Deal Analysis
MAO Formula: How to Calculate Your Maximum Allowable Offer (2026)
One formula sets the ceiling on every offer you make. Here's how to run it.
June 17, 2026 · 6 min read
The maximum allowable offer (MAO) formula is ARV × 70% − estimated rehab costs. It's the most you can pay for a flip and still profit after holding, financing, and selling costs. For a $300,000 after-repair value with $50,000 of repairs: $300,000 × 0.70 − $50,000 = $160,000. Lower the percentage to build in more margin.
What is the maximum allowable offer?
Maximum allowable offer (MAO) is the highest price you can pay for a property and still hit your target profit after every cost a flip carries. It works backward from the after-repair value (ARV) — what the home will be worth renovated — rather than forward from the asking price. That single shift is what separates investors from retail buyers: you decide what a property is worth to you, then offer at or below that number.
The MAO formula and a worked example
The standard formula multiplies ARV by 70% and subtracts your rehab estimate. The 30% gap is a built-in cushion for holding costs, financing, selling costs, and profit.
MAO = (ARV × 0.70) − Estimated Rehab Costs
| Input | Example | Running total |
|---|---|---|
| After-repair value (ARV) | $300,000 | — |
| × 70% | $210,000 | $210,000 |
| − Rehab estimate | $50,000 | $160,000 |
| = MAO | — | $160,000 |
So on this deal you'd offer no more than $160,000. Offering below MAO simply widens your margin — the number is a ceiling, not a target.
When to adjust the 70%
- Use a lower percentage (65% or less) for heavy rehabs, slower markets, or expensive financing — it protects your margin.
- A higher percentage (up to ~75–80%) can work for light cosmetic flips in hot markets with cheap capital and reliable comps.
- Always validate the winning number with a full deal analysis using your actual financing, holding, and selling costs.
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Get started freeFrequently asked questions
- How is MAO calculated?
- Multiply the after-repair value by 70%, then subtract your estimated rehab costs. For a $300,000 ARV with $50,000 in repairs: $300,000 × 0.70 = $210,000, minus $50,000 = a $160,000 maximum allowable offer.
- What is a good MAO?
- A good MAO leaves enough margin to cover holding, financing, and selling costs plus your target profit — which is exactly what the 30% buffer in the 70% formula is for. The lower your offer relative to MAO, the safer the deal.
- What's the difference between MAO and the 70% rule?
- They're the same formula. The 70% rule fixes the multiplier at 70%; MAO is the more general term and lets you adjust that percentage (say 65% or 75%) to match your market, financing, and rehab risk.
- Is MAO the same as ARV?
- No. ARV is the property's value after renovation; MAO is the most you should pay to buy it. MAO is derived from ARV by taking a percentage of it and subtracting rehab costs.