MAO Calculator — Maximum Allowable Offer
Find the highest price you can pay for a deal while hitting your profit target, using either the percentage rule or a direct profit calculation.
Deal Parameters
Hot markets: 65% · Average: 70% · Slow markets: 75%
Max Allowable Offer
Enter ARV and rehab cost to calculate MAO.
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How this works
The MAO formula is simple: (ARV × Rule%) − Rehab Costs. The rule percentage (typically 70%) creates a buffer that covers your profit, closing costs on both ends, holding expenses, and unexpected overruns. It's not precise — it's a fast sanity check.
Adjusting the rule for your market: In highly competitive, fast-moving markets use 65%. In stable markets with moderate competition, the classic 70% works. In slower markets where you have pricing leverage, 75% can be appropriate — but only if your rehab scope is locked in and your exit timeline is realistic.
The profit-target method flips the calculation: instead of a percentage rule, you define exactly how much profit you need and subtract it from the ARV along with rehab costs. This is more precise but requires you to separately account for transaction costs (typically 3–5% of ARV on each side).
Use both outputs together. If the profit-target MAO is significantly higher than the rule-based MAO, the rule is protecting you — and you should trust it. If they're close, the deal's numbers are probably tight enough to proceed carefully.
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Frequently Asked Questions
What does MAO stand for?
MAO stands for Maximum Allowable Offer — the highest price you should pay for a property to still make your target profit after rehab, holding costs, and transaction expenses.
When should I use 65% instead of 70%?
Use a lower percentage in hot markets where properties move quickly and ARVs are more certain. Paradoxically, tighter competition means you need a wider margin to absorb bidding risk and unexpected costs.
When is 75% appropriate?
In slower markets with longer days-on-market and more price negotiation room, 75% can work — especially if you have very tight rehab estimates, low holding costs, or a pre-arranged buyer.
Does the MAO calculator include transaction costs?
The rule-based MAO implicitly bakes in a cushion for transaction costs (the gap between 70% and 100%). The profit-target method does not — you should manually subtract an estimated 3–5% of ARV for closing costs on both sides.