MAO Flip Estimator

What is a Maximum Allowable Offer?

A Maximum Allowable Offer (MAO) is the highest price you can pay for a property and still walk away with the profit you signed up for. It is the discipline that separates investing from gambling in fix-and-flip: the deal is underwritten before the offer is written, not renegotiated after the appraisal comes in low.

The MAO is computed backwards from the exit. You start with the after-repair value (ARV) — what the fully renovated house sells for, based on recent closed comps — and subtract every dollar that leaves your pocket between now and then: construction, the months of loan payments, taxes and insurance while you own it, the agent commissions and transfer fees at closing, your own closing costs on the purchase, and finally the profit you require for taking the risk. What remains is the number you can offer. Anything above it, and the deal pays the house instead of you.

That is why MAO and the popular 70% rule are not the same thing. The 70% rule is a one-line screen that roughly bundles all those costs into a fixed 30% of ARV. It is useful for rejecting leads in seconds, and dangerously wrong on any deal with unusual costs — long holding periods, heavy rehab, high commissions, or a thin target margin.

The 70% rule, exactly

The classic rule: offer = 70% of ARV − rehab. On the example below, that is $320,000 × 70% − $45,000 = $174,500. The 30% haircut is meant to absorb holding costs, closing costs, selling costs, and profit all at once. When ARVs are large and rehab is light, that 30% is generous; when holding drags to nine months, it is thin.

The calculator shows both numbers side by side: the rule-of-thumb offer and the detailed MAO built from your actual cost stack. The gap between them is the margin of error the rule gives you — sometimes a cushion, sometimes a mirage.

How to use this calculator

1. Start with the ARV. Use the sale price of renovated, genuinely similar homes within a half mile closed in the last 90 days. Wishful ARVs are the most expensive mistake in flipping — underwrite as if you were the buyer of the finished house.
2. Enter the real rehab budget from a walk-through with your contractor, then add a contingency of 10–15%. The calculator adds the contingency on top of your budget automatically, because overruns are the norm, not the exception.
3. Set the holding period and monthly carrying cost. Include loan interest or rent on your short-term capital, property taxes, insurance, and utilities for every month you expect to own the property — purchase to sale, not just during construction.
4. Add transaction costs. Purchase closing costs (points, title, inspections) as a percentage of your offer, and selling costs (agent commissions, transfer fees, seller concessions) as a percentage of ARV — 8% is a common national default.
5. Set your profit target. Toggle between a percentage of ARV (10–20% is typical) or a fixed dollar amount. The MAO solver accounts for the fact that purchase closing costs scale with the offer itself.
6. Read the verdict. The card tells you whether the 70% rule screen is above or below your detailed MAO, the total cash the deal needs, and the return on that cash. The allocation bar shows where every dollar of ARV goes.

Formulas & methodology

The division step matters: purchase closing costs are charged as a percentage of the offer, so the offer is inside its own equation. Solving for it algebraically gives the exact maximum — a hand calculation that simply subtracts costs from ARV overstates the offer by the amount of those percentage-based closing costs.

Worked example

Suppose a dated three-bedroom comps out at $320,000 renovated. Construction is quoted at $45,000, and with a 10% contingency the true budget is $49,500. Holding costs run $1,450 a month for 6 months — $8,700 — and selling costs at 8% of ARV come to $25,600.

The 70% rule says offer $174,500. Your detailed MAO, aiming for a 10.0% of ARV profit and paying 2% purchase closing costs, is $200,196 — a 37.4% discount to ARV, breaking even at $231,569. Buying at the rule offer instead would leave $58,210 of profit — a 24.6% return on the cash that deal ties up — the exact gap the rule of thumb hides.

The costs flippers forget

• Loan interest during the hold. Hard money at 10–13% with two to three points is often the single largest expense after rehab. Every month of delay costs real money — model a 15–20% schedule overrun, not the contractor's best case.
• Utilities, taxes, and insurance while you own the property. Insurance on an unoccupied, renovated house is priced differently, and some carriers require renovation coverage during the work.
• Selling costs. Commissions, transfer taxes, staging, and seller concessions routinely consume 8–10% of the sale price. Investors who skip this line overstate profit by five figures.
• Rehab contingencies and permits. Unpermitted past work, knob-and-tube wiring, and sewer line surprises are discovered mid-project. A 10–15% contingency is not pessimism; it is the historical average.
• Your own salary. A flip that returns 18% while consuming six months of full-time work is a different deal than 18% on autopilot. Price your time when comparing against, say, a BRRRR deal.

Once the MAO is set, discipline is the strategy: submit the number, be willing to lose the deal, and keep a pipeline of ten leads for every house you close. Wholesalers and sellers remember the investor who always does the math.

Investor FAQ

What is the 70% rule in house flipping?

The 70% rule says you should pay no more than 70% of a property's after-repair value, minus the cost of repairs. On a $320,000 ARV needing $45,000 of work, that is $224,000 − $45,000 = $179,000. It is a fast screening formula for wholesaler calls, not a profit plan — it ignores holding costs, closing costs, commissions, and your target profit.

What does MAO mean in real estate?

MAO stands for Maximum Allowable Offer: the highest price you can pay for a distressed property and still hit your profit target after every cost of the deal. A detailed MAO starts from the after-repair value and subtracts rehab, holding costs, selling costs, purchase closing costs, and your target profit — which usually produces a lower, safer number than the 70% rule.

How do you calculate the maximum offer on a fix-and-flip?

Subtract rehab (with a contingency), holding costs, selling costs, and your target profit from the ARV, then account for purchase closing costs — which are a percentage of the offer itself. The clean form is: MAO = (ARV − rehab − holding − selling costs − target profit) ÷ (1 + closing cost %). The division step is what most hand calculations miss.

What is a good ROI on a house flip?

Most full-time flippers target 15–25% return on total cash invested, with 10% as a practical floor after considering the risk and the six to twelve months the capital is tied up. Because flips are finite, one-period projects, ROI is simply profit divided by all cash invested — not annualized the way rental returns are.

How much rehab contingency should I budget?

10–15% of the construction budget on any property you have not opened up yet, and 5–10% on a cosmetic-only scope you have walked with a contractor. Overruns are the norm on older homes — failed inspections, rotten subfloors, and unpermitted work are the usual surprises that turn a good MAO into a break-even deal.

MAO Flip Estimator by state

Each state edition starts from that state's typical home price, rent, property tax, and insurance, with a worked example and notes on local rules.

Embed this calculator

Add the live MAO Flip Estimator calculator to your own site or blog. It runs entirely in the reader's browser, needs no account, and links back to this guide for the formulas.

<iframe src="https://keystonecalculators.com/embed/mao-flip-estimator" title="MAO Flip Estimator by Keystone" width="100%" height="1100" style="border:1px solid #0a0a0b;max-width:100%" loading="lazy"></iframe>