).

Step 2: Estimate Repair Costs

This is where most wholesalers fail. You don't need to be a contractor, but you need a solid framework for estimating repairs based on the property's square footage and condition level (light, medium, heavy cosmetic, or full gut). Always err on the side of caution.

Step 3: Calculate MAO

The Maximum Allowable Offer (MAO) is calculated using the 70% Rule: (ARV x 70%) - Repairs - Your Assignment Fee. This formula ensures there is enough meat on the bone for the flipper to make a profit while covering closing costs and holding costs.