What Can I Pay for This Deal? The MAO Formula Explained

Every wholesale deal comes down to a single question: what can I pay for this property and still make money? Pay too much and you're stuck with a contract nobody wants. Pay the right amount and you have a deal that sells itself. The number that answers this question is called the Maximum Allowable Offer, or MAO, and it is the single most important calculation in wholesaling.

Your MAO is the ceiling. It is the absolute most you can pay for a property and still leave enough room for your buyer to profit, for you to collect an assignment fee, and for everyone to cover their costs. Every dollar you go above your MAO comes directly out of someone's margin, and eventually out of your ability to move the deal.

This guide breaks down the MAO formula from the basic 70% rule through the expanded calculation, then shows you how the number changes depending on whether your buyer is flipping, renting, doing a BRRRR, or wholesaling again. We will walk through a real property with real numbers so you can see exactly how it works.

The 70% rule: where it all starts

The 70% rule is the classic shorthand formula that most wholesalers learn first:

MAO = ARV x 70% - Repairs

ARV is the After Repair Value, which is what the property will sell for once it is fully renovated. Repairs is the total cost to get the property to that condition. If you are not sure how to calculate either of those numbers, read how to calculate ARV and how to estimate repair costs.

The 30% discount is not arbitrary. It covers four things that all come out of the gap between the purchase price and the final sale price:

• Buyer's profit margin. The investor buying from you needs to make money. On a flip, that is typically 10-15% of ARV. Without profit, there is no buyer.
• Holding costs. Loan payments, property taxes, insurance, utilities, HOA fees, and lawn care while the property is being renovated and listed. This runs 3-6 months on most flips and costs 3-5% of the property value.
• Closing costs. The buyer pays closing costs when they purchase the property from you (or the seller), and again when they sell the finished product. Title, escrow, commissions, transfer taxes, and lender fees add up to 8-10% across both transactions.
• Your assignment fee. This is how you get paid. Typically $5,000-$15,000 on a standard deal.

Add those up and you get somewhere around 28-32% of ARV, which is why the 70% rule works as a rough guide. It bakes in reasonable assumptions for all four cost categories so you don't have to calculate each one individually on every deal.

The expanded MAO formula

The 70% rule is a starting point, not a final answer. In competitive markets, most wholesale deals actually trade at 70-80% of ARV, and many experienced buyers and wholesalers work at 75% or higher. If you rigidly stick to 70% in a hot market, you will lose deals to competitors offering more. Experienced wholesalers use a more precise formula that accounts for each variable separately:

MAO = ARV x (1 - Profit% - Holding% - Closing%) - Repairs - Assignment Fee

This lets you adjust each component based on the specific deal, market, and buyer. Here is what each variable means in practice:

• Profit% (10-20%). What your buyer needs to make. Flippers in competitive markets accept 10-12%. In softer markets or on heavy rehabs, they want 15-20%.
• Holding% (3-6%). Depends on the renovation timeline. A cosmetic flip held for 3 months costs less than a full gut held for 6 months. Factor in the cost of the loan (hard money at 10-12% interest is common).
• Closing% (8-10%). Closing costs on both the purchase side and the sale side. Buyer-side closing is 2-3%. Seller-side closing with agent commissions is 6-8%.
• Repairs. Total renovation cost in dollars, not a percentage. Get this from a contractor bid or a detailed scope of work. See our repair estimation guide for how to build an accurate number.
• Assignment fee. Your wholesale fee in dollars. Set this based on the deal, not a fixed number. We will cover this in detail below.

The expanded formula gives you a more accurate MAO because you are plugging in real numbers for your specific deal instead of relying on a one-size-fits-all percentage.

MAO for different exit strategies

Here is where it gets interesting. The same property has a different MAO depending on what your buyer plans to do with it. A flipper and a landlord value the same house very differently, and your offer price needs to reflect the exit strategy of the most likely buyer. For a deeper look at how exit strategies shape your analysis, read exit strategies explained.

Flip MAO

This is the classic calculation. The buyer purchases the property, renovates it, and sells it at ARV. Their profit comes from the spread between all-in cost and sale price.

Flip buyers need a 15-20% net profit margin on most deals. They are taking on renovation risk, market risk, and time risk. Cosmetic flips in hot markets can work at thinner margins (12-15%), but anything involving structural work, foundation issues, or long timelines needs more cushion.

Rental MAO

Rental buyers do not care about the resale value nearly as much as flippers do. They care about cash flow. Their MAO is driven by rental income, not ARV. This is a fundamentally different calculation, and it is why the same property can have a higher MAO for a landlord than for a flipper.

The cap rate is the investor's required return on their investment. A cap rate of 8% means the investor wants an 8% annual return on the purchase price. Lower cap rates (5-6%) mean the investor is willing to pay more, usually in appreciation markets. Higher cap rates (8-10%) are typical in cash flow markets. For a full breakdown of rental valuation versus resale valuation, read ARV vs ARR.

The 1% rule is a quick shortcut: if the monthly rent is at least 1% of the purchase price, the numbers probably work for a rental buyer. A property renting for $1,650/month should be purchased for no more than $165,000 all-in under this rule.

