Comments on: New Market Rules: Why MAO Can Be a Moving Target

By: Anonymous

Anonymous — Mon, 09 Jan 2012 17:30:00 +0000

Great post, JP! Full of quality information and well written. Can’t wait for the next one!

By: Shane_umstead

Shane_umstead — Thu, 29 Dec 2011 23:51:00 +0000

Not, sure what to say Stan. My friend David who JP knows and is friends with does seller financing. While the rest of the world is on on side of the MAO forumula he is operating in the other side of the bandwidth. In my market I look for 130K spread, typically like I posted above……if were doing a buy, fix and resell, but the SPREAD could easily shrink to 50K if you doing what my friend David is doing. He simply signs up a house, does zero work, resells it and sells on a wrap….. he has systems to find motivated sellers and buyers……for him its about the financing…. personally, I like assignments, quick turns, fix up and resells and I am doing what David is doing, but I am purchasing with private money, then selling on a wrap as well. Really nice option in this market. Wrapping a SPREAD…at one rate actually pushes your YIELD higher….by default because the CASH in the deal is burning hotter….. Now, my friend David, he’s at at a point, where he does not put any cash in the deal, very little maybe 1K to buy and sell a house. Definitely viable in the market……. Welcome to the World of “Jack Miller”, “Fortunato” and David….and Dyches Boddiford….Brilliant Minds…., just asked a friend one day, 6 years ago who the best educators in the USA were. IMO, the guys I just mentioned along with Dave Tilney, Mike Cantun, along with Vena Jones, another sharp cookie. The reason the MAO differs so much in the same exact market is honestly based on the skillset of the investor. A seasoned pro, signs up for a little as possible and figures out a way to make the most profit, safely, while leaving some meat on the bone for the person………..

By: stan

stan — Thu, 29 Dec 2011 17:48:00 +0000

wow…you are so smart Shane. thanks for helping us

By: Jay von Mohr

Jay von Mohr — Thu, 29 Dec 2011 12:02:00 +0000

I’ve found it hard to stick to one formula ever since the foreclosure/short sale debacle started kicking in. Every REO & short sale pulls the comps down the closer to the subject property they are. You def better have a solid grasp on your local market prices (retail & all the other variants).

If you don’t know this data but need to get started before becoming an expert, team up with an agent or local appraiser (someone who can determine values quickly).

Anyway, don’t let your weaknesses delay or stop you from jumping in. Just partner up with someone who you are sure can cover your weak area(s) while you’re “learning on the job”. You can offer your skills, or plain old hard work in return & split the profits.

Thanks for your site & info JP,

Jay von Mohr

657-777-3540
Mohr Equity

Mohr Music

http://www.IncomePropertyCash.com

By: Shane_umstead

Shane_umstead — Thu, 29 Dec 2011 01:40:00 +0000

Lets not even talk about what our mutual friend David does….Folks can barely grasp what I am saying, let alone what he does…. He is 100% right, until you understand financing, loan constants, and all of that stuff Miller, Boddiford, and Fotunato teach about Taxes, Self Directed IRA’s 10310 and planning for the event beyond the event…….Just saying….

By: Shane_umstead

Shane_umstead — Thu, 29 Dec 2011 01:34:00 +0000

Dont like MAO. JP. Love controvery, always thought it was a HOAX. It is, if you do what the masses are doing, you get those kind of results. Numerous problems with MAO. First off required people to know repairs, (line items) just to hard for many and shortcuts are needed. Issue 2 the same houses are not the same. They can be side by side. One has more warts than the other, (no driveway, low clearance, dirty neighbor, strange lot, lots of steps, drainage) you know all of that Quishy stuff that makes your stomach churn. If you had 50 first time buyers walk thru the house, what would they love or hate about the house. Super important to get the first impression from the street, inside and out the back…. and drive immediately to a nice home (end in mind) and do the same exercise…. MAO is terrible for analytical purposes. It s not fast, nor efficient……. I love markets like this because ever thing Jack Miller and Fortunato said would happen is happening.. Bottomline, buyers in my market want a nice home that meets their needs, solid community a 4bed/2 bath, walk your dog, pitch roof………nicely done……As I write this, I know experienced investors who will not buy in solid subdivision, because they don’t see comps. Hello! their is very low turn-over if any in a good subdivision with no foreclosures and pride of owners. Wake up, folks it is the exact reverse of 2003 thru 2006. Your gonna find out that almost 50% of the potential buyers are bruised up and banged up…that certain people are going to make record profits selling homes both traditionally and non traditionally, (seller financing). Were at a point in most markets nationwide where rents, now match mortgage payments PITI for quality homes….the inflection point. I am an engineer BTW It does not matter if the house can afford themselves. Its about SAFETY, always has been…..would you rather make a 30K profit in a rock solid community or 50K potential wild card scramble…. Builders understand this, this is why they have changed their home styles, and are delivering to the market what the market needs. ITS NOT MAO, ITS HOW MUCH SPREAD DO I NEED FOR WHAT I AM DOING? BTW, coming from a builder repairs are always a range, even if your doing the same exact house. Simple Match and Walla a SF price.. Just is!!! Know your RETAIL Value for your Product Cold, Understand the Spread You Need, and Try to Buy As Low as Possible….Stop wasting time trying to figure out repairs, because I sent in an offer 2 days ago, while you were running around to figure out what was going on… Builders keep it simple. We need to sell this product, for 120 a SF and build it for 85 per SF. Same product ect.. if you don’t like the SF method do it like this…. Him the pros are buying this house type for 80K, and selling for 210 so I need 130K of spread…. So what is the MAO some DARN formula someone made up to make people warm and fuzzy they were making a good decision………You have to know your costs, your product and your farm market cold.

By: jp moses

jp moses — Wed, 28 Dec 2011 23:51:00 +0000

Well said, Barry! And thanks for commenting, man!

By: Barry Hart

Barry Hart — Wed, 28 Dec 2011 23:46:00 +0000

Right on the money JP–no pun intended. I have found that if you are not taking a second or third look at the MAO formula as well as the local and micro market conditions, measuring with precision your marketing campaigns, and qualifying your leads at the time of conversion, your results are going to be less than profitable. Unless by chance you squeak through and close with some profit—I truly believe that in most markets that would be a rare occurrence without tweaking that fundamental formula. It would be like making money in spite of yourself!

JP–keep these posts coming–we need all types of current proven ammo in a variety of contexts to succeed the way we have our goals set—one of my mentors told me ” Become an expert on the basics” and I can tell you albeit :basic, you need to become an expert on applying this formula, as tweaked for your local or micro market to make some real bucks. That said, those real bucks are out there, no doubt about that.