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Maximum Allowable Offer (MAO) Calculator

Calculate your Maximum Allowable Offer using the 70% rule. Determine the highest price you can pay for a distressed property and still profit after repairs, holding costs, closing costs, and wholesale assignment fees. Prevent overpaying on every flip and wholesale deal.

Maximum Allowable Offer (MAO) Calculator

Use the industry-standard 70% rule to calculate your maximum offer on a distressed property. Negotiate strictly backward from ARV — never forward from the seller's ask.

$

Estimated value after full renovation

$

All-in renovation estimate

$

Your fee as wholesaler (0 if flipping)

%

70% standard; up to 80-85% in competitive markets

70% Ceiling = $300,000 × 70% = $210,000
Max Buy Price = $210,000 − $45,000 (repairs) = $165,000
MAO = $165,000 − $10,000 (assignment fee) = $155,000
Equity Buffer = $300,000 × 30% = $90,000 (the 30% rule's baked-in margin)
Investor Max Purchase
$165,000
Flipper cannot exceed this
Your MAO (Wholesaler)
$155,000
Maximum offer to seller
Built-In Equity Buffer
$90,000
30.0% of ARV reserved
🎯 Interactive Offer Simulator
$155,000
$0MAO: $155,000$300,000 ARV
Projected Gross Margin
$90,000
After repairs, fee & 30% rule buffer
Deal Status
✅ Viable
$0 below MAO
Deal Anatomy
ComponentAmount% of ARV
After Repair Value (ARV)$300,000100.0%
30% Equity Buffer (70% rule)($90,000)-30.0%
70% Purchase Ceiling$210,00070.0%
— Estimated Repair Costs($45,000)-15.0%
— Investor Max Buy Price$165,00055.0%
— Wholesale Assignment Fee($10,000)-3.3%
Maximum Allowable Offer (MAO)$155,00051.7%
MAO Sensitivity — Offers at Different Margin Rules
65% Rule
$140,000
70% Rule
$155,000
75% Rule
$170,000
80% Rule
$185,000
85% Rule
$200,000

Practical Example

ARV $300K | Repairs $45K | Assignment Fee $10K | 70% Rule:
70% Ceiling = $300,000 × 70% = $210,000
Max Buy Price = $210,000 − $45,000 (repairs) = $165,000
MAO = $165,000 − $10,000 (fee) = $155,000
Built-in 30% Buffer = $300,000 × 30% = $90,000 (covers holding costs, closing costs, profit)

The negotiation reality: If a seller asks $200,000 for this property, you must walk away. The math is non-negotiable — no emotional offer above $155,000 can work. If the deal is compelling, negotiate on the repair estimate or assignment fee before adjusting the margin rule.

💡 Field Notes

  • The 30% buffer is not profit — it's a survival fund: The 30% gap between ARV and Max Buy Price must absorb: closing costs on purchase (~1-3%), closing costs on sale (~6-8% including agent commissions), holding costs (mortgage, taxes, insurance, utilities during renovation, typically 3-6 months), unexpected repair overruns (budget 10-20% contingency), and finally the investor's actual profit. A deal that "works on paper" at exactly 70% often breaks even or loses money in practice. Experienced investors target 65% or below in normal markets.
  • ARV accuracy is the entire formula's weak point: The MAO formula is only as reliable as the ARV. ARV must be determined by pulling active comparable sales (comps) within 0.5 miles, similar square footage (±10%), same bedroom/bath count, and sold within the last 90 days. Relying on Zillow estimates, tax assessments, or the seller's claimed value is a critical error. Always pull your own comps from MLS or a local agent. A $20,000 ARV error translates to a $14,000 MAO error at the 70% rule — the difference between profit and loss.
  • When to adjust the margin rule: The 70% rule is calibrated for mid-tier US markets. In ultra-competitive coastal markets (San Francisco, NYC, LA), properties sell near ARV even in distressed condition, so investors may pay 80-85% as the competitive norm. In soft rural or declining markets, sophisticated investors may target 55-60% to protect against further depreciation during a 6-month flip. Always validate your margin assumption against actual recent flip data in your specific market before assuming 70% applies.
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What is Real Estate Wholesaling and The 70% Rule?

The MAO formula protects real estate investors from overpaying for distressed properties. It ensures there is enough built-in equity to cover holding costs, closing costs, unexpected repairs, and final profit. The 70% rule is a backward-from-ARV discipline — it forces investors to ignore what sellers are asking and calculate strictly from verified after-repair market data.

