When you're wholesaling real estate, your profit depends entirely on buying at the right price. Buy too high, and you won't find an investor willing to take the deal off your hands. Buy at the right number, and you'll have cash buyers lining up to close.

That's where Maximum Allowable Offer (MAO) comes in—the highest price you can pay for a property while still leaving enough meat on the bone for your end buyer and yourself.

The 70% rule is the most widely used formula for calculating MAO in wholesale deals. It's straightforward, time-tested, and gives you a quick way to evaluate whether a property is worth pursuing. In this guide, we'll break down exactly how to use this rule, when to adjust it, and how to avoid the common mistakes that trip up new wholesalers.

What Is Maximum Allowable Offer (MAO)?

Maximum Allowable Offer is the absolute maximum price you should pay for an investment property to ensure profitability for both you and your end buyer. Think of it as your ceiling—go above it, and the deal stops making sense.

When you're wholesaling, you're the middleman. You need to:

Leave enough profit margin for your cash buyer (typically a flipper or landlord)
Build in your wholesale fee
Account for all repair costs
Consider holding costs and contingencies

MAO helps you calculate all of this into one number. If the seller won't accept your MAO or below, you walk away. It's that simple.

The 70% Rule Explained

The 70% rule states that an investor should pay no more than 70% of a property's After Repair Value (ARV) minus repair costs.

Here's the formula:

MAO = (ARV × 0.70) - Repair Costs

Let's break down each component:

After Repair Value (ARV)

ARV is what the property will be worth after all repairs and renovations are complete. This isn't what the house is worth right now in its distressed state—it's the retail value once it's fully fixed up and ready for market.

To determine ARV accurately:

Pull comparable sales (comps) of recently sold, fully renovated homes in the same neighborhood
Focus on sales within the last 3-6 months
Look for properties with similar square footage, bedroom/bathroom count, and lot size
Adjust for differences in features, condition, and location

For example, if similar renovated homes in the area have sold for $280,000, $290,000, and $275,000, your ARV would be around $280,000.

Repair Costs

This is the total cost to bring the property to retail-ready condition. Accurate repair estimates are crucial—underestimate here, and your end buyer won't make money (which means they won't buy from you).

Repair costs typically include:

Structural repairs (foundation, roof, framing)
Mechanical systems (HVAC, plumbing, electrical)
Interior updates (flooring, paint, kitchen, bathrooms)
Exterior work (siding, landscaping, driveway)
Permits and contingency buffer (usually 10-15% of total repair budget)

Using tools like Rentzilla's repair cost estimator can help you generate accurate repair estimates quickly, which is essential when you're evaluating multiple deals per week.

Why 70%?

The 70% figure accounts for:

Buyer's profit margin: 15-20% of ARV for flippers
Holding costs: Mortgage, utilities, insurance, property taxes during the flip
Transaction costs: Closing costs, realtor commissions (typically 6-8% of sale price)
Your wholesale fee: Usually $5,000-$15,000
Contingency buffer: Unexpected repairs or market shifts

Different markets and property types may require adjustments, but 70% provides a solid baseline that works in most scenarios.

Step-by-Step: Calculating MAO Using the 70% Rule

Let's walk through a real example.

Property Details:

3-bedroom, 2-bathroom single-family home
Current condition: Distressed, needs full renovation
Location: Suburban neighborhood with strong rental and resale demand

Step 1: Determine ARV

You pull comps and find three recent sales of renovated homes:

123 Oak Street: $265,000 (sold 2 months ago)
456 Maple Drive: $275,000 (sold 3 months ago)
789 Pine Lane: $270,000 (sold 1 month ago)

Average: $270,000 ARV

Step 2: Estimate Repair Costs

After walking through the property, you identify:

New roof: $8,000
HVAC replacement: $6,000
Kitchen remodel: $12,000
Two bathroom updates: $8,000
Flooring throughout: $5,000
Paint (interior/exterior): $4,000
Electrical updates: $3,000
Plumbing repairs: $2,000
Landscaping: $2,000
Contingency (10%): $5,000

Total Repair Costs: $55,000

Step 3: Apply the 70% Rule Formula

MAO = (ARV × 0.70) - Repair Costs MAO = ($270,000 × 0.70) - $55,000 MAO = $189,000 - $55,000 MAO = $134,000

This means the maximum you should offer for this property is $134,000.

Step 4: Factor in Your Wholesale Fee

Now you need to subtract your wholesale fee to determine what you'll actually offer the seller.

