How to Calculate the Maximum Offer on a Wholesale Real Estate Deal

The Formula Every Wholesaler Must Anchor To

The Maximum Allowable Offer, or MAO, is the highest price a wholesaler can pay for a property and still deliver an acceptable profit to a cash buyer. The formula is:

MAO = (ARV x 0.70) - Estimated Repair Costs - Wholesale Fee

Each variable carries real weight. ARV is the After Repair Value, the price a fully renovated property will sell for based on recent comparable sales. The 70% multiplier preserves the cash buyer's profit margin and covers their closing costs, holding costs, and financing. Repair costs are the contractor-verified cost to get the property to that ARV condition. The wholesale fee is what you assign the contract for, typically $5,000 to $15,000 on residential deals.

Get any one of those three inputs wrong, and the deal falls apart at the assignment table.

How to Determine ARV Without Guessing

ARV is not the Zestimate. It is not the seller's asking price. ARV is the median sale price of comparable properties, sold within the last 90 days, within a half-mile radius, with similar square footage and bedroom count, in fully renovated condition.

Pull a minimum of three comps from MLS data or county records. Adjust for square footage at roughly $40 to $80 per square foot depending on the market. If the subject property is 1,200 square feet and comps average $185 per square foot after renovation, your ARV is $222,000.

Use the middle comparable, not the highest. Cash buyers will run their own comps. If your ARV is aggressive, they will recut your number or walk.

Worked Example 1: Single-Family Home in a Mid-Tier Market

A three-bedroom, one-bath house in Memphis, Tennessee sits vacant. The seller wants $90,000. Renovated comps in the same zip code, same bed and bath count, sold in the last 60 days show a median price of $162,000.

ARV = $162,000

Apply the 70% rule: $162,000 x 0.70 = $113,400

A licensed contractor walks the property and estimates $38,000 in repairs, covering a new roof, HVAC replacement, kitchen update, and flooring throughout.

$113,400 - $38,000 = $75,400

You want a $9,000 wholesale fee on this deal.

$75,400 - $9,000 = $66,400

Your MAO is $66,400. The seller is asking $90,000. That gap is $23,600. This deal requires either a motivated seller willing to accept a steep discount or a different exit strategy. At $90,000, the deal does not work as a wholesale assignment.

Worked Example 2: Distressed Property With Strong ARV

A four-bedroom, two-bath colonial in Columbus, Ohio needs full cosmetic renovation plus foundation crack repair. Renovated comps within 0.4 miles, sold in the last 75 days, show a median sale price of $298,000.

ARV = $298,000

70% threshold: $298,000 x 0.70 = $208,600

Contractor scope: cosmetic work including kitchen, two bathrooms, paint, and flooring at $41,000. Foundation repair at $14,500. Total estimated repair cost: $55,500.

$208,600 - $55,500 = $153,100

Wholesale fee target: $12,000.

$153,100 - $12,000 = $141,100

Your MAO is $141,100. If the seller accepts $138,000, you lock the contract, assign it for $150,000, and net $12,000 at closing. The cash buyer acquires the property at $150,000, puts in $55,500, and sells at $298,000. After closing costs on both ends and estimated holding costs of $8,000, the buyer clears roughly $78,000. That is a deal both sides can live with.

Why the 70% Rule Exists, and When to Adjust It

The 70% multiplier is not arbitrary. It accounts for three cost categories the end buyer absorbs: closing costs on the buy side at roughly 1% to 2%, holding costs including financing, taxes, insurance, and utilities over a 4 to 6 month renovation period, and selling costs on the back end including agent commissions at 5% to 6% and buyer closing cost concessions.

In low-cost markets where properties sell under $100,000, cash buyers may require 65% of ARV to hit minimum profit thresholds. In high-value coastal markets where buyers flip $800,000 properties, the multiplier can extend to 75% because absolute dollar margins are larger.

Adjust the multiplier only when you have data on what local cash buyers actually require. Ask the buyers in your network what their buy criteria are before you set your formula inputs. Their minimum acceptable margin is your ceiling.

The Repair Cost Error That Kills Wholesale Deals

Wholesalers routinely underestimate repair costs, and it destroys their buyer relationships. Using a price-per-square-foot estimate instead of a line-item contractor scope is the most common source of error.

A $25 per square foot blanket estimate on a 1,500-square-foot property produces a $37,500 repair figure. If the actual scope, confirmed by a contractor walk-through, comes in at $57,000, the MAO drops by $19,500. A wholesaler who already offered $5,000 over a correctly calculated MAO now has a deal $24,500 underwater.

Get a contractor through the property before you make an offer. If the seller will not allow a walk-through, apply a 20% contingency buffer to your repair estimate and reduce your MAO accordingly.

Closing Section: Run Every Deal Through the Same Calculation

Discipline on MAO is what separates wholesalers who build buyer lists from wholesalers who burn them. Every deal, regardless of how motivated the seller sounds, runs through the same formula: (ARV x 0.70) minus Repair Costs minus Wholesale Fee.

The CalcMoney calculator lets you stress-test your inputs before you ever approach a seller. Adjust the ARV by 5%, change the repair estimate by $10,000, and see exactly how the MAO shifts. A deal that looks tight at one set of assumptions may not survive a conservative comp scenario. Know that before you tie up the contract.

Calculate your Maximum Allowable Offer now with the CalcMoney tool →

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Results are estimates for informational purposes only. Consult a licensed financial professional before making financial decisions.