Mathematical Foundation

The MAO Formula
MAO=(ARV×0.70)−Repairs−Wholesale FeeMAO = (ARV \times 0.70) - Repairs - Wholesale\ Fee
ARVARV= After Repair Value — the estimated market price of the property after it is fully renovated and ready for a retail buyer. ARV must be determined strictly from recent comparable sales (comps) — not from seller claims, tax assessments, or automated Zestimates. Comparable sales must be within 0.5 miles, similar square footage (±10%), same bed/bath configuration, and sold within the last 90 days. ARV accuracy is the single most important input in the MAO formula; a 10% ARV error directly translates to a 10% error in your maximum allowable offer, potentially turning a profitable deal into a loss.
0.700.70= The standard 70% rule constant that bakes in a 30% gross equity buffer between what you pay and what the property is worth after repair. This 30% buffer must absorb: acquisition closing costs (1–3%), renovation carrying costs (3–6 months of taxes, insurance, utilities, financing), selling costs (6–8% including agent commissions and buyer concessions), and the investor's actual profit target. In competitive coastal markets, the rule is sometimes relaxed to 80–85%. In declining or rural markets, experienced investors target 60–65%.

Laws & Principles

  • Never negotiate based on the seller's asking price; negotiate strictly backward from the ARV. The seller's asking price is emotionally anchored — it reflects what they believe their property is worth, what they need for retirement, or what their neighbor sold for. None of these factors are relevant to the investor's calculation. The only relevant number is the ARV minus renovation costs minus a 30% profit buffer. If the seller's price does not conform to the MAO, the deal does not conform — period. Walking away is the primary skill of a successful wholesaler.
  • In highly competitive, high-cost markets (like California, New York, or Seattle), investors often adjust the 70% rule up to 80% or 85% because properties in these markets trade near retail value even in distressed condition. Conversely, in soft rural markets or metros experiencing population decline (Detroit, certain Rust Belt cities), sophisticated investors may target 55–60% to protect against further depreciation during a 6–9 month renovation period. Always calibrate your margin rule against actual recent flip data in your specific sub-market before deviating from the industry-standard 70%.

Step-by-Step Example Walkthrough

" A distressed property can sell for $300,000 once flipped, but needs $45,000 in work. A wholesaler wants to make a $10,000 assignment fee. "

  1. Step 1 — Apply the 70% rule to ARV: $300,000 × 0.70 = $210,000 (Investor's Maximum Purchase Price).
  2. Step 2 — Subtract total repair costs: $210,000 − $45,000 = $165,000.
  3. Step 3 — Subtract the wholesaler's assignment fee: $165,000 − $10,000 = $155,000 (MAO).
  4. Step 4 — Verify the 30% buffer: $300,000 − $210,000 = $90,000 reserved for holding costs, closing costs, and investor profit.
Final Result: The wholesaler's Maximum Allowable Offer is $155,000. They cannot offer the seller a single dollar more and still protect the investor's required margin. If the seller will not accept $155,000 or below, the wholesaler must walk away from the deal — not renegotiate the margin or reduce the assignment fee.

Quick Answer: What is the 70% rule in house flipping?

The 70% rule states that an investor should pay no more than 70% of a property's After Repair Value (ARV), minus repair costs. The remaining 30% buffer absorbs closing costs on both sides (1–3% buy + 6–8% sell), carrying costs during renovation (taxes, insurance, utilities, loan payments for 3–6 months), and the investor's profit. If a house will be worth $200,000 after renovation and needs $30,000 in repairs, the maximum purchase price is ($200,000 × 0.70) − $30,000 = $110,000. Any price above that compresses margin and puts the entire investment at risk.

The MAO Formula

MAO = (ARV × 70%) − Repair Costs − Wholesale Fee

ARV

After Repair Value from comps

Must be verified, not estimated

Repair Costs

Contractor-estimated rehab budget

Add 10–15% contingency

Wholesale Fee

Wholesaler's assignment profit

Typically $5K–$15K per deal

MAO Deal Analysis Scenarios

✓ Profitable Flip: The 70% Rule Works

  1. Property: 3BR/2BA ranch, heavy cosmetic rehab needed. ARV from 4 recent comps: $250,000. Contractor bid: $35,000 for rehab.
  2. MAO calculation: ($250,000 × 0.70) − $35,000 = $175,000 − $35,000 = $140,000.
  3. Seller accepts $138,000. Deal is $2,000 under MAO — additional margin.
  4. Actual costs: Purchase $138K + closing $4K + rehab $38K (10% over budget) + carrying costs $6K (4 months) + selling costs $18K (7.2% of ARV) = $204,000 all-in.
  5. Sells for $248,000 (slightly under ARV). Net profit: $44,000 — 21.6% ROI on the $204K total investment. The 70% rule protected the deal even with 10% renovation overrun and slightly below-ARV sale price.

✗ Overpaying at 85%: The Margin Squeeze

  1. Same property: ARV $250,000, Rehab $35,000. Investor bypasses 70% rule, pays 85% of ARV minus repairs.
  2. Purchase price: ($250,000 × 0.85) − $35,000 = $212,500 − $35,000 = $177,500.
  3. Actual costs: Purchase $177.5K + closing $5K + rehab $42K (20% over budget — foundation issue discovered) + carrying costs $9K (6 months — slow market) + selling costs $18K = $251,500 all-in.
  4. Sells for $245,000 (2% below ARV due to market softening). Net loss: −$6,500.
  5. Post-mortem: At 70%, the purchase would have been $140,000. Even with the same cost overruns and lower sale, profit would have been $31,000. The 15% rule relaxation turned a $31K profit into a $6.5K loss. This is why the 70% rule exists.