BRRRR MAO

BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. It is the most complex calculation because the property has to work as both a rental and a refinance. The buyer needs to renovate the property, rent it out, then refinance at the new appraised value and pull out most or all of their initial investment.

The 75% comes from the refinance. Most lenders will refinance at 75% loan-to-value, meaning the investor can borrow up to 75% of the ARV after renovation. For the investor to get all their cash back out, their all-in cost (purchase + repairs + closing + holding) needs to be at or below 75% of ARV. The rent still needs to cover the mortgage payment, taxes, insurance, and leave positive cash flow.

BRRRR buyers are often willing to pay slightly more than pure flippers because they are keeping the property long-term and building equity. But the refinance constraint is hard. If the numbers do not work for the refi, the deal does not work for a BRRRR buyer regardless of how good the rent is.

Wholesale MAO (selling to another wholesaler)

If your buyer is another wholesaler who plans to assign the contract to their end buyer, your MAO needs to account for two assignment fees instead of one.

This is always the tightest number. If a flip MAO is $119,500 with a $10,000 assignment fee, a daisy-chain MAO for the same property might be $109,500 because the next wholesaler needs their $10,000 too. The property has to be a great deal to support two layers of assignment fees.

Worked example: one property, four MAOs

Let's run the numbers on a real property. Take a 3-bedroom, 2-bath, 1,400 square foot house in the Alief area of Houston, TX. Here are the known facts:

• After Repair Value (ARV): $235,000 (based on 5 renovated comps within 0.5 miles)
• Estimated repairs: $35,000 (new flooring, kitchen update, both bathrooms, paint, landscaping)
• Monthly market rent (after renovation): $1,650
• Your target assignment fee: $10,000

Flip MAO

Using the 70% rule:

$235,000 x 0.70 = $164,500
$164,500 - $35,000 (repairs) = $129,500
$129,500 - $10,000 (your fee) = $119,500

If you get this property under contract at $119,500 or less, a flip buyer has room for a 15%+ profit margin after all costs. That is a deal that moves fast.

Flip MAO (expanded formula)

Let's get more precise. Your buyer expects 15% profit, holding costs will be 4% (4-month timeline), and total closing costs across both transactions will be 9%:

$235,000 x (1 - 0.15 - 0.04 - 0.09) = $235,000 x 0.72 = $169,200
$169,200 - $35,000 (repairs) = $134,200
$134,200 - $10,000 (your fee) = $124,200

The expanded formula gives a slightly higher MAO than the 70% rule because the actual costs in this scenario add up to 28% instead of 30%. That $4,700 difference could be the gap between getting a deal and losing it to another wholesaler.

Rental MAO

A landlord buying this property wants an 8% cap rate:

$1,650/month x 12 = $19,800 annual rent
$19,800 / 0.08 = $247,500 (value based on income)
$247,500 - $35,000 (repairs) = $212,500
$212,500 - $10,000 (your fee) = $202,500

Notice the rental MAO is $83,000 higher than the flip MAO. That is because a landlord values the property based on the income it produces, not the resale spread. At $202,500 all-in, the landlord is getting an 8% return on their money. This is why understanding your buyer's exit strategy matters so much. The same property, same condition, same neighborhood, but a completely different price ceiling.

Now, most landlords will also sanity-check against the 1% rule: $1,650 rent / ($202,500 + $35,000 total investment) = 0.69%. That is below 1%, which means a strict cash-flow investor might negotiate lower. A more realistic rental MAO using the 1% rule: $1,650 x 100 = $165,000 all-in, minus $35,000 repairs, minus $10,000 fee = $120,000. The real rental MAO sits somewhere between $120,000 and $202,500 depending on how the buyer weighs appreciation versus cash flow.

BRRRR MAO

$235,000 x 0.75 = $176,250 (max refi amount)
$176,250 - $35,000 (repairs) = $141,250
$141,250 - $10,000 (your fee) = $131,250

The BRRRR buyer can pay a bit more than a flipper because they are using the refinance to recapture their investment. At $131,250 purchase + $35,000 repairs + closing costs, their all-in is roughly $173,000. The 75% LTV refi at $235,000 ARV gives them $176,250 back, meaning they recover almost all of their cash and still have a rental property cash-flowing at $1,650/month.

Wholesale (daisy-chain) MAO

$235,000 x 0.70 = $164,500
$164,500 - $35,000 (repairs) = $129,500
$129,500 - $10,000 (your fee) - $10,000 (their fee) = $109,500

This is the tightest number. You need to get the property at $109,500 for there to be room for both assignment fees and still leave the end buyer with a flip that works. This is why daisy-chaining only works on deeply discounted properties.