If you want to make a $10,000 assignment fee:

Your Offer = MAO - Wholesale Fee Your Offer = $134,000 - $10,000 = $124,000

So you'd offer the seller $124,000, assign the contract to your buyer for $134,000, and pocket the $10,000 difference.

When to Adjust the 70% Rule

The 70% rule is a guideline, not gospel. Smart wholesalers adjust based on market conditions and property characteristics.

Use 75-80% When:

Hot markets with high demand: In competitive markets where inventory is tight, investors may accept thinner margins. You might use 75% instead of 70% to win deals.

Properties in excellent locations: A house in a premium school district or desirable neighborhood can command higher offers because buyers know they'll sell quickly after renovation.

Lower repair costs: If a property only needs cosmetic updates ($20,000-$30,000), there's less risk, and buyers might pay more.

Multiple interested buyers: When you have several cash buyers competing for your deals, you can push closer to 75-80%.

Use 60-65% When:

Slow markets: If properties are sitting longer on the MLS and inventory is high, you need bigger margins to attract buyers.

Extensive structural issues: Foundation problems, roof damage, or outdated electrical systems increase risk—buyers want more profit buffer.

Unfamiliar neighborhoods: Properties in areas you don't know well require conservative numbers until you understand the local market dynamics.

First-time projects: New flippers often prefer deals with larger margins while they're learning the ropes.

Rural or secondary markets: Properties outside major metro areas typically require deeper discounts due to longer holding times and smaller buyer pools.

Common MAO Calculation Mistakes

Mistake #1: Overestimating ARV

This is the number one error that kills wholesale deals. New wholesalers often:

Use listing prices instead of actual sold prices
Pull comps that are too old (6+ months)
Compare to properties in better locations
Ignore differences in square footage or lot size

Solution: Stick to recently sold properties (3-6 months max) that are truly comparable. When in doubt, be conservative. It's better to underestimate ARV slightly than to overestimate it and lose your buyer's trust.

Mistake #2: Underestimating Repairs

Contractors always find more issues once they open up walls. If you tell a flipper repairs will cost $40,000 and they end up spending $65,000, you'll never do business with them again.

Solution: Add a 10-15% contingency buffer to every repair estimate. Walk properties with an experienced contractor when possible. Tools like Rentzilla's deal analysis feature help you quickly estimate repair costs based on property condition and local labor rates.

Mistake #3: Forgetting Holding Costs

Even though you're wholesaling and won't hold the property yourself, your end buyer will. They need to account for:

Mortgage payments during renovation
Property taxes
Insurance
Utilities
HOA fees (if applicable)

A typical flip takes 3-6 months from purchase to sale. On a $150,000 purchase, holding costs might run $1,500-$3,000 per month, or $4,500-$18,000 total.

Solution: Make sure your MAO leaves room for these costs. The 70% rule generally covers this, but in high-tax states or expensive markets, you might need to go lower.

Mistake #4: Ignoring Transaction Costs

Every real estate transaction involves:

Purchase closing costs (2-3% of purchase price)
Sale closing costs (1-2% of sale price)
Realtor commissions (typically 6% of sale price)

On a $270,000 ARV flip, that's roughly $16,000-$22,000 in transaction costs alone.

Solution: The 70% rule accounts for most of this, but be aware of local variations. Some markets have higher transfer taxes or require expensive surveys.

Mistake #5: Using the Same Formula for Every Property Type

Single-family homes, multi-family properties, and commercial buildings require different approaches:

Single-family: 70% rule works great
Multi-family: Consider income potential, not just ARV
Commercial: Totally different valuation method based on cap rates
Land: ARV doesn't apply—use comparable land sales

Solution: Stick to single-family residential when starting out. Once you master MAO calculations there, you can expand to other property types.

How to Present Your MAO to Sellers

You've calculated your MAO. Now comes the hard part: getting the seller to accept it.

Most distressed property sellers are asking far more than your MAO—sometimes 50-100% more. Here's how to present your offer professionally:

Lead with Empathy

"I understand this is probably lower than you were hoping for. Let me walk you through how we arrived at this number..."

Show Your Work

Break down the numbers:

"Comparable renovated homes in your neighborhood are selling for around $270,000"
"Your property needs approximately $55,000 in repairs"
"After accounting for holding costs, transaction costs, and a reasonable profit margin for the investor, we can pay $124,000"

Emphasize Speed and Certainty

"The advantage of accepting our offer is:

Cash purchase (no financing contingencies)
Close in 7-14 days
No repairs needed (we buy as-is)
No realtor commissions
No showings or open houses"

Provide Options

"If you'd prefer to go the traditional route, you could list with a realtor. After $55,000 in repairs, $16,000 in commissions, and 3-6 months on market, you'd net roughly $130,000-$140,000. We can give you $124,000 in cash in two weeks with zero hassle."

