MAO (Maximum Allowable Offer)
The highest price an investor should pay for a property and still hit their profit target. MAO is usually derived from ARV minus repairs, costs, and desired profit — the discipline that protects a flip.
The maximum allowable offer (MAO) is the highest price an investor can pay for a property and still make their target profit. It's the number that turns a deal analysis into an offer — a discipline that keeps emotion out of buying and ensures you don't overpay. If a property can't be bought at or below your MAO, you walk.
The classic MAO formula (70% rule)
The most common MAO calculation is the 70% rule:
MAO = (ARV × 0.70) − Repair Costs
On a property with a $300,000 ARV and a $50,000 rehab budget:
MAO = (300,000 × 0.70) − 50,000 = $160,000
The 30% spread baked into the 70% multiplier covers financing, closing costs, holding/soft costs, selling costs, and profit. So the MAO already builds in your margin.
A more precise MAO
Experienced investors often replace the rule of thumb with an itemized calculation:
MAO = ARV − Repairs − Holding Costs − Selling Costs − Financing Costs − Desired Profit
| Item | Amount |
|---|---|
| ARV | $300,000 |
| Less repairs | −$50,000 |
| Less holding/financing | −$15,000 |
| Less selling costs (≈6%) | −$18,000 |
| Less desired profit | −$40,000 |
| MAO | $177,000 |
This bottom-up method is more accurate than the flat 70% rule because it reflects your actual costs and profit goal, which vary by market and deal.
MAO for different strategies
- Fix-and-flip: MAO protects the resale profit (the examples above).
- BRRRR: MAO is set so your all-in cost (purchase + rehab) lands at or below ~75% of ARV, enabling a full cash-out refinance.
- Wholesale: the wholesaler's MAO must also leave room for their assignment fee and the end buyer's profit — so it's even lower.
Why MAO matters
- It prevents overpaying. The single biggest cause of flip losses is paying too much; MAO is the guardrail.
- It's a fast filter. Once you have ARV and a repair estimate, MAO instantly tells you whether a deal is worth pursuing.
- It anchors negotiation. Knowing your walk-away number keeps you disciplined when a seller pushes back.
The inputs decide everything
MAO is only as good as its two key inputs — ARV and the rehab budget. An inflated ARV or a lowball repair estimate produces a too-high MAO and a bad buy. Pull conservative comps, budget repairs realistically with a contingency, and your MAO will keep you in profitable deals and out of losers.
Frequently asked questions
How do I calculate maximum allowable offer?
The classic formula is the 70% rule: MAO = (ARV × 0.70) − repair costs. For more precision, subtract your actual costs and profit goal from ARV: MAO = ARV − repairs − holding − selling − financing − desired profit. The itemized version is more accurate because it reflects your real costs and target.
Why does the 70% rule build in a 30% spread?
Because that spread covers everything beyond the purchase and repairs — financing costs, closing costs, holding and carrying costs, selling costs (agent commissions), and your profit. Multiplying ARV by 0.70 and subtracting repairs bakes your margin into the offer, so an MAO you actually hit should be profitable.
What ruins an MAO calculation?
Bad inputs — an inflated ARV or an underestimated rehab budget. Either one produces a too-high MAO and leads to overpaying. Pull conservative comps for ARV, budget repairs realistically with a contingency, and your MAO will keep you in profitable deals. The MAO is only as reliable as its two key numbers.