MAO Formula for Real Estate Investors (+ Free Deal Calculator)

If you're serious about making money in real estate, you can't afford to guess on your offers. Whether you're flipping, wholesaling, or building a rental portfolio, learning the MAO formula is one of the most important skills you'll develop as an investor.

The MAO formula, short for Maximum Allowable Offer, is the number that keeps your deals profitable. It's how smart investors reverse-engineer their offers to make sure there's room for repairs, holding costs, and profit before they lock up a deal.

To make your life easier, we’ve included a FREE downloadable Deal Calculator in this guide so you can plug in numbers and instantly calculate your MAO on any property.

Here’s what we’ll cover in this complete guide to the MAO formula:

• What Is the MAO Formula in Real Estate?
• The MAO Formula Breakdown
• How to Calculate MAO Step-by-Step
• 5 Common MAO Formula Mistakes Investors Make
• MAO Formula Example
• How Do You Calculate MAO In Wholesaling?
• Can You Use The MAO Formula For House Flipping?
• How To Create A Maximum Allowable Offer Spreadsheet
• FAQ: MAO Formula in Real Estate
• Final Thoughts on the MAO Formula

If you’re serious about doing your first real estate deal, don’t waste time guessing what works. Our FREE Training walks you through how to consistently find deals, flip houses, and build passive income—without expensive marketing or trial and error.

This FREE Training gives you the same system our students use to start fast and scale smart. Watch it today—so you can stop wondering and start closing.

What Is the MAO Formula in Real Estate?

If you're in the business of flipping houses, wholesaling properties, or building a rental portfolio, you’ve got to know your numbers, and it all starts with the MAO formula. This formula tells you the highest price you can offer on a deal while still hitting your profit goals.

It’s not a guess. It’s a proven calculation that keeps you from overpaying and helps you reverse-engineer smart offers based on the after-repair value (ARV), estimated rehab costs, and your target return. In other words, it’s your deal filter.

Say you’re looking at a fixer-upper that should sell for around $250,000 after renovations. If it’s going to take about $40,000 to get it market-ready, and you want enough margin to make the deal worth it, you'd aim to buy it at 70% of the ARV minus those repair costs.

MAO = $250,000 × 70% – $40,000 = $135,000

In this case, $135,000 is the most you’d offer. Anything higher starts eating into your margin, which is the fastest way to turn a good deal into a bad one. Stay disciplined, and this formula will keep your deals profitable and predictable.

The MAO Formula Breakdown: ARV × % – Repairs = Offer

The MAO formula is simple math, but each part of the equation plays a critical role in making sure your offer works. Let’s break it down:

• ARV (After-Repair Value): This is what the property should realistically sell for after it’s fully renovated. You get this number by analyzing comps, similar homes that recently sold in the same area.
• Discount Percentage (%): Investors usually multiply the ARV by 70% (or sometimes 65%–80%) to leave room for profit, closing costs, holding expenses, and unexpected surprises.
• Repairs: This is your estimated cost to fix up the property and get it to that ARV. It includes labor, materials, permits, and anything else needed to bring the property up to market value.

So when you put it all together, here’s what the full formula looks like:

MAO = ARV × 70% – Repairs

How to Calculate MAO Step-by-Step

It’s one thing to know the MAO formula, but to use it effectively, you need to understand what each part actually represents. These are the four numbers that really drive your offer:

1. After Repair Value (ARV): Start by figuring out what the property will realistically sell for once it’s fixed up. Pull recent comps in the neighborhood (similar size, layout, and condition) to come up with a solid ARV.
2. Rehab/Repair Costs: Walk the property, take photos, and build a scope of work. Don’t guess — create a line-by-line estimate that includes labor, materials, permits, and a buffer for surprises.
3. Fixed Costs: These are your transactional and holding expenses; think closing costs, insurance, utilities, property taxes, financing costs, and agent commissions when it’s time to sell.
4. Desired Profit: This is your target return. Most flippers shoot for at least 10%–20% of ARV as profit. Wholesalers build in their assignment fee here, too.

