MAO Calculator

MAO stands for Maximum Allowable Offer -- the highest price you can pay for a property and still leave enough room for your buyer to profit, your assignment fee, and a cushion for the unknowns that always surface during renovation. The MAO calculator in Deal Run takes your ARV and repair estimate, applies a discount strategy, factors in financing and holding costs, and gives you a number you can take into a seller negotiation with confidence.

The 70% rule

The 70% rule is the foundation of wholesale and flip deal analysis. It states:

MAO = ARV x 70% - Repairs

The logic is straightforward. If a property will be worth $240,000 after repairs (the ARV), a flip buyer needs to purchase it at a low enough price to cover their repair costs, closing costs on both the buy and sell sides, holding costs during renovation, and still make a profit. The 30% discount from ARV is designed to cover all of those costs and leave a reasonable return.

Using our example numbers:

• ARV: $240,000
• 70% of ARV: $168,000
• Repairs: $40,000
• MAO = $168,000 - $40,000 = $128,000

This means the most you should pay for the property is $128,000. If you can get it under contract at $115,000, the $13,000 difference is your assignment fee. If the seller will not go below $140,000, the deal does not work at the 70% rule because your buyer would need to pay more than the MAO, squeezing their profit margin to an unacceptable level.

The 70% rule is a useful shorthand, but it is a simplification. It does not account for market-specific closing costs, variable holding periods, or the difference between cash and financed buyers. That is why Deal Run provides a more detailed calculator with four strategy tiers and adjustable assumptions.

Deal Run's four-strategy MAO

The MAO calculator page presents four MAO numbers, each representing a different risk tolerance and market assumption. All four use the same formula (ARV x Discount % - Repairs) but with different discount percentages.

Conservative (65%)

The conservative MAO leaves the most room for your buyer. Use this when your comp analysis has uncertainty -- maybe you had to expand the radius beyond 1 mile, use comps older than 6 months, or apply large adjustments. The extra 5% cushion (compared to standard) translates to $12,000 on a $240K ARV property, which can absorb a comp miss or unexpected repair discovery without killing the deal.

Conservative pricing also makes sense in declining or flat markets where homes are sitting on the MLS for 60 or more days. In these conditions, the buyer faces the risk that the ARV will be lower by the time they finish renovation, and they need extra margin to absorb that risk.

Standard (70%)

This is the industry default and the starting point for most deal analyses. The 70% rule works in stable markets with moderate repair scopes where your ARV is supported by 3 or more comparable sales within 0.5 miles and 6 months. Most experienced flip buyers evaluate deals at 70% and expect to see a 15-25% return on their total investment.

Aggressive (75%)

The aggressive MAO reduces the buyer's margin but may be justified in specific conditions. Use 75% when repair costs are low (cosmetic-only rehab under $20,000), your ARV is backed by very tight comps (same floor plan, same subdivision, sold within 2 months), and the market is active with homes selling in under 30 days. At 75%, the buyer's profit margin is thinner, so you are targeting experienced investors who can move fast and keep their renovation costs tight.

Stretch (80%)

The stretch MAO is the most aggressive pricing and should be used rarely. It works only for properties that need almost no work (paint, carpet, clean) in rapidly appreciating markets where the ARV at the time of resale will likely be higher than the ARV at the time of purchase. At 80%, the buyer's profit margin is minimal if anything goes wrong -- cost overrun, extended holding period, or market softening. Most wholesale buyers will not purchase at 80% unless they are local operators with their own crews and very low renovation costs.

How MAO connects to assignment fee

Your assignment fee is the difference between what you put the property under contract for (your contract price with the seller) and what you assign the contract for (the marketing price to the buyer).

Assignment Fee = Marketing Price - Contract Price

The MAO is your ceiling for the contract price. If the standard MAO is $128,000, that is the most you should pay. Your marketing price to buyers is typically equal to or slightly below the MAO, depending on market demand. If you got the property under contract at $115,000, you might market it at $125,000 to $128,000, giving you a $10,000 to $13,000 assignment fee.

Deal Run displays the implied assignment fee on the MAO calculator page based on your contract price (which you enter when you create the deal) and the selected MAO strategy. If you have not entered a contract price yet, the calculator shows the MAO as the marketing price and prompts you to add the contract price to see the assignment fee.

Financing assumptions

The MAO calculator includes a financing section that models the buyer's cost of capital. This matters because financed buyers have higher total costs than cash buyers, which means they need a lower purchase price to achieve the same return.

