How to calculate MAO
MAO — maximum allowable offer — is the most you can pay for a property and still hit your margin. The standard formula is MAO = (ARV × 70%) − repairs. On a house with a $385,600 ARV and $55,000 of repairs, that's $214,920. A wholesaler subtracts their assignment fee as well. The 70% is not a law of nature: it is a single number standing in for holding costs, selling costs, and profit, and it should move with your market and your deal size.
Both versions
MAOwholesale = (ARV × 70%) − repairs − assignment fee
Every term is doing real work, and it's worth naming what each one is standing in for:
| Term | What it is | Where it comes from |
|---|---|---|
| ARV | Value once renovated | Renovated sold comps — how to calculate ARV |
| 70% | A reserve for holding, selling, and profit combined | Convention. Should be derived, not inherited — see below |
| Repairs | The full renovation budget, including contingency | A scope, not a guess per square foot |
| Assignment fee | The wholesaler's compensation | You, constrained by what the spread supports |
One house, both versions
ARV $385,600, repairs $55,000, wholesaler's fee $12,000.
| Step | Flipper | Wholesaler |
|---|---|---|
| ARV | $385,600 | $385,600 |
| × 70% | $269,920 | $269,920 |
| − repairs | −$55,000 | −$55,000 |
| − assignment fee | — | −$12,000 |
| MAO | $214,920 | $202,920 |
The wholesaler's number is lower by exactly their fee, and that's the entire structural difference: the wholesaler has to buy low enough that a flipper's MAO still sits above their contract price. Everything a wholesaler earns comes out of the gap between what the seller will accept and what the end buyer's own formula permits.
Run it
Enter ARV and repairs to get the maximum allowable offer, with the margin it reserves for holding, selling, and profit shown separately — and an adjustable rule percentage rather than a fixed 70.
Open the 70% rule calculatorDeriving your own percentage
The honest way to set the rule is to build it from your actual costs rather than accept 70 because it rhymes. The percentage is simply one minus everything you need to reserve:
| Reserve | Fast, cheap market | Typical | Slow or expensive market |
|---|---|---|---|
| Selling costs | 5% | 6% | 7% |
| Holding costs | 3% | 4% | 7% |
| Buying costs | 1% | 1.5% | 2% |
| Target profit | 13% | 18% | 22% |
| Implied rule | 78% | 70.5% | 62% |
The middle column is where the 70% rule comes from, and the outer two are why applying it everywhere is a mistake. A 78% rule in a fast, low-cost market wins deals a 70% competitor will never see; a 70% rule in a slow expensive one buys you a project that loses money while looking disciplined.
Three places MAO breaks
- Cheap houses. A percentage reserve scales with price, but selling costs, holding costs and the wage you need don't scale down as fast. Under about $150,000 of ARV, switch to an absolute floor: MAO = ARV − repairs − estimated costs − the dollar profit you require.
- Very expensive houses. The reverse: 30% of a $900,000 ARV is $270,000, far more margin than the risk warrants, and a 70% offer will never be competitive. Investors at this end typically run 75–80% with an explicit cost model behind it.
- Rentals. MAO is an exit-driven formula and a rental's return comes from holding, not selling. Pricing a buy-and-hold off ARV ignores rent, expenses and financing entirely — see how to build a buy box for what to use instead.
Next
For the wholesaler's version of the whole ladder, see how much should a wholesaler offer. For what the fee in the middle should be, what is a good wholesale spread. And the repair number that MAO depends on deserves as much care as the ARV does — a scope, with a contingency, not a rate per square foot.
Common questions
What is the MAO formula?
MAO = (ARV × your rule percentage) − estimated repairs. Wholesalers use MAO = (ARV × percentage) − repairs − assignment fee, because their buyer's ceiling has to leave room for the fee on top.
Why 70%?
Because 30% of ARV is roughly what a flip's non-renovation costs plus a target profit come to on a mid-priced house: about 6% selling costs, 3–5% holding, 1–2% buying, and 15–20% profit. It's a back-of-envelope shortcut that happens to land near a real cost structure — which is exactly why it stops working when the cost structure changes.
When should I use 65% or 75%?
Lower the percentage when the deal carries more risk or a longer hold: expensive houses, slow markets, heavy or uncertain scopes, high rates. Raise it when costs are genuinely lower: a cheap fast market with low commissions, a light cosmetic scope, cash rather than hard money. Below about 60% you rarely win anything; above 78% you are usually working for the seller.
Does MAO work on cheap houses?
Poorly, and this is its most important failure. At a $110,000 ARV with $30,000 of repairs, 70% gives an MAO of $47,000 — and the 30% reserve is only $33,000, which won't cover selling costs, holding, and a wage. Below roughly $150,000 of ARV, work from an absolute profit floor instead: MAO = ARV − repairs − costs − the dollar profit you need.
Is MAO the same as what I should offer?
No. MAO is the ceiling — the point at which the deal stops being worth doing. Your opening offer belongs below it, and how far below is a negotiation question, not a math one. Treating MAO as the offer means every successful negotiation lands you at exactly zero margin over your floor.
Related guides and calculators
How much should a wholesaler offer?
Working backwards from your buyer's ceiling to a number you can actually sign.
How to calculate ARV
The five-step method, with a worked example and the adjustment table most investors skip.
What is a good wholesale spread?
What the fee actually runs, and how to tell a thin spread from a deal that will fall apart.
ARV for fix and flip
Matching your scope to your comps, and the sensitivity table that shows what a small ARV miss really costs.
The offer price, from a real address.
Faro pulls the comps, values the property, and solves for the price that hits the return you're targeting — no rule of thumb required.
Estimates for analysis and educational use only — not financial, investment, tax, or legal advice. Verify every number independently before making a purchase decision.