Now let’s plug it all in. Say you’re looking at a deal with the following numbers:

• ARV: $300,000
• Rehab Costs: $45,000
• Fixed Costs: $25,000
• Desired Profit: $30,000

MAO = $300,000 – $45,000 – $25,000 – $30,000 = $200,000

That $200,000 is your ceiling. It’s the most you can offer the seller while still covering your costs and hitting your profit target.

Download Our Free MAO Calculator (PDF)

If you don’t want the hassle of running the numbers by hand (or worse, second-guessing whether your offer actually makes sense), we’ve got you covered. Use our FREE Real Estate Deal Calculator to plug in your ARV, repair costs, fixed expenses, and target profit, and it’ll spit out your MAO automatically.

This downloadable PDF is perfect for wholesalers, flippers, and anyone who wants to move fast and stay accurate when analyzing deals.

Our free real estate deal calculator factors in everything you need to calculate your Maximum Allowable Offer, from ARV and repair costs to fixed expenses and your desired profit. No guessing, no spreadsheets, just clean numbers. But if you’re the kind of investor who likes to understand what’s going on behind the scenes, let’s break down each part of the MAO formula so you know exactly how your offer comes together.

Calculating After Repair Value (ARV)

Calculating the ARV or “after repair value” is vital in determining the MAO.

The most effective way to calculate the estimated ARV for any given property is by conducting extensive market research in the subject property’s surrounding neighborhood. Typically, that will include scoring the surrounding market for comps and reaching out to appraisers, lenders, real estate agents, and market experts.

In doing so, the investor will come up with a ballpark price for houses of similar size and make-up. Thus, while embarking on this research-driven journey, the buyer will slowly get a better sense of what to expect after he or she purchases the property and conducts the rehab.

As an aside, have an idea of the scope of work you will be conducting on the home as you do your research. It is a waste of time to conduct research on five-bedroom homes with garages if you are planning on converting a two-bedroom house into a three-bedroom house with a carport.

Be specific in your search to get a true sense of what your finished product will look like and what comparable properties cost.

Although it's not an exact science, working smarter and more efficiently will reduce mistakes and free up more time for more real estate investments.

Calculating Repair Costs

Repair costs can include anything from the cost of hiring a plumber to the cost of a bucket of paint. Costs will be entirely dependent on the scope of work you’ll be performing and the state of your property.

The key to estimating repair costs appropriately is determining the materials and man-hours you’ll need to get the job done.

First, I’d recommend walking through the property.

It’s very difficult to get an idea of what work needs to be done from just pictures and videos. Looking under the hood is essential in creating an appropriate budget.

Then, I’d write down all the items you’d like to get fixed and adjusted. Every last detail is vital in this stage. For example, write down how many lightbulbs you’ll need, how many rooms you’d like to get painted, if the driveway needs repaving, or if you’ll need to order another vanity set.

If you want to flip a house, you must be scrupulous with expenses. Flippers spare no details.

Next, you’ll want to call as many contracting companies as possible.

Get 3-4 different quotes for your painter, head over to a few different stores to pick out an appropriate vanity set, and get an idea of how long each task will take.

Then, when you’ve finally jotted down the full breadth of work you’ll be performing, add another 15% - 20% to the overall cost.

This is known as the margin of safety or a contingency buffer.

There are always issues that emerge throughout the process that you might not be aware of. Perhaps a pipe bursts, or you find mold eroding the drywall from within.

As a rule of thumb, anything can happen when flipping houses. Budget accordingly.

Calculating estimated repair costs usually takes a little bit of experience, but if you are a novice investor, don’t get discouraged. With some trial and error, research, and practice, you’ll get the hang of it pretty quickly.

Determining Fixed Costs

Fixed costs are any costs that aren’t variable.

Variable costs would include rehab and repair costs mentioned in the prior section, whereas fixed costs would include real estate agent fees, title fees, holding costs, taxes, insurance, and utilities associated with carrying the property.

