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Before making an offer on an investment property, experienced wholesalers and house flippers ask one question:
"What's the highest price I can pay and still make money?"
The answer is your Maximum Allowable Offer (MAO).
Whether you're wholesaling, flipping houses, or using the BRRRR strategy, calculating MAO helps you avoid emotional decisions and protect your profit margin.
In this guide, you'll learn:
Maximum Allowable Offer (MAO) is the highest price an investor should pay for a property while still achieving their desired profit after accounting for repairs, holding costs, and selling expenses.
Instead of asking, "How much is this property worth?"
MAO asks,
"How much can I safely pay?"
It acts as a financial guardrail that prevents investors from overpaying.
Real estate investing involves more than buying low and selling high.
Every deal includes additional costs, including:
Without calculating MAO, it's easy to erase your profit before renovations even begin.
The most commonly used formula is:
Maximum Allowable Offer = (ARV × Investment Percentage) − Repair Costs
Most investors use the 70% rule, making the formula:
MAO = (ARV × 70%) − Estimated Repair Costs
Some investors also subtract:
These adjustments create a more accurate MAO for today's market.
The 70% rule is one of the most popular guidelines in real estate investing.
It recommends paying no more than:
70% of the property's After Repair Value (ARV), minus repair costs.
The remaining 30% helps cover:
It's important to remember that the 70% rule is a guideline, not a law.
Highly competitive markets may require investors to use 75–80%, while slower markets may justify lower offers.
Everything starts with determining the property's After Repair Value (ARV).
ARV is the estimated value of the home after renovations based on recently sold comparable properties.
For example:
Comparable homes sold for:
Average ARV:
$340,000
Without an accurate ARV, every MAO calculation becomes unreliable.
Next, determine how much it will cost to renovate the property.
Typical repair categories include:
Many investors obtain contractor estimates before finalizing their offer.
Let's calculate MAO.
Property ARV:
$350,000
Estimated repairs:
$45,000
Using the 70% rule:
MAO = ($350,000 × 70%) − $45,000
MAO = $245,000 − $45,000
Maximum Allowable Offer = $200,000
If the seller wants significantly more than $200,000, the deal may not leave enough room for profit.
Suppose you're assigning the contract rather than renovating the property yourself.
Property ARV:
$300,000
Repair costs:
$35,000
Desired assignment fee:
$12,000
Closing costs:
$8,000
70% of ARV:
$210,000
Adjusted MAO:
$210,000 − $35,000 − $12,000 − $8,000
MAO = $155,000
This ensures there's enough margin for both the end buyer and your wholesale fee.
No two deals have the same MAO.
Several variables influence your maximum offer.
Hot markets often require higher purchase prices.
Slower markets allow more negotiation.
Hard money loans usually increase borrowing expenses.
Cash buyers often have more flexibility.
Older homes typically require a larger contingency budget.
Hidden structural issues can significantly affect profitability.
Your MAO changes depending on whether you plan to:
Optimistic comparable sales lead to inflated property values.
Always use recent sold properties, not active listings.
Small repair mistakes quickly become expensive.
Professional inspections reduce surprises.
Utilities, taxes, insurance, and loan interest accumulate every month the property isn't sold.
Agent commissions and closing fees reduce final profits.
Always include them when calculating your investment.
Every market behaves differently.
Some cities require a 75% or 80% threshold, while others demand a more conservative approach.
The formula should adapt to your local market.
Modern real estate investment platforms increasingly use AI to estimate MAO in minutes.
AI systems can analyze:
Instead of manually reviewing dozens of comparable properties, investors receive data-driven offer recommendations almost instantly.
However, AI should support investment decisions, not replace professional judgment.
Experienced investors still validate every estimate before making an offer.
Maximum Allowable Offer is one of the most important numbers in real estate investing because it protects your profit before negotiations even begin.
A solid MAO starts with an accurate ARV, realistic repair estimates, and a clear understanding of all transaction costs. While the 70% rule provides a useful starting point, successful investors adjust their calculations based on local market conditions, financing costs, and their chosen investment strategy.
As AI continues to improve property analysis and valuation, calculating MAO is becoming faster and more data-driven. Even so, the best investment decisions still combine technology with local market expertise and disciplined financial analysis.
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MAO stands for Maximum Allowable Offer, the highest amount an investor should pay for a property while maintaining their desired profit margin after accounting for repairs and expenses.
The basic formula is:
MAO = (After Repair Value × Investment Percentage) − Estimated Repair Costs
Many investors use 70% as the investment percentage, though it varies by market.
The 70% rule recommends paying no more than 70% of a property's After Repair Value (ARV), minus repair costs. It helps leave room for financing, closing costs, holding expenses, and profit.
No. It's a guideline rather than a strict rule. Investors often adjust the percentage based on local competition, financing costs, market conditions, and their investment strategy.
ARV estimates what a renovated property will be worth, while MAO determines the highest purchase price an investor should pay to achieve their target profit.
Yes. Many real estate investment platforms use AI to analyze comparable sales, repair estimates, local market trends, and investment costs to generate faster and more accurate MAO estimates. Investors should still v
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