How to Calculate MAO (Maximum Allowable Offer) on Any Deal

The Maximum Allowable Offer (MAO) is the highest price you can pay for a distressed property and still meet your profit targets. Get this number right, and every deal you close has profit built in from the start. Get it wrong, and you're already working at a loss before you swing a hammer.

The MAO Formula

MAO = (ARV × Target Percentage) − Estimated Repair Costs

That's it. But the inputs require precision. Let's break each one down.

After Repair Value (ARV)

ARV is what the property will be worth after all repairs and renovations are complete. This is not the current value — it's the finished value. To find ARV, pull sold comps within 0.5 miles, same bed/bath count, similar square footage, sold within the last 6 months, in comparable condition after renovation.

Be conservative. If comps range from $280k to $320k, use $280k for your ARV calculation, not $320k. Overestimating ARV is the single most dangerous mistake in real estate investing.

Target Percentage

This is where wholesalers and flippers differ. Wholesalers typically use 70% of ARV as their ceiling (which already includes their assignment fee and the flipper's profit). Fix-and-flip investors also commonly use the 70% rule but adjust it based on their required profit margin, holding costs, and market conditions.

In slower markets or for higher-risk properties, use 65%. In fast-moving markets with very clean comps, some investors push to 75% — but never higher.

Estimated Repair Costs

Get a real number. Walk the property if at all possible. Use a repair cost estimator or a trusted contractor. Line-item your estimate: roof, HVAC, electrical, plumbing, kitchen, baths, flooring, paint, landscaping. Add a 15–20% contingency.

If you can't walk the property, apply a conservative per-square-foot estimate based on the condition of what you can see from photos or drive-by.

A Worked Example

ARV: $300,000 | Target: 70% | Repairs: $40,000 MAO = ($300,000 × 0.70) − $40,000 = $210,000 − $40,000 = $170,000

That $170,000 is your ceiling. Offer below it whenever you can. The MAO formula does not guarantee profit — it establishes the outer boundary within which profit is possible.

Why MAO Discipline Matters

In competitive markets it is tempting to stretch your offer to win the deal. Resist that impulse. A deal that requires your number to work is a deal with no margin for error. Deals with no margin for error become losses when (not if) something unexpected happens.

The investors who stay in this business long-term are the ones who walk away from bad numbers without hesitation.