Maximum Allowable Offer (MAO)

What is Maximum Allowable Offer (MAO)?

Maximum allowable offer (MAO) is the calculated ceiling price that a real estate investor should pay to acquire a distressed property while still achieving their target profit margin. MAO is the most important number in deal analysis because it establishes the walk-away point — if the seller won't accept a price at or below the MAO, the investor should pass on the deal.

The standard MAO formula used by most fix-and-flip investors is: MAO = ARV x 70% - Repair Costs. The 70% factor accounts for selling costs (typically 8-10% including agent commissions and closing costs), holding costs (property taxes, insurance, loan interest, utilities during renovation), and profit margin (typically 10-15% of ARV). Some investors adjust the percentage based on market conditions — using 65% in slower markets or up to 75% in fast-moving markets.

For wholesalers, the MAO calculation includes an additional subtraction for the assignment fee: Wholesaler's MAO = ARV x 70% - Repair Costs - Assignment Fee. This ensures the end buyer still has room for profit after paying the wholesaler's markup.

Ugly House Finder's property data — including tax assessment values, property characteristics (beds, baths, square footage, year built, lot size), and distress descriptions — provides the starting information investors need to begin their MAO calculations. The distress description helps estimate repair scope, while property characteristics enable comparable sales analysis to establish ARV.

Example

With an ARV of $180,000 and estimated repairs of $45,000, the investor calculated a maximum allowable offer of $81,000 using the 70% rule: ($180,000 x 0.70) - $45,000 = $81,000.

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