What is MAO in Real Estate?
MAO (Maximum Allowable Offer) is the highest price an investor can pay for a property and still make their target profit after accounting for renovation costs, holding costs, selling costs, and their profit margin. It is the single most important number in wholesale deal analysis because it determines whether a deal works or not.
The MAO formula (70% rule)
The standard MAO formula used by wholesalers and flippers:
MAO = ARV x 70% - Repair Costs - Assignment Fee
ARV is the after-repair value. The 70% factor accounts for the buyer's profit margin, holding costs, financing costs, and selling costs. Repair costs are the estimated renovation expense. The assignment fee is the wholesaler's profit (omit this if you are the end buyer calculating your own MAO).
Example: ARV = $250,000, Repairs = $45,000, Assignment fee = $10,000.
MAO = $250,000 x 0.70 - $45,000 - $10,000 = $120,000
If the seller will accept $120,000 or less, the deal works. If they want more, either negotiate down or walk away.
Why 70%?
The 30% gap between ARV and the 70% factor covers: investor profit (10% to 15%), selling costs and agent commissions (6% to 8%), holding costs during renovation (3% to 5%), and financing costs if using hard money (2% to 4%). In competitive markets, some buyers work at 72% to 75%, accepting thinner margins for deal flow. In riskier markets, some use 65%.
MAO for different exit strategies
The 70% rule applies primarily to flip deals. For rental or BRRRR exits, investors use a different calculation based on rental income, cap rate, and cash-on-cash return targets. A property that does not work as a flip at 70% might work as a rental at 80% of ARV if the rental income supports positive cash flow. Deal Run calculates MAO across multiple exit strategies so you can evaluate a deal from every angle.