How to Calculate MAO (Maximum Allowable Offer)
To calculate MAO, multiply the property's After Repair Value (ARV) by 70%, then subtract estimated repair costs and, if you're wholesaling, your assignment fee:
MAO = (ARV x 70%) - Repair Costs - Assignment Fee
Example: a house with a $300,000 ARV that needs $40,000 in repairs, with a $15,000 assignment fee, has a MAO of $300,000 x 0.70 - $40,000 - $15,000 =$155,000. That's the most you can offer and still leave enough margin for everyone in the deal to get paid.
That's the whole calculation. The rest of this guide explains where each number comes from, walks through the math step by step, and covers the two places new investors get stuck: estimating repairs without a contractor, and knowing when the 70% baseline needs adjusting. If you'd rather just run your numbers, the free MAO calculator does this math for you.
What MAO Is and Why It Exists
MAO stands forMaximum Allowable Offer: the highest price a real estate investor can pay for a property and still make a profit after repairs, holding costs, and resale. It is a ceiling, not a target. You can offer less than MAO. You should never offer more.
The point of calculating MAO before you make an offer is discipline. Sellers negotiate. Agents anchor high. A motivated buyer who "really likes this one" can talk themselves into overpaying in about four minutes. MAO takes the decision away from your emotions and gives it to arithmetic that was done before the negotiation started. If the seller won't come down to your number, the answer isn't a higher offer. It's the next deal.
Wholesalers rely on MAO more than anyone, because a wholesaler's profit depends on an end buyer's profit. If you contract a property above MAO, you haven't made a bad deal for yourself. You've made an unsellable one, because no flipper will take the assignment.
The MAO Formula, Term by Term
MAO = (ARV x 70%) - Repair Costs - Assignment Fee
ARV (After Repair Value)
ARV is what the property will sell for once it's fully renovated. Not what it's worth today, and not the online estimate. It comes from comparable sales: recently sold homes near the property with similar size, age, and layout, in renovated condition. ARV is the single most important input in the formula. Every other number is subtracted from a percentage of it, so an ARV that's 10% too high inflates your offer far more than a repair estimate that's 10% too low.
The 70% multiplier
Multiplying ARV by 70% sets aside roughly 30% of the property's future value before you subtract anything else. That 30% is not profit. It covers the end buyer's purchase costs, financing and holding costs during the renovation, selling costs (agent commissions and closing costs on the resale), and only then their profit margin. The multiplier is what makes an offer "safe": it prices in all the costs of getting from a distressed purchase to a retail sale.
Repair costs
The full renovation budget to take the property from its current condition to the condition of your ARV comps. This is the second place investors blow up deals. More on estimating it below.
Assignment fee
If you're wholesaling, this is your fee for putting the deal together, and it comes out of the offer math up front. Subtracting it in the formula is what protects your end buyer's margin: they pay your contract price plus your fee, and the total still has to work under the 70% rule. If you're flipping the property yourself, this term is zero.
Step-by-Step Worked Example
Take a property where renovated comps support a$300,000 ARV, the renovation budget is$40,000, and you plan to collect a$15,000 assignment fee.
Step 1: Multiply ARV by 70%.
$300,000 x 0.70 = $210,000. This is the ceiling before deal-specific costs.
Step 2: Subtract repair costs.
$210,000 - $40,000 = $170,000. This is roughly what a flipper could pay and still hit their margin.
Step 3: Subtract your assignment fee.
$170,000 - $15,000 =$155,000 MAO.
$155,000 is the most you can put in the contract. Offer above it and someone's margin, yours or your buyer's, disappears. Offer at or below it and the deal has room for everyone.
Notice what the formula did with the fee: your profit was decided before the offer went out, not scraped together afterward by hoping a buyer overpays.
Estimating Repairs When You Don't Have a Contractor
The repair number is where most new investors stall. You usually can't walk the property with a contractor before making an initial offer, and a 20-line repair worksheet full of guesses isn't more accurate than a good rule of thumb. It's just slower.
The practical approach for an initial offer is to bucket the property's condition and estimate repairs as a percentage of ARV:
Light rehab — paint, carpet, cosmetics — 5% of ARV
Medium rehab — kitchen, bath, systems — 12% of ARV
Heavy rehab — full gut renovation — 20% of ARV
On a $300,000 ARV, that's $15,000 for a cosmetic refresh, $36,000 for a kitchen-bath-and-systems renovation, and $60,000 for a full gut. These are initial-offer estimates, not final budgets. You'll tighten the number during due diligence. But they're accurate enough to tell you whether a deal is worth pursuing, which is all the first offer needs to do.
