Are the MAO too low for these subject properties?

Question

I found subject properties and found the 3 comps for each. The subject properties were in really in poor condition and needed a full gut renovation for each. Here is the details for this ->

1) ARV Range = $220k-$240k

ARV = $230k

Renovations: $135k

Assignment Fee: $10k

MAO = $16k

2) ARV Range = $330k-$360k

ARV = $340k

Renovations: $120k

Assignment Fee: $10k

MAO = $210k

3) ARV Range = $320k-$360k

ARV = $345k

Renovations: $167k

Assignment Fee: $10k

MAO = $64k

Does this seem to little for a MAO did I do something wrong with the renovation estimates. Or does these sound okay?

Caleb Brown · Answer

I think you need to dive deeper into the rehab. 120K rehab on a 800 SQ FT property would be a full rehab, how do you know it needs a gut and a bunch of mechanicals? If you're just guessing without getting info on the condition you'll be wasting time. Many properties won't need a full gut and mechanicals so you need to figure out what's needed then estimate the rehab.

Alex Carter · Answer

Arthur, I just audited the numbers in your post. You are mixing up your formulas, which is exactly why your results feel off.

On Properties 1 and 3, you correctly applied the standard 70% Rule [(ARV x 0.70) - Rehab - Fee]. Your MAOs of $16k and $64k are mathematically accurate. The reason they feel painfully low is that your rehab estimates are massive relative to the property value. When a rehab consumes 60% of the ARV, the seller's equity is entirely wiped out. The math is correct; it's just a severely distressed asset.

However, you made a critical error on Property 2. You completely forgot to apply the 70% multiplier. You calculated ($340k - $120k - $10k = $210k). If you contract that property at $210k, you are leaving $0 in the deal for the cash buyer's profit, holding costs, or closing costs. No flipper will touch it. The true MAO for Property 2 using the 70% rule is $108k.

Don't try to force the numbers to look pretty for the seller. If the math dictates the MAO is $16k, offer $16k. If they say no, walk away.

Carson Nordmann · Answer

Your formula looks like ARV x 0.7 minus rehab minus fee, which is the standard wholesale MAO. Numbers 1 and 3 just have rehab eating most of the spread, that's the math working correctly. A 135k rehab on a 230k ARV usually isn't a wholesale deal, it's a heavy-rehab flip that only pencils for a specific buyer.

Arthur Hernandez · Answer

Okay. I sent you a message with more details. I am already looking into the rehab estimates inaccuracy and how to get it accurate by using line items instead of just assuming this is a full gut or cosmetic by looking at the photos. And yes I don't know why the $210k happened it. I must of hit the wrong button on my calculator while doing the MAO, will be very careful with that.

Arthur Hernandez · Answer

I am using this table I got from Gemini AI.

What I did was take a look at the subject property and look at the photos and saw that the house needed a full gut. So depending on the sqft of the subject property if it was 850 sqft I used $120 * the Subject Property sqft to keep it conservative but really wanted to use $100. Two cash buyers told me that they just wanted the renovation estimate like Full Gut $140k (with line items like Roof $2k, etc...).

Cost and Market Context (2026 Estimates)

In the current Fort Worth market, a full gut is a significant investment. Based on regional data for 2026:

Project Level

Estimated Cost (per sq. ft.)

Total for 1,200 sq. ft. Home

Cosmetic Refresh

$15 – $60

$18,000 – $72,000

Mid-Range Remodel

$60 – $100

$72,000 – $120,000

Full Gut Renovation

$100 – $150+

$120,000 – $180,000+

Are the MAO too low for these subject properties?

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