This approach positions your low offer as the practical choice rather than an insult.

MAO for Different Wholesale Strategies

Traditional Wholesale Assignment

You're simply assigning your purchase contract to an end buyer.

Formula: MAO = (ARV × 0.70) - Repair Costs - Your Fee

Your fee: $5,000-$15,000 depending on market and deal size

Timeline: 7-14 days from contract to assignment

Double Close

You briefly take ownership of the property before immediately selling to your end buyer.

Formula: Same as above, but add:

Your closing costs (typically $2,000-$4,000)
Transactional funding fees (if used)

Your fee: $10,000-$25,000 (higher because of increased risk and costs)

Timeline: Same day or back-to-back closings

Wholetail

You make minor cosmetic improvements before selling (light renovation between wholesale and full flip).

Formula: MAO = (ARV × 0.85) - Repair Costs - Holding Costs - Your Profit

Your profit: $15,000-$40,000 (you're doing more work)

Timeline: 30-60 days for light renovations before listing

Using Technology to Calculate MAO Faster

Evaluating deals quickly is crucial in wholesaling. The faster you can run numbers, the more properties you can analyze, and the more likely you are to find winners.

Rentzilla's deal analysis tools help you:

Compare properties instantly: Input property details and get ARV estimates based on local comps
Generate repair cost estimates: Based on square footage, age, and condition scoring
Run multiple scenarios: See how different ARV or repair cost assumptions affect your MAO
Share with buyers: Create professional-looking deal packages to send to your buyer list

This is especially valuable when you're evaluating 20-30 properties per week. Manual spreadsheets work, but automated tools save hours and reduce errors.

Building Your Buyer's List Around MAO

Your MAO calculations should align with what your end buyers actually want. Before you start making offers, interview 5-10 active investors in your market and ask:

What's your minimum profit margin?

Fix-and-flip investors typically want $30,000-$50,000 minimum
Smaller operators might accept $20,000-$30,000
Experienced flippers in hot markets might work for $15,000-$25,000

What percentage rule do you use?

Some buyers use 70%, others use 65% or 75%
This tells you whether your MAO will align with theirs

What property types do you prefer?

Single-family only?
Condos and townhomes?
Multi-family?

What are your deal-breakers?

Foundation issues?
Properties over X square feet?
Certain neighborhoods?

Use this information to adjust your MAO calculations. If all your buyers use 65% instead of 70%, you need to adjust accordingly or find new buyers.

Market-Specific MAO Adjustments

Urban vs. Suburban vs. Rural

Urban markets (major cities):

Often use 75-80% due to high demand
Renovation costs are higher (expensive contractors, permits)
ARV appreciation happens faster
Example: In downtown Seattle, investors might pay 80% because properties sell quickly after renovation

Suburban markets (residential neighborhoods):

Standard 70% rule typically applies
More comparable sales data available
Renovation timelines are predictable
Example: In suburban Chicago, 70% is the norm with consistent buyer demand

Rural markets (small towns):

Often require 60-65% due to slower sales
Limited buyer pool
Longer holding times
Example: In rural Missouri, investors need bigger margins because properties sit longer

Regional Cost Variations

High-cost markets (California, New York, Massachusetts):

Transaction costs are higher (closing costs, taxes)
Labor costs are significantly higher
But ARVs are also much higher
May need to adjust to 65% to account for increased costs

Low-cost markets (Midwest, South):

Lower transaction costs
Labor is more affordable
70% rule works well as-is
But wholesale fees might be lower ($5,000-$8,000 instead of $10,000-$15,000)

Growing markets (Florida, Texas, Arizona):

High demand allows for 70-75%
Fast appreciation can cover some errors
Plenty of active buyers competing for deals

Frequently Asked Questions

What if the seller won't accept my MAO?

Walk away. It's tempting to increase your offer, but paying too much for a property means you won't be able to sell it to a cash buyer—and then you're stuck with a contract you can't assign.

If you really believe in the deal, you have a few options:

Wait and follow up in 30-60 days (many sellers come around once their other options fall through)
Offer creative terms like seller financing or delayed closing
Connect them with a realtor who can

How to Calculate MAO Using the 70% Rule for Wholesale Deals