Maximum Allowable Offer Calculator

Formula

The formula to calculate the Maximum Allowable Offer (MAO) is:

$MAO = ARV - (RC + DP + HC + CC)$

Where:

MAO – The Maximum Allowable Offer.
ARV – The After Repair Value.
RC – The Repair Costs.
DP – The Desired Profit.
HC – The Holding Costs.
CC – The Closing Costs.

Definition

Maximum Allowable Offer (MAO): The highest price a real estate investor should offer for a property to ensure a profitable investment.
After Repair Value (ARV): The estimated value of the property after all repairs and renovations are completed.
Repair Costs (RC): The total cost of repairs and renovations needed for the property.
Desired Profit (DP): The profit margin the investor aims to achieve.
Holding Costs (HC): The costs associated with holding the property during the repair and selling process.
Closing Costs (CC): The costs associated with closing the transaction.

Example

Let's say the After Repair Value (ARV) is $300,000, the Repair Costs (RC) are $50,000, the Desired Profit (DP) is $40,000, the Holding Costs (HC) are $10,000, and the Closing Costs (CC) are $5,000. Using the formula:

$MAO = 300,000 - (50,000 + 40,000 + 10,000 + 5,000) = 300,000 - 105,000 = 195,000$

So, the Maximum Allowable Offer is $195,000.