Why We’re Telling You This
Most real estate buyers keep their calculation opaque so they can lowball without pushback. We take the opposite approach: we show you exactly how we arrived at our offer. If you understand the math, you can trust the number, negotiate specific line items, or correctly choose between cash, Subject-To, seller-finance, or novation strategies.
Cash Offer: The 70% Rule (Starting Point)
The industry-standard formula for a quick cash offer is:
Maximum Allowable Offer (MAO) = (ARV × 0.70) − Estimated Repairs
Example:
- After Repair Value (ARV): $220,000
- Estimated Repairs: $40,000
- 70% of ARV: $154,000
- MAO: $154,000 − $40,000 = $114,000
Why 70% Instead of 100%?
The 30% covers:
- Purchase closing costs (3-4%)
- Resale closing costs + agent commissions (7-8%)
- 6-9 months of holding costs: taxes, insurance, utilities, interest (5-7%)
- Unexpected repair overruns (3-5%)
- Profit margin (10-13%)
When rolled up, the retail-rehab economics usually land around 70% minus repairs to make the deal worth doing.
When We Offer More Than 70%
- The property is in move-in condition (repairs near $0) and the market is hot.
- It’s a fast wholesale flip to a pre-committed cash buyer.
- You accept a creative structure (Subject-To, seller-finance, novation) instead of straight cash.
Subject-To: Different Math
Subject-To offers don’t use the 70% rule — they use cashflow economics:
- Keep the existing low-rate mortgage.
- Pay off your equity position at closing (if any).
- Rent the property for market rent and pocket the difference.
This means Subject-To offers often match or exceed the mortgage payoff amount, even if equity is thin — because we’re paying for cashflow, not a discount rehab flip.
Seller Finance: Time Value of Money
Seller-finance offers pay 10-20% above a cash offer because:
- We get to buy with zero down (or minimal down).
- You carry the loan, not a bank.
- The financing premium is baked into the price.
Novation: Top of the Market
Novations can reach retail market value because we’re selling to a retail buyer, just doing the work for you. Your net is typically 85-92% of retail, minus our marketing and repair costs.
How We Estimate Repairs
We use three inputs:
- Photos or a brief walk-through.
- Public tax assessor data (age of systems, square footage).
- Regional per-square-foot repair estimates updated quarterly.
Most properties fall into one of these buckets:
| Condition | Typical Repair Budget |
|---|---|
| Move-in ready | $5K – $15K cosmetic |
| Needs cosmetic work | $15K – $30K |
| Needs mechanicals (HVAC, electric, plumbing) | $30K – $60K |
| Full rehab | $60K – $120K+ |
| Teardown / rebuild | Case by case |
How to Get a Higher Number From Us
- Share photos — especially of kitchens, baths, and exterior.
- Share the year of the roof, HVAC, and water heater.
- Let us know if there are recent upgrades we can’t see from public records.
- Consider whether a creative structure (Subject-To, seller-finance) gets you to a higher net.