It is imperative to do your research and determine the fixed costs associated with any given project. Speaking to Realtors could be a great way to learn about typical fixed costs for a property of similar size.

If you anticipate you’ll hold the property for a total of three months – two for repairs and one for selling – you’ll need to budget the costs accordingly.

Over the span of working on the property, you’ll have to pay for holding costs, real estate taxes, and utilities such as electricity and gas.

Over the span of selling the property, you’ll have to pay real estate agent fees, closing costs, attorney fees, title search fees, and maybe even Homeowners Association (HOA) costs and lender fees.

Take the time to understand your market and the level of expenses you should expect. The last thing you want is to buy a property expecting to rake in $10,000 in cash flow, only to realize after the fact that half of that is going to go to fixed costs.

Your Desired Profit

Lastly, after you've calculated the repair and fixed costs, we come to the crux of the MAO formula – your anticipated profit. This is the key component that is entirely at the discretion of the flipper.

Are you aiming for a profit of $10,000? Incorporate that into your calculations. Maybe you're seeking a higher margin, say $15,000? Use that figure instead.

The goal here is to determine a profit number that makes sense to you. Remember, as your desired profit increases, your MAO correspondingly decreases. Conversely, the more flexible you are with your profit margin, the more appealing your offer becomes in a competitive market.

Striking the right balance is crucial in your house-flipping venture. And, once you've found your sweet spot, you're ready to dive into the exciting world of real estate investing.

*For in-depth training on real estate investing, Real Estate Skills offers extensive courses to get you ready to make your first investment! Attend our FREE Webinar Training and gain insider knowledge, expert strategies, and essential skills to make the most of every real estate opportunity that comes your way!

5 Common MAO Formula Mistakes Investors Make

The MAO formula is a powerful tool, but like any formula, it’s only as accurate as the numbers you put into it. Here are five common mistakes investors make when using MAO, and how to avoid them:

1. Overestimating the ARV
   

   Relying on overpriced comps or hot market hype can inflate your ARV and throw off your entire offer. For example, assuming a property will resell for $350,000 when the actual comp average is $310,000 could destroy your margin.

   Quick fix: Stick to recently sold comps within a half-mile radius. Use 3–5 real data points, not Zillow guesses or best-case scenarios.

2. Underestimating Repair Costs
   

   This is one of the most common real estate investor errors. Missing hidden issues like foundation cracks, electrical upgrades, or plumbing problems can sink a deal. What you thought was a $25K rehab might turn into $50K fast.

   Quick fix: Walk every property, take detailed notes, and build a line-item scope of work. Add a 10–15% buffer for unexpected costs.

3. Leaving Out Fixed Costs
   

   Many investors focus only on ARV and repairs, and forget about holding costs, utilities, taxes, insurance, and selling fees. Ignoring these eats into your profit fast.

   Quick fix: Always include estimated closing costs, monthly overhead, and realtor commissions in your MAO calculation.

4. Skipping the Profit Margin
   

   Some new investors fall in love with a deal and squeeze their margin just to “make it work.” That mindset leads to razor-thin profits — or losses.

   Quick fix: Set a non-negotiable profit target (like 15%–20% of ARV). If the deal doesn’t work at that number, walk away.

5. Failing to Adjust for Market Conditions
   

   If you're using the same MAO formula in every market, you’re doing it wrong. A 70% rule might be too low in competitive areas — or too risky in slow ones.

   Quick fix: Stay flexible. Adjust your investor discount (e.g., 65%–80%) based on local demand, inventory, and deal type.

MAO Formula Example

Let's walk through a simple example to understand how the MAO formula works in a real-world scenario.

