The direct answer
Maximum allowable offer (MAO) sensitivity shows how a flip investor's bid ceiling changes when after-repair value, repairs, transaction costs, holding period and desired profit change. The widely used 70% heuristic is not a universal valuation rule.
Define a transparent offer formula
For a direct profit-target model, start with expected exit price and subtract estimated repair, selling, financing, holding and required profit amounts, adjusting for buyer acquisition costs.
To apply the approach to an editable scenario, use the Maximum Allowable Offer Calculator. For the neighboring question, explore ARV Calculator.
Stress ARV and scope together
An optimistic ARV paired with unrealistically low repair costs can materially inflate the offer ceiling. Compare several independently supported scenarios.
Retain an appropriate risk margin
Contingency is distinct from target profit; both can be necessary when the deal contains unresolved physical or market risk.
Worked example
If expected sale price is $400,000, repairs $70,000, selling and carrying costs $45,000 and desired profit $55,000, illustrative MAO before any additional acquisition charges is $230,000. A $20,000 repair overrun cuts it to $210,000.
Open Maximum Allowable Offer Calculator and test your assumptions →
Common mistakes and limitations
Do not treat ARV minus repairs as MAO; financing, selling, holding costs and required profit matter.
Rule-of-thumb calculator only. Market conditions, financing, taxes and required return vary by investor.
Frequently asked questions
Does the 70% rule work everywhere?
No. It is a heuristic that can differ markedly from property-specific underwriting.
Does a higher ARV always justify a higher bid?
Only if the value estimate and other deal assumptions are credible.
Sources and further reading
The article’s examples are illustrative arithmetic. The references below provide context for operating, valuation or transaction concepts; they do not endorse the assumptions or the calculator.
- IRS — Publication 527 (2025), Residential Rental PropertyRental income and expense concepts; operating/rental expense context.
- Office of the Comptroller of the Currency — Comptroller's Handbook — Commercial Real Estate LendingNOI, direct capitalization, cap-rate valuation and DCF concepts for commercial real estate.
Read our editorial policy for the scope of these educational methods.