The Maximum Allowable Offer is the single most important number in fix-and-flip investing. Get it right and every deal is profitable by design. Get it wrong and you lose money before you swing a hammer.
The Core Formula
MAO = ARV × 0.70 − Repair Costs
ARV = After Repair Value | Repair Costs = Full Rehab Budget
The 70% rule is a quick heuristic that real estate investors use to ensure they buy distressed properties at a price that leaves enough margin to cover renovation costs, holding costs, transaction fees, and profit. The rule states you should never pay more than 70% of the property's after-repair value, minus your estimated repair costs.
Why 70%? The remaining 30% of ARV is allocated roughly as follows: 10–15% covers all transaction costs (purchase closing costs, selling agent commissions, transfer taxes, title fees), 5–10% covers holding costs during the renovation and marketing period (mortgage interest, property taxes, utilities, insurance), and the final 10–15% is your target profit margin. This allocation is intentionally conservative — real-world projects almost always encounter unexpected costs.
The beauty of the formula is that it works regardless of market. A $500,000 ARV property in Los Angeles and a $150,000 ARV property in Cleveland both get evaluated through the same disciplined lens. You're not making emotional bids — you're computing a ceiling.
It is critical to understand that MAO is a ceiling, not a target. Just because you can pay $210,000 doesn't mean you should. If the seller accepts $185,000, you've just added $25,000 to your profit. Always negotiate below your MAO.
Standard Deal
Light Cosmetic Flip
Heavy Rehab
UK Property (£)
Use 65% When:
Use 70% When:
Experienced investors often apply a sliding scale. In a competitive urban market with strong comparable sales and a 45-day flip timeline, 70% may be appropriate. In a slower regional market with a 120-day expected hold, 62–65% gives you the buffer you need to still exit profitably.
As a rule of thumb: every extra 1% of cushion you build in is $2,000–$5,000 of protection on a $200,000–$500,000 ARV deal. That's cheap insurance against a surprise foundation issue or a contractor who doesn't show up.
Using the highest sale in the neighborhood instead of the median adjusted comp. ARV must reflect what a move-in-ready version of this specific property would sell for, based on genuine comparable sales within 0.5 miles and 90 days.
Walk the property with your contractor before making an offer. Never estimate repairs from photos. Structural, HVAC, roof, and foundation issues routinely double initial verbal estimates.
If your rehab takes 4 months and your loan costs 12% annually, you're burning 4% of your loan balance just in interest. Add insurance, taxes, and utilities on top of that.
MAO is your absolute ceiling. Start 10–15% below and negotiate up. Sellers almost never accept initial offers. Build negotiation room into every deal.
Agent commissions (5–6%), closing costs, and potential concessions typically consume 8–9% of your sale price. If you haven't modelled these, your 70% isn't really 70%.
BuildIQ's Fusion Engine performs every step of MAO calculation automatically. When you enter a property address, the engine pulls live comparable sales from MLS data, tax records, and public transaction databases to compute a confidence-weighted ARV. It then applies condition-adjusted repair cost estimates based on property age, square footage, and local contractor labour rates.
The output isn't just a single MAO number. BuildIQ presents a range: a conservative MAO (using 65%) and a standard MAO (using 70%), along with a breakdown of every cost assumption so you can override any input. If you already have a contractor quote, you can substitute that figure and the MAO recalculates instantly.
This means you spend zero time hunting for comps or guessing repair costs. You get a defensible, data-backed offer ceiling in seconds — the same analysis that would take an experienced investor 2–3 hours to assemble manually.
Stop doing this by hand. BuildIQ computes MAO, ARV, and repair estimates automatically for any UK or US property.
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