What is MAO (maximum allowable offer)?

MAO stands for maximum allowable offer: the highest price an investor has decided they can pay for a specific property and still have the project work on their own numbers. It is computed before the negotiation starts, from the investor's estimate of what the finished property will sell or rent for, what the work will cost, and what their own transaction costs and required compensation are. Whatever happens in the negotiation, the MAO is where this buyer stops.

The important thing to say first is what kind of number a MAO is not. It is not a valuation of the property, not an appraisal, and not a statement about what the property is worth to anyone else. Two investors screening the same house on the same day will usually compute two different MAOs, because the inputs — their financing costs, their renovation costs, their exit plans, their required minimum — belong to the investor, not to the house.

The term is native to the fix-and-flip and wholesaling trades, where deals are screened in volume and a fast, defensible ceiling is worth more than a precise one. In that context the MAO functions less as a price opinion and more as a discipline: a number written down while thinking clearly, to be obeyed later while negotiating under pressure.

The best-known shortcut for computing a MAO is the 70% rule: multiply the ARV — the estimated resale price of the property after renovation — by 0.70, then subtract the estimated repair cost. The 30 percent the formula holds back is a bundled allowance for closing costs on both ends, holding costs during the work, resale costs, a cushion for surprises, and the investor's own compensation. The output is the MAO.

The longer route is a line-item version of the same arithmetic: start from the ARV, subtract each cost individually — purchase closing costs, financing, insurance, taxes and utilities during the hold, the renovation budget with its contingency, the costs of the eventual resale — and then subtract the minimum the investor requires for taking on the project. What remains is the most the purchase itself can absorb. Investors who run the full worksheet usually reserve it for deals that already passed the shortcut.

Both routes make the same point in different resolutions: a MAO is derived from an exit and a cost structure. Change the exit — flip versus rental, for instance — and the same property produces a different MAO for the same investor, because the costs and the required outcome changed even though the house did not.

Wholesalers run the MAO calculation twice, in opposite directions. Facing their end buyers, the wholesaler needs to know what those investors' MAOs will be, because a contract priced above the buyer pool's ceiling does not sell no matter how it is marketed. Facing the property owner, the wholesaler works backwards from that ceiling: the contract price with the owner has to sit far enough under the expected resale price of the contract to leave room for the wholesaler's fee.

This is why experienced dispo teams talk about their buyers' criteria in MAO terms. Knowing that a given buyer screens at a given multiplier, in given areas, with a given appetite for repairs, lets the wholesaler price a contract before marketing it — and lets them decline a deal at acquisition time that no buyer on their list could take at a workable number.

It is also why a wholesaler's asking price is not evidence of a property's value. The ask is constructed from the buyers' expected ceilings and the wholesaler's intended fee. An investor reading a wholesale listing is expected to run their own MAO from their own inputs, and the deals that trade are the ones where the ask happens to fall under enough buyers' ceilings.

The following figures are invented round numbers, labelled hypothetical; they describe no real property and no listing on this site. An investor screens a house needing a full renovation. Sales of similar renovated houses nearby suggest an ARV of $200,000, and a contractor's walkthrough prices the work at $40,000.

The shortcut: $200,000 × 0.70 = $140,000, minus $40,000 of repairs, gives a MAO of $100,000. If the owner will sign at or under $100,000, the deal moves to a full budget; if the owner needs $120,000, this investor passes — not because the house is bad, but because at that price the project no longer fits this investor's cost structure.

A wholesaler working the same house from the other side, whose buyers screen at that same multiplier, knows the contract has to resell at or under roughly $100,000. Wanting a $10,000 fee, the wholesaler needs the owner under contract at $90,000 or less. Every number in the chain is somebody's ceiling, and none of them is the house's value.

The MAO's first job is speed: it turns a stack of leads into a short list without a full underwriting pass on each one. Its second job is discipline. Negotiations escalate, sellers counter, and the pull to close a deal that took weeks of work is real. A ceiling computed in advance, from stated inputs, gives the investor a stopping rule that does not renegotiate itself in the room.

The number is only as good as its inputs, and the inputs are estimates. An ARV built on the wrong comparison set, or a repair budget from a hasty walkthrough, produces a confident ceiling in the wrong place. Practitioners treat the MAO as the start of diligence, not the end of it: deals that pass the screen get the full budget, the inspection and the hard look at the ARV before any contract is signed.

As throughout this glossary, this page describes how the term is used in the industry. Cost structures, financing terms and closing practice vary by investor, by market and by deal, and nothing here is advice about any particular property or transaction.