What this measures
MAO is a ceiling: the most you would pay so a flip still has room for holding costs, selling costs, and profit. The 70% figure is a rule of thumb people use. It is not a law and this site does not tell you to use it.
Many investors use 65% or 75% depending on the market and the price range. Change the percent field and the MAO moves. The other-costs field is for anything you want taken off the top, such as closing costs or a wholesaler's assignment fee.
For a wholesale deal with buyer closing costs, an assignment fee, and your contract price, use the full wholesale MAO calculator linked below. For the background on where the rule comes from, read the 70% rule explained.
Formula
MAO = ARV × rule percent − repairs − other costs. With the 70% rule: MAO = ARV × 0.70 − repairs.
If you leave the ARV blank, there is nothing to take a percent of, so the result is below zero. A result below zero means your repairs and other costs are more than the share of ARV you allowed, and the deal does not fit the rule.
Example
Example
The sample ARV, repairs, and percent below are a check of the subtraction. Max allowable offer is $140,000. ARV × rule % is $175,000. Repairs + other costs is $35,000.
Illustrative example. The ARV and repair figures are sample inputs so the math is visible. They are not a house RE Underwrite Lab bought or valued.
Example
Second example
Illustrative example. An ARV of $180,000 at 70% is $126,000. With $22,000 of repairs, the MAO is $104,000. Add a $6,000 assignment fee as other costs and the MAO is $98,000. These figures are made up. They are not the sample in the form above.
When this ratio misleads
The rule is only as good as the ARV and repair numbers you type. An optimistic ARV or a light repair estimate raises the MAO dollar for dollar, and a flat 70% ignores high holding costs, slow markets, and expensive financing.
Common pitfalls
Subtracting repairs from ARV before taking 70% gives a different, higher number. The rule takes the percent of ARV first, then subtracts repairs.
Counting an assignment fee or closing costs twice, once inside the repair estimate and again in other costs, lowers the MAO more than intended.
Questions
What is the 70% rule in real estate?
A rule of thumb: pay no more than 70% of the after-repair value minus the repairs. The other 30% is meant to cover holding, selling, financing, and profit.
How do I calculate MAO?
Multiply the ARV by the rule percent, then subtract the repair estimate and any other costs. This page does that arithmetic on the numbers you type.
Can I use 65% or 75% instead of 70%?
Yes. Type any percent. The page does not pick the right percent for your market.
Is this the same as the wholesale calculator?
No. This page is the short rule. The wholesale MAO calculator also handles buyer closing costs, an assignment fee, and the contract price.
Is the MAO an offer I should make?
No. It is a ceiling from your own inputs. It is not an appraisal and not advice to make any offer.