A maximum allowable offer is the highest purchase price supported by your resale estimate, costs, and required profit.
Frequently asked questions
What is the Max Allowable Offer (MAO)?
Max Allowable Offer (MAO) is the highest price an investor should pay for a property and still hit a target profit after all costs. It's the line between a deal and a money-losing mistake. The classic formula is the 70% rule: MAO = (ARV × 0.70) − rehab. The 30% spread is the buffer that has to absorb every cost the seller doesn't see — closing, financing, holding, selling, and your own profit margin.
How do you calculate the 70% rule?
The 70% rule says: never pay more than 70% of the After Repair Value (ARV) minus rehab costs. Example: a $300,000 ARV property needing $40,000 in rehab → MAO = ($300,000 × 0.70) − $40,000 = $170,000. That's the highest you can offer and still leave room for closing, financing, holding, and profit. In hot markets some flippers stretch to 75–80%; in soft or unfamiliar markets, drop to 65% to be safe.
What's the difference between MAO and a 'safe' offer?
MAO is your hard ceiling — pay one dollar more and the deal stops penciling. A safe offer sits 5–15% below MAO to absorb the things you can't predict: rehab overruns, ARV softening, longer holds, surprise capex. Pros call this the 'investor safe price'. Submit your safe offer first; only walk MAO up if a counter-offer forces it AND your numbers still work after a fresh stress test.
Why does the 70% rule fail in some markets?
The 70% rule is a national-average heuristic — it doesn't know your market. It fails when: (1) ARVs are appreciating fast enough that 70% is below market and no seller will accept; (2) rehab costs are atypically high (heavy structural / historic restorations) and the 30% spread can't cover them; (3) days-on-market are unusually long and your holding costs balloon. In those cases, run the full MAO formula (this calculator) instead of the shortcut — it backs into your actual desired-profit number from the actual cost stack.
What desired profit should I target on a flip?
Most experienced flippers target $25,000–$50,000 net profit per deal as a minimum, scaling up with deal size. As a percentage: 10–15% of ARV is the common floor; below 10% is too thin to absorb a single bad surprise. Lower targets are common only on (a) wholesale assignments where you're not taking the rehab risk, or (b) repeat-volume operators with crews on payroll. If your target profit drops below $20K, the deal isn't worth the time and risk — pass and find another.