When to break the 70% rule

The 70% rule is a guideline, not a law. In practice, wholesale deals commonly sell for 70-80% of ARV depending on the market. There are many situations where experienced wholesalers and their buyers accept tighter margins:

• Hot markets with strong demand. In a seller's market where renovated homes sell in days, flippers accept 10-12% margins because there is minimal holding risk. The 75% or even 78% rule might be realistic.
• Cosmetic-only rehabs. A property that only needs paint, flooring, and landscaping ($10-15K) carries far less risk than a $60K gut rehab. Less risk means the buyer can accept a thinner margin.
• A/B neighborhoods with strong appreciation. In neighborhoods where values are climbing 5-8% annually, the ARV might be higher by the time the flip is done. Buyers factor appreciation into their calculations even if they do not say so.
• Experienced buyers who know their costs precisely. A flipper who has done 50 houses knows their exact contractor costs, holding costs, and closing costs. They do not need the 70% rule's buffer because they have their own numbers dialed in.
• Rental buyers. As the example above shows, landlords often pay more than flippers. If your buyer pool is mostly landlords, the 70% rule may be too conservative for your market.

When to stick to the 70% rule (or go tighter)

There are also situations where 70% is not conservative enough:

• Unknown neighborhoods. If you do not have strong comps or you are working a submarket you are unfamiliar with, protect yourself with tighter numbers. Use 65%.
• Heavy structural rehabs. Foundation work, roof replacement, major plumbing or electrical. These projects go over budget more often than not. Pad the repair estimate by 15-20% and use the 70% rule on top of that.
• Properties that have been sitting. If a property has been on the market for 60+ days without offers, that is the market telling you the price is too high. Your MAO should reflect that reality.
• Declining markets. If values are dropping, your ARV might be lower by the time the flip sells than it is today. In a market losing 1% per month, a 6-month flip effectively loses 6% of ARV.
• Your first few deals. When you are still learning, err on the conservative side. It is better to miss a few deals than to lock up a property you cannot move. Your reputation survives low-ball offers that do not get accepted. It does not survive contracts you have to back out of.

The assignment fee question

How much should you charge? There is no fixed answer, but there are principles.

Most wholesale assignment fees fall between $5,000 and $15,000. On rare, deeply discounted properties the fee can be $20,000-$30,000 or more. On thin deals it might be $2,000-$3,000. The fee should be based on the deal quality and the buyer's margin, not a number you decided on before you saw the property.

Here is how to think about it. Calculate the flip MAO at 70% with zero assignment fee. The difference between that number and your contract price is the total margin available. Split it roughly 60/40 or 70/30 in favor of the buyer. On the Houston property above: $164,500 - $35,000 = $129,500 max contract price with no assignment fee. If you have it under contract at $115,000, there is $14,500 of margin. A $10,000 assignment fee leaves the buyer $4,500 of extra cushion beyond the standard 70% rule margin, which is fair.

Two more things about fees. First, your fee is negotiable. If a deal is tight and you need $5,000 instead of $10,000 to make it work for your buyer, take the $5,000. Five grand you close on beats ten grand you do not. Second, be transparent. The best buyer relationships are built on honesty about what you are making. Sophisticated investors know how wholesale works, and they respect wholesalers who bring honest deals.

Common MAO mistakes

These are the errors that lose money, kill deals, and damage your reputation with buyers. Every one of them is common, and every one of them is avoidable.

1. Using optimistic ARV to make the MAO work. If your offer does not work at a conservative ARV, the deal is not there. Do not stretch comps, cherry-pick the highest sale, or ignore the lower comps to inflate the ARV. Your buyer will run their own comps and they will see exactly what you did. Read how to run comps properly.
2. Underestimating repairs. A $35,000 rehab that turns into $55,000 wipes out the buyer's profit. Always scope repairs conservatively. If you are unsure about a line item, round up. Include a 10% contingency on every estimate.
3. Forgetting holding costs. Property taxes do not stop while the house is being renovated. Neither do insurance premiums, utility bills, loan payments, or HOA dues. On a $200,000 hard money loan at 12% interest, holding costs are $2,000/month just for the loan. A 5-month flip adds $10,000 in interest alone.
4. Ignoring closing costs on both sides. Your buyer pays closing costs when they buy the property from you. They pay them again when they sell the finished product. Title fees, escrow, transfer taxes, and real estate commissions on the resale side add 8-10% across both transactions. On a $235,000 ARV, that is $19,000-$23,500 in closing costs alone.
5. Using the wrong formula for the wrong buyer. Sending a flip MAO to a landlord means you are leaving $30,000-$80,000 on the table. Sending a rental MAO to a flipper means the deal does not work for them. Know your buyer's exit strategy before you set your offer price.
6. Treating MAO as a fixed number. Your MAO should be a range, not a single point. Know your walk-away price (the tightest acceptable number) and your target price (where you'd like to land). Negotiate within that range based on what you learn about the seller's situation.

Putting it all together

The MAO formula is not complicated math. It is discipline. It is the willingness to run the numbers honestly, account for every cost, and walk away when the deal does not work. The wholesalers who build sustainable businesses are the ones whose MAO calculations hold up under scrutiny, deal after deal.

Start with the 70% rule as your gut check. Then run the expanded formula with your specific buyer's profit requirements, real holding cost estimates, and actual closing cost percentages. Calculate the MAO for each exit strategy so you know what the property is worth to each type of buyer. And never, ever fudge the numbers to make a deal work on paper that does not work in reality.

For a deeper dive into the full deal analysis process, from comps to repairs to offer strategy, read the complete guide to analyzing wholesale deals.

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