What is MAO in Real Estate? Maximum Allowable Offer Explained
Quick Answer
MAO stands for Maximum Allowable Offer — the highest price you can pay for an investment property and still hit your target profit. The standard formula is: MAO = (ARV × 0.70) − Renovation Costs. This ensures a minimum 30% equity buffer for profit, holding costs, and deal friction.
The MAO formula is the cornerstone of disciplined real estate investing. It is not a suggestion — it is a mathematical ceiling that protects your profit margin before you write a single cheque.
Breaking down the formula: ARV (After-Repair Value) is what the property is worth fully renovated based on comparable sales. The 0.70 multiplier preserves 30% gross margin for: your target profit (typically 15–20%), holding costs during renovation and sale (3–6%), closing costs on purchase and sale (2–4%), and unexpected overruns (3–5%).
The most common MAO mistake: using optimistic ARV estimates. ARV should be based on sold comps — not list prices, not Zillow estimates. Use properties that exchanged in the last 90 days within half a mile, adjusted rigorously for size and condition differences.
Adjusting MAO for market conditions: in a buyer's market, tighten to 0.65 × ARV. In a competitive seller's market with thin inventory, some investors stretch to 0.75 — but this eliminates your contingency buffer and increases risk substantially.
BuildIQ calculates MAO automatically for any address using live comp data and local renovation cost benchmarks, giving you a confident ceiling before you make an offer.
Analyse Any Property in Seconds
BuildIQ applies institutional-grade analysis to any address — instantly.
Start Free Analysis →