Work out the most you can pay a seller and still leave room for your buyer's profit and your fee, before you make the offer.
Your maximum allowable offer (MAO) is the most you can pay a seller and still leave room for your buyer's profit and your fee. The common formula is MAO = ARV x 70% - repairs - your assignment fee. The 70% changes by market and by buyer, so confirm what your buyers really pay before you make offers.
A lot of new wholesalers get excited about getting a house under contract. I get it. But a contract isn't a deal. A deal is a contract at a price a cash buyer will actually pay. Your maximum allowable offer (MAO) is how you make sure you sign the second kind.
MAO is the most you can pay the seller. It's not your offer. You'll open lower and negotiate (lesson 13 covers that). MAO is your walk-away line: go over it and the deal stops working for your buyer, which means it stops working for you.
You need three numbers first: a solid ARV, a realistic repair estimate, and the percentage of ARV your buyers pay in your market.
What the house sells for after repairs. Lesson 9.
What it costs to get it to that value. Lesson 11.
The share of ARV your buyers will pay, before repairs. Often around 70%, but it varies.
Your assignment fee or double-close spread. It comes out of the MAO, not on top of it.
Everything starts with the after repair value. Use 3 to 5 renovated sold comps, average the price per square foot and round down. If you skipped it, go back to lesson 9 first.
Your MAO is only as good as your ARV. A 5% mistake in ARV moves your MAO by more than you'd think (there's an example below).
Walk the house and list every repair a buyer will have to make: roof, HVAC, kitchen, baths, flooring, paint, and so on. Put a rough cost next to each. Lesson 11 shows how to estimate rehab costs quickly, and my rehab cheat sheet helps.
Be honest here. Your buyer will walk the house too, and if your repair number is too low, they'll lower their price or walk.
The 70% rule says an investor should pay no more than 70% of ARV, minus repairs. The other 30% covers their profit, holding costs, closing costs and selling costs. It's a rule of thumb, not a law.
In some markets buyers pay more than 70%, often on higher-priced houses or in busy markets. On cheaper houses they often pay less. The only way to know is to ask your buyers what they paid on their last few deals, and to look at what they sold for.
Your fee comes out of the deal, not on top of it. Pick a fee that leaves the deal still good for your buyer. A smaller fee on a deal that closes beats a big fee on one that doesn't.
How fees must be disclosed varies by state. Some states require you to tell the seller you're assigning the contract. Check your state's rules.
Multiply the ARV by your buyer's percentage, subtract the repairs, then subtract your fee. That's your MAO.
MAO = (ARV x buyer %) - repairs - your fee
Some buyers don't think in percentages. They tell you, "I'll be all in at this number," meaning purchase price plus repairs. If your buyer gives you an all-in number, work backward: all-in number minus repairs minus your fee.
If the percentage method and the all-in method give you different answers, use the lower one.
MAO = buyer's all-in number - repairs - your fee
Your opening offer should be below your MAO, so you have room to negotiate. Your MAO is your walk-away. If the seller won't come down to it, thank them, leave the door open and follow up later.
Write all of it down for every lead: ARV, repairs, buyer %, fee, MAO, opening offer. My free Deal Analyzer does it in one sheet.
These are made-up numbers to show the math. Use your own ARV, repairs and buyer numbers.
| Step | Math | Result |
|---|---|---|
| ARV x 70% | $150,000 x 0.70 | $105,000 |
| Minus repairs | $105,000 - $18,000 | $87,000 |
| Minus your fee | $87,000 - $4,000 | $83,000 |
In this example the MAO is $83,000. You might open in the low to mid $70,000s and walk away above $83,000.
| Step | Math | Result |
|---|---|---|
| Buyer's all-in number | Purchase plus repairs | $45,000 |
| Minus repairs | $45,000 - $10,000 | $35,000 |
| Minus your fee | $35,000 - $2,500 | $32,500 |
In this example the MAO is $32,500.
Take the first example, but say the real ARV is 5% lower: $142,500 instead of $150,000. Now $142,500 x 0.70 = $99,750, minus $18,000 repairs, minus $4,000 fee = $77,750.
A 5% miss on ARV cut the MAO in this example by $5,250. That's why you round ARV down.
MAO is your ceiling. Open below it so you have room to negotiate.
Ask your buyers. Your market might be higher or lower.
Your buyer will walk the house. A low repair number only delays the bad news.
The fee comes out of the MAO. Add it on top and your buyer pays too much.
Small ARV mistakes make big MAO mistakes. Use good comps and round down.
A contract over MAO isn't a deal. No deal is better than a bad deal.
Check your state. Wholesaling laws vary by state, including how you can market a contract and what you have to disclose. Read your state's rules, and ask a local real estate attorney if you're not sure.
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An Excel workbook that takes you from comps to ARV, repairs and your maximum allowable offer in one sheet. Free.
MAO stands for maximum allowable offer. It's the highest price you can pay for a property and still leave enough room for repairs, your buyer's profit and costs, and your fee. Wholesalers and flippers figure it out before making an offer, then open below it.
Multiply the after repair value (ARV) by the percentage your buyers pay, often around 70%. Subtract the estimated repairs, then subtract your assignment fee. What's left is your MAO. The worked examples on this page walk through the math step by step.
The 70% rule says an investor should pay no more than 70% of a property's ARV, minus repairs. The other 30% is meant to cover their profit plus holding, closing and selling costs. It's a rule of thumb. Buyers in some markets pay more or less, so ask yours.
You can, but then the numbers stop working for your buyer, and the deal usually falls apart or you have to cut your fee. If the seller needs more than your MAO, it's usually better to walk away politely and follow up later. Situations change.
There's no set amount. Your fee has to fit inside the deal and still leave it good for your buyer. Start with what the deal can support after your buyer's numbers. How you have to disclose your fee varies by state, so check your state's rules.
Yes. My free Wholesale Deal Analyzer is an Excel workbook. Enter your comps, repairs, your buyer's percentage and your fee, and it shows your MAO, the spread against the asking price, and a simple go, negotiate or no-go signal. It opens in Excel and is built to work in Google Sheets too.
Yes, but landlords often think in rent and monthly cash flow rather than ARV. Ask a rental buyer what they'd pay for a house like yours, and treat that as their all-in number. Then subtract repairs and your fee to get your MAO.
Present your number in person, trade on terms and get it signed.
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Not financial or legal advice. Wholesaling University is for education. David Frizzell is a real estate wholesaler, not an attorney or financial advisor. Wholesaling laws vary by state, so check the rules in your state before you market a property or make offers, and talk to a local real estate attorney if you're not sure.
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