Suppose you've identified a potential investment property. Here's what you've estimated:

1. After Repair Value (ARV): You've researched comparable sales and determined that the property, after being fully repaired and renovated, will have an estimated market value of $300,000.
2. Fixed Costs: These include costs like closing fees, holding costs (property taxes, insurance, utilities), and any loan payments. Let's assume these total $20,000.
3. Rehab Costs: After a thorough property inspection and taking quotes from contractors, you estimate that it will cost $50,000 to repair and renovate the property to reach the desired ARV.
4. Desired Profit: You aim to make a profit of $40,000 on this deal.
5. Using the MAO formula, here's how you'd calculate your Maximum Allowable Offer:

$300,000 (ARV) - $20,000 (Fixed Costs) - $50,000 (Rehab Costs) - $40,000 (Desired Profit) = $190,000 (MAO)

So, according to the MAO formula and your desired profit, the highest price you should offer for this property is $190,000.

MAO Formula vs. Other Offer Strategies

There are plenty of ways investors try to come up with offers — some good, some risky. Let’s break down how the MAO formula stacks up against other common pricing strategies used in real estate investing.

Pros & Cons of the MAO Formula

Like any investing strategy, the MAO formula has its strengths and trade-offs. But if you’re looking for consistency and built-in protection, here’s what sets it apart:

How Do You Calculate MAO In Wholesaling?

Wholesaling is the act of contracting a home from a motivated seller and simultaneously finding a different buyer for the same home at a slightly higher price. Typically, wholesalers look to flip contracts on attractive investment opportunities and distressed properties. In doing so, they retain a small fee.

The beauty of the MAO formula is that it can be applied to wholesaling real estate deals as well.

Instead of calculating the formula as After Repair Value (ARV) – Fixed Costs – Rehab Costs – Desired Profit/Equity, a wholesaler would simply add their fee to the equation and bake it into the value of the property. Thus, the formula would look a little like this:

After Repair Value (ARV) – Fixed Costs – Rehab Costs – Desired Profit or Equity – Wholesale Fee = MAO

By backing in his or her desired profit, the wholesaler ensures the price of the house offered results in a good deal for both the wholesaler and the buyer. Keep that in mind as you cold-call prospective clients to kick off your wholesale business. Now, let's go over an example together!

Let's assume that the After Repair Value (ARV) of a property you're interested in wholesaling is $250,000. You've estimated the repair costs to be $30,000, and you've set aside $20,000 for fixed costs (closing costs, holding costs, etc.). Your desired profit is $15,000, and you plan to charge a wholesale fee of $10,000.

The formula would look like this:

$250,000 (ARV) – $30,000 (Repair Costs) – $20,000 (Fixed Costs) – $15,000 (Desired Profit) – $10,000 (Wholesale Fee) = MAO

So, $250,000 - $30,000 - $20,000 - $15,000 - $10,000 = $175,000

Based on these numbers, the Maximum Allowable Offer (MAO) you could make while still ensuring your desired profit and covering all costs and fees, would be $175,000. If you can acquire the property at this price or lower, you're in a good position to hit your investment goals.

Success Story: How Roxy Virtually Wholesaled 8 Houses & Made $45k Within 90 Days!

Does the MAO Formula Work For House Flipping?

Absolutely, the MAO formula is an excellent tool for house flippers!

Just like the 70% Rule often used in house flipping, the MAO formula serves as a comprehensive guide for investors. It takes into account all potential costs associated with flipping a house and ensures you make a satisfactory profit in the end.

Let's illustrate this with an example.

Assume you've found a potential house to flip. Based on your calculations and market analysis, the figures are as follows:

1. After Repair Value (ARV): After comparing similar properties and their selling prices, you estimate the house will be worth $350,000 once you've finished renovations.
2. Fixed Costs: These costs encompass all the unavoidable expenses, such as closing costs, holding costs (e.g., property taxes, insurance, utilities), and any mortgage payments. In this case, let's say they amount to $25,000.
3. Rehab Costs: After assessing the property and getting estimates from contractors, you predict the renovation will cost around $60,000.
4. Desired Profit: You want to make a profit of at least $45,000 from this flip.

Now, let's plug these numbers into the MAO formula:

$350,000 (ARV) - $25,000 (Fixed Costs) - $60,000 (Rehab Costs) - $45,000 (Desired Profit) = $220,000 (MAO)

So, in this case, your Maximum Allowable Offer for this house flip would be $220,000. Anything more, and you'd risk not achieving your desired profit.

