Max Allowable Offer (MAO) Calculator

Overview

How to use this calculator

1. Estimate the property’s ARV using comparable sales, agent opinions, or appraisal data.
2. Estimate rehab costs, including labor, materials, contingencies, and any contractor overhead you expect to carry.
3. Estimate closing costs on both purchase and sale (title, escrow, commissions, transfer taxes, etc.) and your monthly holding costs multiplied by expected hold time.
4. If wholesaling, enter your desired assignment fee; if you are taking the project down yourself, leave the fee at zero.
5. Choose a target profit percentage based on your risk tolerance and market conditions (30% is a common starting point but not a rule).
6. Review the calculated MAO and compare it to the seller’s asking price or the market to see whether the deal has enough margin to pursue.

Inputs explained

After-repair value (ARV)

Your best estimate of the property’s sale price after all planned renovations and improvements are complete. Use conservative comps and professional input when possible.

Rehab costs

Total projected renovation costs, including contractor bids, materials, permits, and a sensible contingency for surprises.

Closing costs (buy/sell)

Estimated transaction costs for both buying and selling, such as title, escrow, recording, transfer taxes, and real estate commissions.

Holding costs

Carrying costs you expect to pay while you own the property: property taxes, utilities, insurance, HOA dues, and interest if you’re using financing.

Assignment/wholesale fee (optional)

If you’re wholesaling, enter the fee you want to earn when assigning the contract to an end buyer so the MAO reflects what you can offer the seller while leaving room for your buyer’s profit.

Target profit (% of ARV)

Your profit goal as a percentage of ARV. Around 30% mimics the 70% rule, but you can adjust higher in risky markets or lower if deals are scarce and you’re comfortable with thinner margins.

Outputs explained

Max allowable offer

The highest purchase price (or seller offer price) that covers your rehab, costs, assignment fee (if any), and target profit, assuming your ARV and cost estimates are accurate.

Target profit (dollars)

Your profit target expressed in dollars, calculated as ARV × Target profit %. This shows how much you expect to make before taxes if everything goes according to plan.

When to use it

• Running quick back-of-the-envelope MAO checks on potential flip or wholesale deals before investing time in detailed analysis.
• Adjusting target profit percentages for different risk profiles—for example, higher margins for heavy rehabs, lower margins for quick, cosmetic flips.
• Communicating clear offer logic to partners, lenders, or investors by showing how ARV, costs, and desired profit flow into the MAO calculation.
• Comparing how different rehab scopes (cosmetic vs full-gut) change the maximum price you can pay.
• Evaluating deals across neighborhoods by applying different target margins based on resale volatility and days-on-market.
• Estimating whether a seller’s counteroffer still leaves enough room for profit after costs.
• Creating a consistent offer framework for a wholesale buyer list so numbers are comparable across deals.

Tips & cautions

• Increase your target profit percentage or add extra contingency to rehab and holding costs when dealing with uncertain scopes, older properties, or volatile markets.
• Be realistic (or conservative) with ARV and cost estimates; optimistic assumptions can make weak deals look better than they are.
• Layer this MAO check together with lender metrics like LTC (loan-to-cost) and LTV (loan-to-value) to verify that your offer still works with real-world financing terms and cash requirements.
• Add a rehab contingency (often 10–20%) if you are early in due diligence or working on older housing stock.
• Include commissions, staging, and selling concessions in closing costs so the back-end sale is fully funded.
• If your hold time is uncertain, run multiple holding-cost scenarios (short, base, and long) to stress-test the deal.
• If the seller is offering credits or repairs, reflect them in closing or rehab so the MAO still protects your margin.
• Document assumptions in your deal notes so you can revisit them quickly.
• This is a simplified MAO model and does not include every possible cost, such as financing points, income taxes on profits, or detailed month-by-month holding period modeling.
• ARV, rehab, closing, and holding cost inputs are estimates; actual numbers can differ, especially if unexpected issues arise during renovation or the market shifts.
• Assignment fees and target profit are business decisions; using aggressive or unrealistic values can distort the result.
• Does not model financing structure (cash, hard money, DSCR), which can change both costs and timing.
• Does not account for buyer financing issues or appraisal shortfalls that can reduce realized ARV.
• Assumes you can sell at the stated ARV when the project is complete; market downturns or slow demand can reduce outcomes.

Worked examples

Deep dive

Methodology & assumptions

• Target profit is calculated as ARV × (Target profit % ÷ 100).
• MAO is calculated as ARV minus rehab, closing, holding, assignment fee, and target profit.
• All costs are treated as cash outlays; financing structure is not modeled.
• The 70% rule is represented by a 30% target profit, but any percentage can be used.
• Outputs are rounded for display only; internal calculations use full precision.

Sources

• REI Glossary — The 70% RuleDefines the 70% rule and its relationship to MAO calculations.
• CFPB — Closing Disclosure ExplainerOverview of common closing cost components that inform MAO inputs.

FAQs

Is the 70% rule always the right target?

No. The 70% rule is a rule of thumb, not a law. In hot, low-inventory markets, investors may accept lower margins; in risky or slow markets, many insist on higher margins to compensate for uncertainty.

Should I include financing costs in this calculator?

Yes. To avoid overpaying, fold interest, points, and lender fees into closing or holding costs so the MAO reflects your real out-of-pocket expenses.

Does this calculator include taxes on profit?

No. It is a quick deal-screening tool. Evaluate income taxes with your accountant or modeling tools when you’re closer to closing or comparing final net profit.

How do I handle uncertainty around ARV or rehab?

Run multiple scenarios with lower ARVs and higher rehab estimates to build in a safety margin. If a deal only works under very optimistic assumptions, it may be too thin.

Can I use this for both wholesaling and flipping?

Yes. When wholesaling, include your desired assignment fee so MAO reflects what you can offer the seller while still leaving profit for your buyer. When flipping yourself, set assignment fee to zero.

Should target profit be based on ARV or total cost?

Many investors base the target on ARV (as in the 70% rule), but others prefer a profit margin on total cost. You can approximate a cost-based margin by adjusting the target profit percentage upward or downward to match your preferred framework.

How do I choose a realistic ARV?

Use sold comps (not active listings), similar size and condition, and recent dates. If the comps are older or the market is moving, discount ARV slightly to build in a margin of safety.

Do I include agent commissions and seller credits?

Yes. Agent commissions, staging, buyer credits, and typical concessions should be included in closing costs so your MAO reflects the true all‑in cost of selling.

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