ARV (after-repair value) is what a property is worth fully fixed up. MAO (maximum allowable offer) is the most you can pay and still leave room for the end buyer and your fee. Wholesaling is really just the discipline of never offering more than your MAO.
What is ARV
ARV is the resale value of the property after repairs, based on comparable sales (comps) of similar, renovated homes nearby. It is not the Zestimate and not what the seller thinks it is worth. Pull 3 to 5 recent, close comps and you have a defensible ARV.
What is MAO
MAO is the ceiling on your offer. It works backward from ARV: take what the end buyer will pay, subtract repairs and your assignment fee, and what is left is the most you can offer the seller.
The MAO formula
The standard wholesaler formula is:
MAO = (ARV x 0.70) - repair costs - your assignment fee
The 0.70 is the classic "70% rule": cash buyers and flippers generally want to be all-in at about 70% of ARV so they have margin. In hot markets some investors flex to 75%; in slow ones they drop to 65%. Adjust the percentage to your buyers, not the other way around.
A worked example
Say the comps support an ARV of $300,000, repairs are about $40,000, and you want a $10,000 assignment fee (these are example numbers to show the math):
- ARV x 0.70 = $300,000 x 0.70 = $210,000
- Minus repairs: $210,000 - $40,000 = $170,000
- Minus your fee: $170,000 - $10,000 = $160,000 MAO
Common mistakes
- Inflating ARV with optimistic or far-away comps. Be conservative.
- Lowballing repairs. Walk the property or get a contractor number; surprises kill spreads.
- Forgetting your own fee and closing costs in the MAO.
- Running the math after the call instead of during it. Have ARV and MAO on the lead so you can talk numbers live.
Pipelio puts ARV, repair cost, and a live MAO calculator right on every lead, so you are never offering blind.