Remember, the MAO formula is a critical tool for house flipping because it ensures you consider all the financial factors before jumping into a deal. It helps you set a price limit on your property purchase, protecting you from overbidding and guaranteeing your profitability.

How To Create A Maximum Allowable Offer Spreadsheet

Creating a step-by-step spreadsheet is a fantastic way to keep costs controlled throughout your research and renovation journey.

Although the investor can tailor the spreadsheet to his or her needs and desires, the gist of it will be the same from one investor to the next.

For example, all MAO spreadsheets will include a section for the estimated after-repair value, a section for renovation costs, a section for fixed costs, and a section for desired profit. In the end, the spreadsheet should compute an MAO that is best suited given the provided inputs.

Below we’ve included a sample MAO spreadsheet. In theory, you’d have one spreadsheet for each property you are analyzing.

Based on the spreadsheet above, the MAO for this particular property would be $119,050.

Keep in mind, the MAO is not an exact science. Just because I put $150,000 as the ARV doesn’t mean I’ll fetch that offer. Each line item is an estimation, so it might be better to create a sensitivity table to determine the MAO given a large variety of inputs.

For example, I should know the MAO if the ARV comes in at $125,000 instead of my desired $150,000. I should also know the MAO if my miscellaneous fee comes in higher than the $1,000 I budgeted for.

Flipping is a game with a lot of moving parts. If you stay on top of the variables, you’ll surely come out on top.

FAQ: MAO Formula in Real Estate

Still have questions about how the MAO formula works in real estate investing? Here are answers to the most common ones we get from new and experienced investors alike.

Is the 70% rule always accurate?

The 70% rule is a general guideline, not a one-size-fits-all formula. In hot markets, you may need to offer 75%–80% of ARV to compete, while slower markets might require you to stay closer to 65%. The key is adjusting your MAO based on market conditions, deal type, and risk tolerance.

How do I find ARV for a property?

To calculate ARV, look at comparable sales ("comps") of recently sold homes within a half-mile radius. Choose properties that are similar in size, style, bed/bath count, and condition. Use multiple comps to estimate a realistic resale value after renovations — this is your ARV.

What if the seller wants more than my MAO?

If the seller’s asking price is higher than your MAO, you have a few options: renegotiate with better terms, ask for seller concessions, or walk away. Don’t force the numbers to work — if you go above your MAO, you’re risking your margin and overpaying for the deal.

Can you use the MAO formula for rentals or BRRRR deals?

Yes, but with a twist. The MAO formula can be adapted for rental properties by factoring in your cash flow goals and refinance strategy. For BRRRR deals, you’ll want to ensure the refinance covers your acquisition and rehab costs while still leaving equity in the deal.

Final Thoughts on the MAO Formula

In the real estate business, paying the right price for an investment can make or break your success. Navigating the fast-paced nature of this industry and monitoring your costs can prove to be very challenging for even the most experienced of investors.

The Maximum Allowable Offer (MAO) formula can keep you in check to ensure you are always making the right decision. This formula should help anyone proceed with confidence, whether they are house flipping, wholesaling, BRRRR, or buying a rental property.

Remember, you make your money when you buy;  this formula will ensure you buy right and you buy smart. Good luck!

If you’re serious about doing your first real estate deal, don’t waste time guessing what works. Our FREE Training walks you through how to consistently find deals, flip houses, and build passive income—without expensive marketing or trial and error.

This FREE Training gives you the same system our students use to start fast and scale smart. Watch it today—so you can stop wondering and start closing.

*Disclosure: Real Estate Skills is not a law firm, and the information contained here does not constitute legal advice. You should consult with an attorney before making any legal conclusions. The information presented here is educational in nature. All investments involve risks, and the past performance of an investment, industry, sector, and/or market does not guarantee future returns or results. Investors are responsible for any investment decision they make. Such decisions should be based on an evaluation of their financial situation, investment objectives, risk tolerance, and liquidity needs.