How to Calculate Maximum Allowable Offer for Any Property
The complete MAO formula breakdown for wholesalers, flippers, and rental investors — with real-world examples for every strategy.
What Is MAO?
Maximum Allowable Offer (MAO) is the highest price you should pay for a property based on your exit strategy. It accounts for the property's value, repair costs, your desired profit, and all transaction costs. Exceeding your MAO means you're gambling, not investing.
The Wholesale MAO Formula
MAO = ARV x 0.70 - Repairs - Wholesale Fee
Example: ARV $200,000, Repairs $30,000, Fee $15,000. MAO = $200,000 x 0.70 - $30,000 - $15,000 = $95,000. If you can contract at $95K or less, the deal works.
The Flip MAO Formula
MAO = ARV x 0.70 - Repairs - Holding Costs - Selling Costs
Example: ARV $250,000, Repairs $40,000, Holding $8,000, Selling $15,000. MAO = $250,000 x 0.70 - $40,000 - $8,000 - $15,000 = $112,000.
The Rental MAO Formula
MAO = (Monthly Rent x 12 x 0.50) / Target Cap Rate
Example: Rent $1,500/mo, Target 8% cap rate. MAO = ($1,500 x 12 x 0.50) / 0.08 = $112,500.
When to Use 65% Instead of 70%
Drop to 65% for: properties over $300K ARV, full gut renovations, your first 5 deals, and slow markets with 60+ days on market. The extra 5% margin protects you from unknowns.
The Bottom Line
MAO is your deal-or-no-deal number. Calculate it before every offer. Never exceed it because you 'feel good' about a deal. The math either works or it doesn't.
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