1. What is a Maximum Allowable Offer (MAO) Calculator?

Definition: This calculator determines the maximum price you should offer for a property based on its after-repair value, repair costs, and other expenses.

Purpose: It helps real estate investors make profitable decisions by ensuring they don't overpay for properties.

2. How Does the MAO Calculator Work?

The calculator uses the formula:

Where:

• \( MAO \) — Maximum allowable offer (USD)
• \( ARV \) — After-repair value (USD)
• \( k \) — Margin factor (typically 0.7 for 30% profit margin)
• \( R \) — Repair costs (USD)
• \( C \) — Other costs (USD, e.g., closing, holding, selling costs)

Explanation: The formula ensures you maintain your desired profit margin after accounting for all costs associated with the property.

3. Importance of MAO Calculation

Details: Calculating MAO helps investors avoid overpaying, ensures profitability, and provides a clear negotiation benchmark.

4. Using the Calculator

Tips: Enter the property's estimated ARV, your desired margin factor (default 0.7), repair costs, and other costs. All values must be ≥ 0.

5. Frequently Asked Questions (FAQ)

Q1: Why is the margin factor typically 0.7?
A: A factor of 0.7 ensures a 30% profit margin (100% - 70%) after accounting for all costs.

Q2: How do I determine the ARV?
A: Research comparable properties (comps) in the area that have been recently renovated.

Q3: What should be included in "other costs"?
A: Include closing costs, holding costs, financing costs, and selling costs (agent commissions).

Q4: Can I adjust the margin factor?
A: Yes, increase for lower-risk properties or decrease for higher-risk/higher-reward deals.

Q5: What if my MAO is lower than the seller's asking price?
A: Either negotiate harder, find ways to reduce costs, or walk away from the deal.