All Forum Posts by: Richie Martin

Great. I was doing it correctly ARV *70% =MAO if I read your explanation correctly..

This threw me off: MAO = (0.70 * ARV) - Rehab... If the rehab is already part of the ARV why subtract it again?

This is what I have been using:

Hi Richie,

Great question! To clarify, the MAO (Maximum Allowable Offer) is indeed the price at which you should aim to offer for the property. Here's a breakdown of the process:

1. ARV (After Repair Value): This is the estimated value of the property after it's been fully renovated.

2. Purchase Price + Renovation Costs + Holding Costs: These are the costs involved in acquiring and improving the property. Make sure to include all potential expenses for repairs and the time it may take to sell or refinance the property.

3. Multiply by 70%: This percentage helps account for your profit margin, unexpected expenses, and ensures you leave room for a reasonable return on investment (ROI).

So, once you've calculated your ARV and added in your purchase, renovation, and holding costs, multiplying by 70% will give you the MAO, the maximum price you should offer for the property to stay within profitable margins.

In essence, your MAO is the highest amount you should be willing to pay for the property, factoring in all your costs and desired profit.

I hope this clears things up! Let me know if you need further clarification or help with the numbers. I also have a spreadsheet I can send you that I use to run numbers on every offer I make. 

Best regards,
Laura

 Perfectly put! So much clearer than I. 

Hey @Richie Martin, welcome to the BP Forum! Nope, take the ARV and times it by 70% and THEN subtract the rehab costs. So, for a $200k ARV that needs $25k in rehab, it would be 200*0.7=140-25. So, $115k.

For the algebra nerds, it's: MAO = (0.70 * ARV) - Rehab. FYI, the holding costs are built into the 70% discount factor.