How to Calculate Maximum Allowable Offer (MAO)

Your maximum allowable offer (MAO) is the highest price you can pay for a property and still reach your profit goal after every cost. It's the number you decide before you negotiate — so emotion doesn't decide it for you.

There are two common ways to estimate MAO: a quick rule of thumb (the 70% rule) and a detailed cost-by-cost calculation. The rule is useful for screening; the detailed method is what you should rely on before making an offer.

The 70% rule: a screening heuristic

The 70% rule says:

MAO ≈ (ARV × 70%) − estimated repairs

The remaining 30% of ARV is meant to roughly cover closing, holding, financing, and selling costs plus profit. It's quick and easy to apply to many properties at once.

Why the 70% rule is not a universal standard

• It is a rule of thumb, not a valuation method or an industry requirement.
• In higher-priced markets, 30% of ARV may be far more than costs and profit require; in lower-priced markets it may not be enough.
• It ignores how long the project will take, so holding and financing costs aren't reflected directly.
• It depends entirely on an accurate ARV and repair estimate.

That's why our Fix-and-Flip Deal Analyzer lets you adjust the percentage to fit your market rather than locking in 70%.

The detailed MAO method

Work backward from the resale price, subtracting every cost and your target profit:

MAO = ARV − selling costs − repairs − contingency − holding costs − financing costs − buyer closing costs − target profit

Getting the inputs right

ARV

Base ARV on recent, nearby sales of similar renovated properties — similar size, age, layout, and condition. An inflated ARV is the most common reason an MAO is too high.

Repairs and contingency

Walk the property with a contractor when possible. Add a contingency for unknowns, especially in older homes.

Time

Estimate the full timeline: closing, permits, renovation, listing, and the buyer's closing. Holding and financing costs depend on it.

Profit target

Decide your minimum acceptable profit before you see the property. Some investors use a dollar figure, others a percentage of ARV; either way, it should compensate you for the risk and time.

Benefits of calculating MAO

• Removes emotion from negotiating.
• Lets you screen many properties quickly, then analyze the best ones in detail.
• Shows exactly which assumption kills a deal.

Limitations

• MAO is only as accurate as your ARV, repair, and timeline estimates.
• Markets move; an MAO calculated today may not hold in six months.
• MAO doesn't account for unique risks such as title problems or unpermitted work unless you add them.

Common mistakes

• Treating the 70% rule as a guarantee of profit.
• Using the list price or a hopeful ARV instead of comparable sales.
• Leaving out selling costs or the contingency.
• Raising the MAO mid-negotiation without changing any assumption.

Next steps

Enter your numbers in the Fix-and-Flip Deal Analyzer, which shows a rule-of-thumb maximum offer at any percentage you choose plus the maximum purchase price that hits your target profit. Read our Fix-and-Flip Loans guide to understand financing costs, and visit Financing Resources when you're ready to explore options with All Ways Capital LLC, which independently determines eligibility, terms, and approval.