1. What is the MAO Formula?

The MAO (Maximum Allowable Offer) formula is used in real estate wholesaling to determine the maximum price an investor should offer for a property. It calculates the highest offer that still allows for a profit after accounting for repairs, fees, and the desired profit margin.

2. How Does the Calculator Work?

The calculator uses the MAO formula:

Where:

• \( MAO \) — Maximum Allowable Offer ($)
• \( ARV \) — After Repair Value ($)
• \( R \) — Repair costs ($)
• \( F \) — Wholesaling fee ($)

Explanation: The formula starts with 70% of the ARV (which accounts for profit margin and holding costs), then subtracts repair costs and the wholesaler's fee to determine the maximum offer price.

3. Importance of MAO Calculation

Details: Calculating MAO is crucial for real estate wholesalers to ensure they make profitable deals while remaining competitive. It helps determine the maximum price to offer while preserving profit margins for both the wholesaler and end buyer.

4. Using the Calculator

Tips: Enter the estimated After Repair Value in dollars, the total repair costs in dollars, and your desired wholesaling fee. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why use 70% of ARV in the formula?
A: The 70% factor accounts for the end buyer's profit margin (typically 20-30%), closing costs, holding costs, and contingency buffer.

Q2: What if my repair estimate is inaccurate?
A: Always get multiple contractor quotes and add a contingency buffer (10-20%) to your repair estimate to account for unexpected costs.

Q3: How should I determine the ARV?
A: Research comparable sold properties (comps) in the same neighborhood with similar size, condition, and features after repairs are completed.

Q4: Can I adjust the 70% factor?
A: Yes, experienced investors may adjust this percentage based on market conditions, property type, and their risk tolerance.

Q5: What if the calculated MAO is below the seller's asking price?
A: Either negotiate the price down, reduce repair costs, find a lower ARV comp, or walk away from the deal if it doesn't meet your criteria.