How to Calculate Your Maximum Allowable Offer (MAO) — With the Actual Math

Your Maximum Allowable Offer is the highest price you can pay for a property and still hit your required profit after every real cost is counted. It is not a negotiating opener and it is not a feeling. It is arithmetic — and if you can't produce it on demand for a deal, you don't have an offer, you have a guess.

Here is the full formula, what belongs in each line, and the places the math quietly goes wrong.

The MAO formula

The general form is:

MAO = ARV − Rehab − Holding Costs − Buying Costs − Selling Costs − Financing Costs − Required Profit

Start from what the property will be worth finished (ARV), then subtract everything it costs to get there and the profit that makes the deal worth doing. Whatever is left is the most you can pay. Every shortcut formula you've seen — including the 70% rule — is a compression of this equation, with some of the lines baked into a single percentage.

What goes in each line

ARV (After Repair Value). The finished value, from comparable sales — not the listing price, not the Zestimate, not what the seller "needs." Pull recent solds that match on location, size, bed/bath, and condition, and adjust for differences. (Full method: our ARV guide.) Everything downstream depends on this number, so it deserves the most scrutiny.

Rehab. An itemized scope — roof, HVAC, kitchen, bath, flooring, paint, landscaping, permits — not a single guessed number. A line-item budget forces you to walk the property with a list, and it gives you something to check invoices against later.

Holding costs. Taxes, insurance, utilities, and loan interest for every month you own it. Multiply your monthly carry by a realistic timeline — purchase to rehab to list to close — not the optimistic one. Six months of carry on a deal you modeled at three is a common way winners become break-evens.

Buying costs. Title, escrow, inspections, lender fees, points.

Selling costs. Agent commissions, seller-paid closing costs, concessions. On many exits this is the largest single line after rehab — commonly modeled around 6–8% of ARV all-in, but use your market's actual numbers.

Financing costs. Points and interest on hard money or private funds. If you're borrowing at 12% with 2 points, that's real money that comes out of your maximum offer, not out of thin air.

Required profit. Decide it before you look at the deal — a dollar floor, a percentage of ARV, or both. If the number only "works" when you shrink your profit requirement, the deal is telling you something.

A worked example (hypothetical numbers, shown so you can check them)

Suppose ARV is $300,000, rehab is $45,000, holding is $1,800/month × 5 months = $9,000, buying costs are $4,000, selling costs are 7% of ARV = $21,000, financing costs are $8,000, and your required profit is $40,000.

MAO = 300,000 − 45,000 − 9,000 − 4,000 − 21,000 − 8,000 − 40,000 = $173,000

Offer anything above that and you are, by your own numbers, paying yourself less than your target — or paying to work.

Where MAO math goes wrong

• ARV optimism. One flattering comp does not set the value. Average multiple sources; investigate the spread.
• Rehab as one number. Un-itemized budgets are where deals hide their losses.
• Timeline compression. Carry costs scale linearly with months. Model the slow version.
• Forgetting the exit's costs. Commissions and concessions come off the top of ARV.
• Moving the profit line to make the deal work. The formula's job is to say no.

Frequently asked questions

What does MAO stand for in real estate?

Maximum Allowable Offer — the most you can pay for a property and still achieve your required profit after all costs: rehab, holding, buying, selling, and financing.

Is MAO the same as the 70% rule?

No. The 70% rule is a shortcut that approximates MAO by lumping most costs into a flat 30% of ARV. It's fast, but it breaks at low and high price points and ignores your actual financing. The full formula above is what the shortcut is trying to imitate.

What profit should I require in my MAO?

That's a business decision, not a market fact — common approaches are a fixed dollar minimum, a percentage of ARV, or the greater of the two. Set it before you analyze the deal, and don't negotiate with yourself.

Should wholesalers calculate MAO differently?

Yes — a wholesaler's MAO must be the end buyer's MAO minus the assignment fee, or the deal won't move. See our wholesale assignment math guide.