Hard money loan defaults

Deal Run's default hard money assumptions reflect common terms available to fix-and-flip investors:

• Interest rate: 12% annually (1% per month). This is the standard rate for hard money loans on investment properties. Rates range from 10% to 14% depending on the borrower's experience, the property's condition, and the lender's risk assessment.
• Origination points: 2 points (2% of loan amount). Points are upfront fees charged by the lender at closing. Two points on a $100,000 loan is $2,000 paid at closing. Points range from 1 to 3 depending on the lender and loan terms.
• LTV (Loan-to-Value): 80%. The lender finances 80% of the purchase price. The buyer brings 20% as a down payment plus all repair costs. Some lenders also finance a portion of repairs, but Deal Run's default assumes all repairs come from the buyer's cash.

You can adjust all three of these assumptions on the calculator page. If you know your buyers typically use a lender offering 10% interest with 1 point at 75% LTV, entering those numbers gives you a more accurate picture of their total cost and therefore a better sense of what marketing price they will accept.

Cash buyer scenario

The calculator also shows a cash buyer scenario with no financing costs. Cash buyers avoid interest payments, points, and the closing costs associated with obtaining a loan (appraisal, lender title policy, etc.). This means a cash buyer's total cost is lower, their profit is higher, and they can afford to pay more for the same deal. Deal Run displays both scenarios side by side so you can see the MAO from each perspective.

Holding costs built into MAO

The 70% rule implicitly assumes a certain holding cost structure. Deal Run makes this explicit by breaking out estimated monthly holding costs that accumulate during the renovation and listing period.

• Property taxes: Monthly portion of the annual tax bill, pulled from the property detail data.
• Insurance: Builder's risk or vacant dwelling policy, estimated at $100 to $200/month.
• Utilities: Electric, water, and gas during renovation, estimated at $150 to $300/month.
• Loan interest: Monthly interest on the hard money loan (only for financed buyers). At 12% on a $102,400 loan, this is $1,024/month.
• HOA dues: If applicable, pulled from property data or entered manually.

The default holding period is 6 months: approximately 3 to 4 months for renovation and 2 to 3 months for listing and closing. You can adjust this from 3 to 12 months using the slider. Each additional month of holding costs reduces the buyer's profit and may require a lower MAO to make the deal attractive.

Deal Run calculates total holding costs and subtracts them from the buyer's profit estimate on the exit strategy page. The MAO calculator shows the total holding cost number so you can see its impact on the overall deal economics.

Using the interactive slider

The centerpiece of the MAO calculator page is an interactive slider that lets you continuously adjust the ARV discount percentage from 60% to 85%. As you drag the slider, every number on the page updates in real time:

• The MAO price
• The implied assignment fee (if a contract price is entered)
• The buyer's estimated gross profit
• The buyer's estimated net profit (after closing costs, holding costs, and financing)
• The buyer's estimated ROI (return on investment)
• The total holding cost over the assumed period

The slider has color-coded zones to give you immediate visual feedback. The green zone (60-70%) indicates conservative to standard pricing where buyer profit margins are healthy. The yellow zone (70-78%) indicates standard to aggressive pricing where margins are adequate but thinner. The red zone (78-85%) indicates stretch pricing where buyer margins are slim and the deal may be difficult to assign.

Use the slider to find the balance point where your assignment fee is worth your time and effort (typically $5,000 to $15,000 for a standard deal) and your buyer's net profit is high enough to attract offers within the first week of marketing (typically $25,000 or more for a flip buyer, or 15%+ ROI).

Common MAO mistakes

Avoid these errors that lead to deals that cannot be assigned or assignment fees that evaporate:

• Using AVM instead of ARV. The AVM is a computer-generated estimate that does not account for condition. Your MAO should always be based on a comp-supported ARV. An AVM-based MAO will be unreliable.
• Forgetting closing costs. The 70% rule accounts for buyer closing costs on both the purchase and sale. If you add closing costs on top of a 70% MAO, you are double-counting them and pricing the deal too conservatively.
• Underestimating repairs. The MAO formula subtracts repairs directly from the discounted ARV. If your repair estimate is $30,000 but the actual cost is $45,000, your buyer loses $15,000 in profit. Use the AI repair estimate with adequate contingency, and if you have not physically inspected the property, add extra cushion.
• Ignoring holding costs in thin deals. On a deal with a $30,000 gross margin, 6 months of holding costs at $2,500/month consumes $15,000 -- half the margin. Thin deals are extremely sensitive to holding period length.