Use these tiers to get to a repair number, then run it: the free MyMAO calculator takes the ARV, your repair estimate, and the investor percentage you are working at, and returns your MAO.
Why an Offer Range Beats a Single Number
A single MAO figure implies a precision the inputs don't have. Your ARV is an estimate. Your repair number is an estimate. Stacking two estimates and reporting the result to the dollar is false confidence.
A more honest output is a range: the calculated MAO plus or minus 5%. The bottom of the range is a conservative opening offer; the top is your walk-away ceiling. The calculator returns that range for you. On the $300,000 example with a medium rehab ($36,000) and a $15,000 fee, the MAO is $159,000 and the range runs roughly $151,100 to $167,000.
The assignment fee in that calculation is an editable assumption, not a fixed constant. It defaults to $15,000; if your market supports $10,000 fees or you're pushing for $20,000 on a bigger deal, change it and the range updates. The fee is your number. The formula just makes sure it's accounted for before the offer goes out instead of after.
When to Adjust the 70% Rule
Seventy percent is a baseline, not a law. It encodes assumptions about holding time, selling costs, and buyer margins that hold in a typical market, and not every market is typical.
Run a higher percentage (75-80%) whenyou're in a hot metro where renovated inventory sells in days, end buyers accept thinner margins to win deals, and holding periods are short. A rigid 70% in these markets produces offers that never get accepted.
Run a lower percentage (65% or less) whenyou're in a slow or rural market with long days-on-market, thin comps, and buyers who demand a bigger cushion for the added risk and holding time.
Be careful adjusting at the price extremes.On low-priced properties, fixed costs (closing, utilities, insurance) are a large share of the deal, and 70% often isn't conservative enough. On high-priced properties, the 30% cushion can be far more dollars than the buyer actually needs, and strict 70% offers will lose every negotiation.
The honest way to adjust is deliberately: start every deal at 70%, and move the multiplier only when you can name the market condition that justifies it. What you're guarding against is the other kind of adjustment: creeping to 78% mid-negotiation because you want this deal to work. The free calculator holds the line at 70% for exactly that reason. Every offer starts from the same disciplined baseline.
The deeper limitation is that any percentage rule is a stand-in for information you don't have yet. The full MyMAO product replaces the assumptions with data for the actual property: real as-is and flip comps pulled for the address, AI-supported verification of the ARV, offer math tuned to the property's condition and how the local market actually runs, and a rental exit analysis that can justify a higher offer when the income supports holding the property. The free calculator answers "what should I offer, given my ARV?" The full product also answers the harder question underneath it: "is my ARV right?"
Frequently Asked Questions
What does MAO stand for in real estate?
MAO stands for Maximum Allowable Offer: the highest price an investor can pay for a property and still profit after repairs, holding costs, and resale. It's the core number in wholesaling and house-flipping offer math.
How do you calculate MAO?
Multiply the After Repair Value by 70%, then subtract repair costs and (for wholesalers) your assignment fee. Example: $300,000 ARV x 0.70 = $210,000, minus $40,000 repairs and a $15,000 fee = a $155,000 maximum offer.
Should the assignment fee really come out of the MAO?
Yes. Your end buyer pays your contract price plus your fee, and that total is what has to satisfy the 70% rule. Subtracting the fee inside the formula guarantees the deal still works for the buyer, which is what makes your contract assignable in the first place.
How do I estimate repairs without walking the property?
For an initial offer, bucket the condition: light rehab (cosmetics) at about 5% of ARV, medium rehab (kitchen, bath, systems) at about 12%, heavy rehab (full gut) at about 20%. Refine the number during due diligence. The free calculator applies these same tiers for you when you pick the condition.
What if my MAO comes out at zero or negative?
It means the numbers don't support a deal at any price the seller is likely to accept: the repair burden plus required margins exceed 70% of the future value. Renegotiate substantially or move on. A negative-MAO deal doesn't become profitable because you want it to.
Is MAO the same as what I should offer?
No. MAO is your ceiling. Most investors open below it (the bottom of a plus-or-minus 5% range is a reasonable starting offer) and negotiate up toward MAO, never past it.
Try it yourself: run your next deal through the free MAO calculator. Enter the ARV, pick the condition, and get your offer range in seconds.
