How to Calculate MAO (Maximum Allowable Offer) for Real Estate

MAO (Maximum Allowable Offer) is the highest price you can pay for a property while still making your target profit. It's the foundation of every real estate investment decision. Offer too high, and you lose money. Offer too low, and you lose the deal. MAO helps you find the sweet spot.

MAO = ARV × 70% - Repair Costs - Your Profit

ARV (After Repair Value): What the property is worth fully renovated 70%: The standard discount to account for buying/selling costs and profit margin Repair Costs: Your rehab budget Your Profit: For wholesalers, this is your assignment fee ($5k-$25k typical)

Wholesalers need to leave room for the end buyer's profit. The formula becomes:

Wholesale MAO = ARV × 70% - Repairs - End Buyer Profit - Your Assignment Fee

Example: $300k ARV property needing $50k in repairs $300,000 × 0.70 = $210,000 $210,000 - $50,000 repairs = $160,000 $160,000 - $10,000 assignment fee = $150,000 MAO

You'd offer around $150k, assign at $160k, and your buyer still has a deal.

Flippers calculate MAO based on their own profit targets:

Flipper MAO = ARV × 70% - Repairs - Holding Costs - Target Profit

Holding costs include: loan interest, insurance, utilities, taxes, and time value of money. A typical 6-month flip might have $15-25k in holding costs. Target profit is often 10-15% of ARV or a minimum dollar amount ($30k-$50k).

The 70% rule is a starting point, not gospel. Adjust based on:

• Hot markets: May need 75-80% to compete • Expensive properties: Lower percentages on $500k+ properties • Light rehabs: Can go higher with minimal work • Distressed properties: Go lower (65%) for major rehabs • Holding period: Lower percentage for longer holds

Overestimating ARV: Use conservative comps, not the highest sale in the neighborhood.

Underestimating repairs: Add 10-20% contingency for surprises.

Forgetting soft costs: Permits, inspections, staging, realtor commissions.

Emotional bidding: Your MAO is your MAO—don't chase deals above it.