Free tool
Maximum allowable offer calculator
Enter an after-repair value and a repair cost. The page subtracts a profit reserve, a closing reserve, and a holding reserve, each taken as a percent of ARV. It also shows the 70% rule on the same two inputs so you can see the gap. The starting percents are the ones the deal report uses: 25, 5, and 3.
The formula, written out
MAO = ARV − repairs − (ARV × profit %) − (ARV × closing %) − (ARV × holding %). Each percent is applied to ARV only, not to ARV minus repairs, and each dollar reserve is rounded to the nearest dollar before it is subtracted. The 70% rule on the same inputs is ARV × 0.70 − repairs, also rounded to the nearest dollar. Repairs are subtracted once in both formulas. They are not a percent.
With the fields left at the sample values, ARV is $200,000 and repairs are $40,000. Profit is 25% of ARV, which is $50,000. Closing is 5%, which is $10,000. Holding is 3%, which is $6,000. The offer is $200,000 − $40,000 − $50,000 − $10,000 − $6,000 = $94,000. The 70% rule is $140,000 − $40,000 = $100,000. These sample values are here so the arithmetic can be checked by hand. They are not a closed sale.
25 + 5 + 3 is 33, so the report formula keeps 67% of ARV and then subtracts repairs. The 70% rule keeps 70%. The whole difference, before rounding, is 3% of ARV. On a $200,000 ARV that is $6,000, which is why $100,000 and $94,000 are $6,000 apart. Change the profit percent if the buyer you are underwriting for uses a different cushion. The 70% line stays on 0.70 so the comparison does not move when you edit the reserves.
Questions
What formula does this MAO calculator use?
Maximum allowable offer equals after-repair value minus repairs, minus a profit reserve, minus a closing reserve, and minus a holding reserve. Each reserve is that percent of ARV, rounded to the nearest dollar, and then subtracted. The starting percents are 25 for profit, 5 for closing, and 3 for holding.
How is the 70% rule different from the 25/5/3 offer?
The 70% rule is ARV times 0.70, minus repairs. The 25/5/3 offer takes 33% of ARV off the top (25 plus 5 plus 3) and then subtracts repairs, which is the same shape as a 67% rule. On a $200,000 ARV with $40,000 of repairs, the 70% rule is $100,000 and the 25/5/3 offer is $94,000. The $6,000 gap is the extra 3 points of ARV.
Does this page send the numbers I type to a server?
No. The arithmetic runs in the browser on this page. Changing a field only updates the totals you see here. Nothing you type is uploaded.
What is left out of both offers?
Neither figure includes loan interest, lender points, an assignment fee, or a repair bill that comes in higher than the number you typed. A negative offer means the repairs and reserves are larger than the ARV, so the formula has no price that still fits.
Where to go next
- How to calculate fix and flip profit once you have a purchase price.
- How to price a wholesale assignment fee from the end buyer’s offer, not from the ARV.
- All of the deal analysis guides.
ARV Analyzer fills in this same 25/5/3 formula after you paste an address.