What Maximum allowable offer (MAO) means
For a flip-oriented buyer, MAO works backward from supported sale proceeds. A rental buyer may instead work backward from cash flow, DSCR, or a target cash-on-cash return.
Model selling costs and concessions before calling ARV the net exit value.
Keep the assignment fee separate so the end buyer can see that the contract plus fee still fits the deal.
MAO example
- Supported ARV: $300,000
- Rehab: $55,000
- Holding, financing, and sale costs: $35,000
- Required buyer profit: $45,000
- Assignment fee: $10,000
Result: $300,000 - $55,000 - $35,000 - $45,000 - $10,000 = $155,000 maximum seller contract price.
When investors use it
- Setting a flip acquisition ceiling
- Structuring a wholesale offer
- Recalculating after inspection discoveries
- Explaining why the offer changes when scope or exit value changes
Common mistakes
- Using ARV instead of net sale proceeds
- Hiding financing and holding costs
- Applying a fixed 70% rule in every market
- Increasing the offer without reducing another cost or return requirement
Frequently asked questions
What is the 70% rule?
It is a rough screen that starts with a percentage of ARV and subtracts repairs. Actual selling costs, financing, holding time, market risk, and buyer requirements can make that shortcut too high or too low.
Does MAO include the assignment fee?
For a wholesale deal, the seller contract price should leave room for the fee while keeping the end buyer's total acquisition price within their maximum.
Can a rental property use MAO?
Yes, but the ceiling may be derived from required cash flow, DSCR, cap rate, or cash-on-cash return rather than a resale-profit model.
This guide is educational and does not provide investment, lending, tax, legal, or appraisal advice. Verify inputs and requirements for the specific property, lender, and jurisdiction.
Put the metric inside a complete deal.
PropLurk keeps acquisition inputs, financing, expenses, returns, and the decision record together.