Real estate investing is 10% finding houses and 90% managing your own emotions. The biggest mistake a rookie investor makes is “falling in love” with a property and overpaying.
In a BRRRR deal, your profit is locked in the moment you buy. To protect yourself, you need a cold, hard mathematical line in the sand: the Maximum Allowable Offer (MAO).
What is the MAO?
The MAO is the absolute highest price you can pay for a property to ensure your refinance covers your costs and the deal remains profitable. If the seller wants $155,000 and your MAO is $150,000, you walk away. No exceptions. No “what ifs.”
The 70% MAO Formula
The most common way to calculate MAO is using the 70% rule, but it’s tailored specifically for BRRRR and Flip investors:
MAO = (ARV × 0.70) - Rehab Costs
- ARV (After Repair Value): What the house is worth after it’s beautiful.
- 70%: This 30% gap covers your buying costs, holding costs, interest, and the 20-25% equity the bank will require to stay in the deal during the refinance.
- Rehab: Every dollar needed to fix the foundation, the roof, and the kitchen.
Example in Action:
- ARV: $200,000
- Rehab Estimate: $40,000
- Calculation: ($200,000 × 0.70) - $40,000 = $100,000 (MAO)
If you pay $110,000, you are essentially gambling that the market will appreciate or that your contractor will be cheaper than expected. Both are dangerous bets in 2026.
⚠️ The “Fixed Cost” Trap
Many investors forget to include their “holding costs” (property taxes, insurance, and interest on the hard money loan) while the house is being renovated. These can easily eat up $5,000 to $10,000 of your margin.
If you don’t account for these, your “perfect BRRRR” will quickly turn into a deal where you leave $15,000 of your own cash trapped in the house.
Stop using “napkin math” and guesswork. 👉 Calculate your exact Refinance and Cashflow with BRRRR Metrics right now. Don’t sign a contract until you see the numbers.
Adjusting MAO for 2026 Markets
In high-competition markets (like Florida or Texas), finding a 70% MAO deal is rare. Some investors are pushing their MAO to 75% or 80%.
While this helps you win more bids, it increases your risk. If the appraisal comes in even 3% lower than expected, you could find yourself unable to pull your cash out, killing your ability to “Repeat” the process.
The 3 Rules of the MAO:
- Verify your ARV: Never guess. Use real comparable sales.
- Buffer your Rehab: Always add a 10% contingency for “hidden” issues behind the walls.
- Stick to the Number: The MAO is your shield. Use it.
Conclusion
The MAO is what separates professional investors from “hobbyists.” Pros follow the math; hobbyists follow their hearts.
Before you make your next offer, run the scenario through BRRRR Metrics. If the calculator says you’ll leave too much cash in the deal, you know exactly what to do: Lower your offer or walk away.