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The video discusses a formula for analyzing rental properties to determine if they are a good deal or a bad deal. The speaker has analyzed hundreds of rental properties and has developed a formula to quickly and effectively analyze rental properties. The first formula he uses is the Max Allowable Offer (MAO) formula, which shows if he is buying a house at enough of a discount to make it a good deal. To calculate the MAO, he takes the After Repair Value (ARV) times 75% and subtracts the repairs. The ARV is determined by finding three comparable house sales within a half-mile of the house being analyzed. The 75% discount percentage gives multiple exit strategies, including fixing and flipping, wholesaling, or refinancing using the BRRR method. Repairs include physical repairs, rehabbing, renovating, and holding costs such as insurance.
The speaker emphasizes the importance of cash flow when analyzing rental properties. To calculate cash flow, he subtracts all owning expenses from the monthly rent. Owning expenses include mortgage payments, taxes, maintenance, property management fees, vacancy, and insurance. He looks for a cash flow of $200-$300 per month. He stresses the importance of accurately calculating ARV and repairs to avoid losing money on a deal. He uses the Max Allowable Offer (MAO) formula to determine if he is buying a house at enough of a discount to make it a good deal. The MAO formula is calculated by taking the ARV times 75% and subtracting the repairs. He also mentions the importance of factoring in closing costs when analyzing a property. Overall, the video provides valuable insights into how to analyze rental properties effectively and efficiently.
The video discusses a formula for analyzing rental properties to determine if they are a good deal o