70% Rule Calibration by Market Type

Market Type Target MAO %
Hot coastal (SF, NYC, Miami)75% – 85%
Stable suburban70% (standard)
Midwest secondary65% – 70%
Declining / rural55% – 65%
Wholesale (no rehab)60% – 65%

MAO Strategy Directives

Do This

  • ✓Get your ARV from 3–5 recent closed comparable sales, not active listings. Active listings represent aspirational prices — asking prices that may or may not convert. Only closed sales within 90 days, 0.5 miles, and ±10% square footage represent actual market value. Verify comps through MLS (via your agent), county recorder records, or Redfin/Zillow "sold" data. An ARV based on active listings overstates value by 5–15% on average, which at 70% MAO translates to a $3,500–$10,500 overpayment on a $100,000 ARV deal.
  • ✓Always add a 10–15% contingency to your contractor's rehab estimate before running MAO. Renovation budgets overrun on 70–80% of residential rehabs. Foundation issues, termite damage, plumbing behind walls, and electrical code violations are invisible during walkthroughs. If the contractor bids $40,000, use $44,000–$46,000 in the MAO formula. This contingency protects the 30% buffer from being consumed by surprise scope changes.

Avoid This

  • ✗Never relax the 70% rule because "the deal feels too good to pass up." Emotional deal attachment is the #1 cause of losses in house flipping. The 70% rule is a mathematical discipline specifically designed to override emotional decision-making. Every experienced flipper has a story about the "guaranteed home run" they paid 82% of ARV for that became their worst loss. If the numbers don't work at 70%, the deal doesn't work — regardless of how convinced you are that the ARV is conservative, the rehab will come in under budget, or the market is about to spike.
  • ✗Don't use tax-assessed value or Zestimate as your ARV. Tax assessments are calculated by county assessors for tax collection purposes — they often lag market values by 1–3 years and use mass-appraisal models that ignore individual property condition, upgrades, and micro-location factors. Zestimates have a published median error of 6–7% nationally, and much higher in non-homogeneous neighborhoods. Both systematically deviate from actual market value. Only agent-pulled comparable closed sales from MLS represent defensible ARV data for investment underwriting.

Frequently Asked Questions

What costs does the 30% buffer in the 70% rule actually cover?

The 30% buffer must absorb all costs between purchase and sale that are not captured in the repair estimate: acquisition closing costs (title insurance, recording fees, attorney fees: 1–3% of purchase price), carrying costs during renovation (property taxes, insurance, utilities, and financing/hard money interest for 3–6 months: typically $1,500–$4,000/month on a $200K property), selling costs (real estate agent commissions of 5–6%, buyer concessions of 1–2%, transfer taxes: combined 6–8% of sale price), and the investor's actual profit. On a $250K ARV, the 30% buffer is $75K. After typical costs consume $30–40K, the remaining $35–45K is gross profit — before income taxes on the flip gain.

How do I accurately determine ARV for a distressed property?

ARV must be determined from 3–5 recently closed comparable sales (not active listings). Criteria for valid comps: (1) Sold within 90 days (180 days maximum in slow markets). (2) Within 0.5 miles of subject property (1 mile max in rural areas). (3) Similar square footage (±10%). (4) Same bedroom/bathroom configuration (±1). (5) Similar lot size and condition class (updated/renovated — matching what your property will look like post-rehab). Pull comps from MLS via a licensed agent, verify through county records. Average the $/sqft of your best 3 comps and multiply by subject property square footage. Discard outliers (highest and lowest) if using 5+ comps. This is the same methodology appraisers use — if your ARV matches what an appraiser would find, you've calibrated correctly.

When should a wholesaler adjust the MAO percentage below 70%?

Wholesalers must leave room for the end-buyer (flipper/investor) to apply their own 70% rule — plus the wholesaler's assignment fee. This means the wholesaler's effective MAO is typically 60–65% of ARV minus repairs, not 70%. If ARV = $200K, repairs = $30K, and the wholesaler wants a $10K fee: End-buyer's MAO = ($200K × 0.70) − $30K = $110K. The wholesaler must contract the property at $110K − $10K = $100K or less. That $100K represents 50% of ARV — far below 70%. This double-discount requirement is why successful wholesaling depends on finding deeply discounted properties and is mathematically impossible with properties at or near market value.

Is the 70% rule still valid in today's market?

Yes — the 70% rule is a risk management framework, not a market-timing tool. In appreciating markets (2020–2022), some investors relaxed to 75–80% and the rapid appreciation masked their thinner margins. When markets cooled (late 2022–2023), those same investors suffered losses because the margin compression left no room for extended holding periods, price reductions, or buyer concessions. The 70% rule is specifically calibrated for the real-world costs that exist in every market condition: commissions, carrying costs, and renovation overruns don't disappear in hot markets. The investors who survived the 2008 crash and the 2022 correction are uniformly the ones who never deviated from disciplined MAO calculations.

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