The 70 percent rule is a way to determine what price to pay for a fix and flip to make money. What is the 70 percent rule when applied to fix and flipping houses? The 70 percent rule states that an investor should pay 70 percent of the ARV (After Repair Value) of a property minus the repairs needed.
So…what is your Maximum Allowable Offer or MAO???
MAO= Maximum Allowable Offer
He who masters the discipline of proper property analysis
will become the master of profit.
You cannot violate the maximum allowable offer (MAO). If you trespass beyond this line you will be tempting fate and less profit. The MAO is the most you should offer for a property. MAO is the ARV of the property less your 30 % profit margin, then less your rehab costs.
Maximum Allowable Offer (MAO)
Formula: ARV – 30% – Repairs = MAO
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