MAO — Maximum Allowable Offer — is the highest price you can pay for a property and still leave enough profit for your cash buyer plus your assignment fee.
The formula
MAO = (ARV × 0.70) − Estimated Repairs − Your Assignment Fee
Example: ARV $250,000, repairs $45,000, your fee $12,000.
- $250,000 × 0.70 = $175,000
- $175,000 − $45,000 = $130,000
- $130,000 − $12,000 = $118,000 MAO
That $118,000 is the ceiling you can pay. Your opening offer should sit 8–15% below it so you have room to negotiate up.
What the 30% actually covers
New wholesalers assume the 30% is pure profit for the flipper. It isn't. It covers:
- Purchase closing costs (1–2% of price)
- Holding costs — insurance, taxes, utilities, loan interest at 10–13% for 5–7 months
- Selling costs — agent commission 5–6%, seller concessions 1–3%
- Rehab overruns, which happen on roughly two-thirds of projects
- The flipper's actual profit, typically 10–15% of ARV
Once you list those out, 70% stops looking greedy.
When 70% is wrong
Break it lower (60–65%) when:
- The rehab is a full gut, structural, or has foundation/fire damage
- The market is softening or renovated comps sit 90+ days
- The property is rural, unique, or has no clean comps
Break it higher (75–80%) when:
- ARV is above ~$400,000 — a fixed 30% spread becomes enormous in dollar terms; flippers there work on 15–20% margins
- The buyer is a landlord or BRRRR investor, not a flipper. Their math is rent-driven, not resale-driven, and they routinely pay 75–80% minus repairs
- Repairs are cosmetic only (paint, carpet, fixtures, under $15k) and the house is fully functional
- You're in a low-price market where a 30% spread is only $30k and the flipper's fixed costs eat it
The landlord version of MAO
For a rental buyer, price is set by cash flow, not resale:
Landlord MAO ≈ (Monthly rent × 12 × 0.55) ÷ target cap rate − repairs
At $1,400 rent and an 8% target cap: (16,800 × 0.55) ÷ 0.08 = $115,500 − repairs. Run both formulas and offer against whichever buyer you actually have.
Offer mechanics that matter more than the formula
- Never lead with your MAO. Lead 10–15% under and let the seller counter.
- Anchor with the repairs. Walk the seller through the roof, HVAC, and kitchen numbers before you say a price.
- Offer two options. "I can do $105,000 cash, close in 14 days, you take nothing with you — or $122,000 if you can wait 60 days and clear it out." Choice converts far better than a single number.
- Write down the seller's motivation — timeline, payoff, and what they're doing next. That's what tells you whether the number is negotiable at all.
The sanity check before you sign
If your assignment fee is more than 5% of ARV on a sub-$200k house, expect pushback from your buyer. If your MAO is above 75% of ARV minus repairs and your buyer is a flipper, you're probably holding a contract nobody will take.