The MAO formula
MAO = ARV × 70% − repair costs
On a house worth $250,000 after repairs that needs $40,000 of work: $250,000 × 0.70 = $175,000, minus $40,000 = $135,000. That's the most you'd pay.
The 30% you leave on the table isn't all profit. It pays for closing on the buy and the sale, agent commissions, holding costs (taxes, insurance, utilities, loan interest) and the cushion for surprises. The flipper's profit is whatever is left after all of that.
Which percentage should you use?
- 65%: hot markets with lots of investor competition, or lower-priced houses where fixed costs eat a bigger share of the ARV.
- 70%: the standard most flippers and wholesalers start from.
- 75–80%: higher-priced houses, slower markets, or buyers with cheap money who will take a thinner margin.
The rule is a screen, not an offer. On a $100,000 house, 30% is $30,000, and that barely covers costs. On a $600,000 house, 30% is $180,000, which is more cushion than most buyers need. That's why the calculator also takes a dollar profit target.
MAO for wholesalers
If you're wholesaling, your buyer's MAO is your ceiling, not your offer. Take your assignment fee off the top:
Your offer to the seller = (ARV × 70% − repairs) − your assignment fee
With a $10,000 fee on the example above, you'd contract the house at $125,000 and assign it to your cash buyer at $135,000. Push the price up to make room for a bigger fee and your buyers will walk away.
Getting the inputs right
- ARV comes from sold comps in the last 3–6 months, as close and as similar as possible, fixed up to the condition you plan to sell in.
- Repairs: price them line by line. Our free rehab estimator helps you build the number.
- For a full cost breakdown with taxes, insurance and hard money, use the house flip calculator.