How do you calculate the maximum allowable offer (MAO)?
Multiply the ARV by the percentage your buyers need, usually around 70%, then subtract the repair costs and your wholesale fee. That number is the most you can offer the seller and still leave room for the buyer and for yourself.
Check the percentage with your actual buyers. A buyer who wants a larger margin in your market will pay less, and your maximum offer drops with it.
Always recalculate if the repair estimate changes after a walkthrough.
Common mistakes
- Leaving out your own fee, so the offer works for a buyer but leaves nothing for you.
- Guessing repairs low. A repair estimate that is $15,000 short comes straight out of the buyer’s margin.
- Ignoring holding and closing costs that a flipper will subtract from what they can pay.
- Treating MAO as the opening offer. It is the most you can pay; start lower and negotiate.
More questions
Should I include closing costs in MAO?
The percentage usually covers the buyer’s costs, but subtract any unusual costs you know about, such as back taxes or a large association balance. Your own costs come out of your fee.
Is MAO the same for every buyer?
No. Landlords and flippers value deals differently, and some buyers accept a higher percentage. Use the percentage of the buyer most likely to close.
How do I explain MAO to a seller?
Walk through the repairs and what investors pay for renovated homes, without pressuring them. Many sellers understand a lower price once they see the repair list.