Maximum Allowable Offer (MAO)
The highest price an investor can pay for a property and still achieve their target profit.
Definition
Maximum Allowable Offer (MAO) is the highest price an investor should offer for a property to still hit their profit target after all costs. The classic formula: MAO = (ARV × Investment Factor) − Rehab Costs − Closing Costs − Holding Costs.
The 70% Rule is a simplified version: MAO = (ARV × 0.70) − Rehab Costs. This formula has been the industry standard for flippers for decades — it's easy to calculate quickly and provides a rough margin cushion for unexpected costs.
The '70%' factor isn't fixed. In high-cost markets with thin margins, flippers use 60–65%. In slower markets where ARVs are harder to achieve, they may require 65%. The key is that the formula's output ensures your profit target after ALL costs — you should actually calculate in every real cost (purchase closing, rehab, holding, selling) rather than relying on a single percentage shortcut.
Related Terms
After Repair Value (ARV)
The estimated market value of a property after all renovations are completed.
Fix and Flip
Buying a distressed property, renovating it, then selling it quickly for a profit.
Rehab Costs
The total estimated cost to renovate a property, including materials, labor, permits, and contingencies.
Comparable Sales (Comps)
Recent sales of similar properties used to estimate the market value of a subject property.
Wholesaling
Finding distressed properties, getting them under contract, then selling that contract to another investor for a fee.
Also in "M"
Market Value
The price a property would sell for in a competitive market between a willing buyer and seller.
Mortgage
A loan used to purchase real property, secured by the property itself as collateral.
Multifamily Property
A residential building containing two or more housing units — from duplexes to large apartment complexes.