Interactive real estate analysis
Maximum Allowable Offer Calculator
Estimate a flip offer from resale value, costs and target profit.
What the maximum offer measures
The maximum allowable offer works backward from a supportable resale price to the acquisition price that leaves room for expenses and a target profit. It is a budgeting limit, not evidence that the seller’s property is worth that amount.
How to Use This Calculator
- Support ARV using recent comparable renovated sales.
- Estimate repair, financing, holding and selling costs separately.
- Set a profit target, then stress-test a lower resale price and longer timeline.
Run Your Numbers
Enter your assumptions below. The calculator provides educational estimates; confirm inputs for your property and financing.
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Understand the numbers
Formulas and Assumptions
This guide explains the core calculation methods. The widget’s detailed assumptions and schedules govern its displayed results.
- Maximum offer = ARV − repairs − buying costs − holding costs − financing costs − selling costs − target profit
- Simplified rule-based offer = ARV × chosen percentage − repairs
How to Interpret the Results
ARV is after-repair value. The simplified percentage is an adjustable screening assumption, not a valuation rule. In a detailed budget, do not deduct the same cost twice. Where costs depend on purchase price or loan balance, the supported offer must be solved with those dependencies included.
Use consistent time periods and enter percentages in the format requested by each field. Test conservative assumptions as well as your expected case. Estimates are not a lending commitment or individualized financial, legal or tax advice.
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Detailed Methodology and Model Assumptions
Solving Closing Costs That Depend on the Offer
Where purchase closing costs equal c × offer, the exact expression is: maximum offer = (ARV − rehab with contingency − holding − selling − target profit) ÷ (1 + c). Here c is a decimal. Simply subtracting a fixed guessed closing bill can overstate the supported offer.
Rehab with contingency = base rehab × (1 + contingency rate). Holding = monthly carrying cost × holding months. Selling costs = ARV × selling-cost rate. If a cost is already included in carrying costs, do not deduct it again.
Detailed Offer Example
Assume $300,000 ARV, $45,000 base rehab, 10% rehab contingency, $10,000 holding, 8% selling costs, $35,000 profit and 2% purchase closing costs. The supported offer is (300,000 − 49,500 − 10,000 − 24,000 − 35,000) ÷ 1.02 = approximately $177,941.18.
Profit at a chosen offer = ARV − offer × (1 + closing rate) − rehab − holding − selling. ROI then divides profit by the actual cash invested. Establish whether the scenario assumes an all-cash project or separate debt-funded sources before interpreting that denominator.
Worked Example
Hypothetical illustration: these figures are separate from the live calculator inputs.
For a $300,000 ARV, subtract $45,000 repairs, $5,000 buying costs, $10,000 financing and holding costs, $24,000 selling costs and $35,000 target profit. The detailed maximum offer is $181,000. A separate 70% rule calculation gives $165,000 after repairs; that percentage already reserves a broad allowance and should not be mixed blindly with the detailed budget.
What is a sensible offer?
The right price leaves a margin for uncertainty after realistic costs. Compare several resale and repair scenarios rather than relying on the most optimistic projection.
Rules of Thumb, and Their Limits
The 70% rule is a screening convention. It does not automatically fit an expensive market, a small renovation or a slow resale. Percentage-based costs may change with the offer itself.
Frequently Asked Questions
Is MAO the same as market value?
No. It is your estimated acquisition limit under a particular project budget and profit target.
Should I include contingency?
Yes. Identify a contingency allowance explicitly so an ordinary repair overrun does not consume the entire planned profit.
Massachusetts and Property-Specific Considerations
Use the municipality’s actual assessed taxes and the property’s current insurance and association costs. Local rent evidence, building condition and the transaction’s legal use matter more than a statewide average. Review current lender or tax requirements where applicable.
Explore Massachusetts investment guides · Use the due diligence checklists · Compare other calculators
Resale Price Sensitivity
| ARV | Supported offer | Target profit |
|---|---|---|
| $300,000 | $177,941 | $35,000 |
| $285,000 | $164,412 | $35,000 |
| $270,000 | $150,882 | $35,000 |
Keep rehab with contingency at $49,500, holding at $10,000, selling at 8% of ARV and buying costs at 2% of the offer. A lower ARV reduces the acquisition price you can justify while preserving the same profit target.
Use the Comparison in Your Decision
Change one assumption at a time in the calculator, record the result and compare it with your base case. Then combine adverse assumptions to see whether the plan still fits your cash reserves and objectives. A useful scenario explains what must remain true for the transaction to work.