Beginners overpay because they don't know the screening math. MAO — Maximum Allowable Offer — is the number investors run before they bid: ARV × 70% − repair costs. The 70% haircut isn't pessimism; it's where the closing costs, holding costs, sale costs, and the profit that makes the project worth doing all live, compressed into one rule of thumb. Some investors run it at 65% (heavier projects, softer markets), some stretch to 75% (hot markets, cheap money, thin-margin volume). This calculator lets you flex it and see what moves.
Fair warning: this is a 60-second screen, not an underwriting model. If a deal only works because you nudged the percentage up, it doesn't work.
65% = conservative (big rehabs, slower markets). 70% = the classic rule. 75% = aggressive (competitive markets, experienced crews). The percentage is doing a lot of work — flex it down before you flex it up.
This is the ceiling a disciplined flipper would put on their offer — the same screen professionals run on a listing in seconds. If the asking price is well above your MAO, the conversation is renegotiation or walking away, not hoping.
It's not an appraisal, not a promise the flip works at this price, and not a recommendation to offer anything. The rule compresses real line items — holding costs, two sets of closing costs, sale costs, profit margin — into one percentage, and your market's real numbers can differ. Before money moves, investors replace the rule with a full line-item analysis. And run your own numbers — your own advisors beat internet math.
The repair estimate. ARV is checkable against comps; repairs are where wishful thinking hides. A $40K rehab that's really a $65K rehab erases the entire margin the 70% rule was protecting. If you only pressure-test one input, pressure-test that one — walk the property with a checklist, get contractor eyes on it, and pad for what the walls are hiding. (A repair-cost estimator is on this toolbox's build list.)
Getting started in real estate investing, or feeling stuck? Explore Real Deal Network, a nationwide community of investors focused on learning and helping one another make progress.
Free entry starts with your name and mobile number. No card is required for the free account. Paid memberships and education are optional.