How to calculate maximum allowable offer?

Calculate your maximum allowable offer by multiplying the property's after-repair value (ARV) by your maximum investment percentage (typically 70%), then subtract all repair costs and additional expenses. This gives you the highest price you can pay while maintaining your target profit margin.

What is MAO maximum allowable offer?

MAO stands for Maximum Allowable Offer, which is the highest price a real estate investor should pay for a property to ensure profitability. It's calculated based on the property's after-repair value, renovation costs, and desired profit margin, serving as a ceiling price to avoid overpaying.

What is a MAO calculator?

A MAO calculator is a tool that helps real estate investors determine the maximum price they should offer on investment properties. It factors in the after-repair value, renovation costs, additional expenses, and desired profit margin to calculate a safe offer price that protects profitability.

How to calculate ARV wholesaling?

For wholesaling, calculate ARV by researching recent comparable sales of similar properties in renovated condition within the same neighborhood. Use properties sold within the last 3-6 months with similar size, features, and condition. The ARV represents what the property would sell for after a buyer completes all necessary repairs and improvements.

Maximum Allowable Offer (MAO) Calculator

Calculate the maximum price you should pay for an investment property to ensure profitability.

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How Maximum Allowable Offer (MAO) Calculator Works

The Maximum Allowable Offer (MAO) calculator helps real estate investors determine the highest price they can pay for a property while still maintaining their desired profit margin. It's based on the property's after-repair value (ARV) and accounts for all renovation costs and additional expenses.

This calculation is essential for house flippers, wholesalers, and buy-and-hold investors who need to quickly assess deals and make competitive offers. By setting a firm ceiling on what you'll pay, you avoid overpaying and protect your investment returns.

The calculator uses your maximum investment percentage (typically 70% of ARV for conservative investors) and subtracts all estimated costs to show your maximum offer. This ensures you maintain your target profit margin even if costs run higher than expected.

Maximum Allowable Offer (MAO) Calculator Formula Breakdown

Formula

Maximum Allowable Offer = (After Repair Value × Maximum Investment Percentage) - Repair Costs - Additional Costs

Variables Explained

After Repair Value (ARV)The estimated market value of the property after all repairs and renovations are completed. This is typically determined by researching comparable sales (comps) in the area of similar properties in renovated condition. Real estate agents, appraisers, and market analysis tools can help establish accurate ARV estimates.
Maximum Investment PercentageThe percentage of the ARV you're willing to invest, typically 70% for conservative investors following the '70% rule.' This percentage can be adjusted based on your risk tolerance, market conditions, and investment strategy. More aggressive investors might go up to 80-85% in hot markets.
Repair CostsThe total estimated cost for all renovations, repairs, and improvements needed to bring the property to its target condition. This includes materials, labor, permits, and contractor fees. It's wise to add a 15-20% contingency buffer for unexpected issues.
Additional CostsAll other expenses associated with the investment, including closing costs, holding costs (utilities, taxes, insurance), financing costs, legal fees, and any other miscellaneous expenses during the renovation period.

Example Calculation

Given:

After Repair Value (ARV): $300,000
Maximum Investment Percentage: 70%
Repair Costs: $50,000
Additional Costs: $10,000

Calculation:

Maximum investment amount: $300,000 × 70% = $210,000
Total costs to deduct: $50,000 + $10,000 = $60,000
Maximum Allowable Offer: $210,000 - $60,000 = $150,000

Result:

$150,000

Explanation

This example shows a typical house flip scenario where an investor finds a property worth $300,000 after renovations. Using the conservative 70% rule and accounting for $60,000 in total costs, the maximum offer should be $150,000 to maintain profitability and risk management.

Tips for Using Maximum Allowable Offer (MAO) Calculator

💡Always add a 15-20% contingency buffer to your repair cost estimates to account for unexpected issues like hidden structural problems, permit delays, or material cost increases.
💡Research comparable sales (comps) from the last 3-6 months in the immediate area to get an accurate ARV estimate, and consider current market trends that might affect future values.
💡In competitive markets, consider whether you can accept a lower profit margin to win deals, but never compromise your minimum acceptable return on investment.

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