MAO (Maximum Allowable Offer)

MAO stands for Maximum Allowable Offer — the ceiling price an investor should pay for a property to ensure profitability after renovation and resale. Going above MAO means you are eating into your profit margin or, worse, risking a loss on the deal.

The MAO Formula

The standard MAO formula used by fix-and-flip investors is:

MAO = (ARV × 70%) – Estimated Repair Costs

The 70% factor accounts for closing costs on both the buy and sell side (typically 2–4% each), holding costs during rehab (loan interest, insurance, taxes, utilities), real estate agent commissions (5–6%), and your target profit margin.

Worked Example

Say a property has an estimated ARV of $300,000 and needs $50,000 in renovations. Plugging into the formula: MAO = ($300,000 × 0.70) – $50,000 = $210,000 – $50,000 = $160,000. This means you should offer no more than $160,000 for the property. If the seller is asking $185,000, the deal does not meet your criteria at the standard 70% rule.

Adjusting the Multiplier

Experienced investors often adjust the 70% factor based on market conditions and deal specifics. In hot seller's markets where homes sell quickly and at or above list price, some investors use 75% or even 80% because holding time is shorter and sale price risk is lower. In slower markets, they may tighten to 65%. The key is understanding what costs the multiplier is covering and making sure your total expenses plus target profit fit within the gap between MAO and ARV.

Why Discipline Matters

One of the biggest mistakes new investors make is "falling in love" with a deal and bidding above MAO. Every dollar above MAO comes directly out of your profit. Over the course of many deals, staying disciplined about MAO is what separates consistently profitable investors from those who break even or lose money.

How Vortonic Helps

Vortonic's deal analysis platform automatically calculates MAO for any property by combining AI-generated ARV estimates with customizable rehab cost inputs and your preferred profit margin. You can adjust the multiplier, input your own holding cost assumptions, and instantly see how changes affect your offer price — making it easy to run scenarios and submit competitive but disciplined offers.