MAO — maximum allowable offer — is the highest price an investor can pay for a property while keeping the deal's required room for repairs, holding costs, selling costs, and profit. It is computed from the ARV, not negotiated from the seller's asking price. If the seller will not accept the MAO, the correct move is to walk away, because every dollar above MAO comes directly out of the deal's costs or profit.
The formula / structureMAO = (ARV × 0.70) − Repair Costs (the 70% rule form)
MAO: a worked example
Worked example. ARV $215,000, repairs $40,000. MAO = ($215,000 × 0.70) − $40,000 = $150,500 − $40,000 = $110,500. A wholesaler targeting a $10,000 assignment fee would contract with the seller at $100,500, leaving the end buyer's price at the $110,500 MAO.
What affects MAO
- ARV accuracy — an inflated ARV inflates MAO dangerously
- Repair estimate accuracy
- The percentage used (70% is the standard screen; markets and exits move it)
- Whether an assignment fee must fit inside it (wholesaling)
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