Maximum allowable offer (MAO) formula for Pittsburgh flips

The standard MAO formula is MAO = (ARV x 0.70) - Rehab - the highest you can pay and still hit ~30% in combined selling costs, financing carry, and profit. Adjust for wholesale fees (subtract them above MAO if buying assigned), hard money carry (use 0.65 instead of 0.70 if rates are above 11% or timeline is >6 months), and tight comp spreads (use 0.65 if ARV is uncertain). Take a Brighton Heights 3/1 with $180k ARV and $42k rehab: MAO = $84,000.

The standard MAO formula

MAO = (ARV x 0.70) - Rehab

Three inputs:

• ARV: after repair value, anchored to renovated single-family comps in similar bed / bath / sqft and the same condition, within a half-mile and 6 months. See how to find ARV comps in Pittsburgh.
• 0.70: the 70% multiplier - 30% buffer covering selling costs, financing carry, rehab overruns, and profit.
• Rehab: a realistic line-item rehab budget for the scope you actually plan to do. DealScanner does not bake a contingency multiplier into its rehab estimate - if you want a buffer, add it explicitly.

Output: the highest price you can offer and still hit your target return. See the 70% rule explainer for the underlying logic.

The adjusted MAO formula (what experienced flippers actually use)

The textbook formula assumes a generic deal. Pittsburgh deals deviate in practice. Adjusted version:

MAO = (ARV x M) - Rehab - Wholesale Fee - Extra Carry

Where:

• M (multiplier) shifts based on market conditions and risk:
  • 0.75 in tight A/B sub-markets with hot exit demand and short timelines
  • 0.70 standard
  • 0.65 when ARV is uncertain, rehab has structural unknowns, or carry costs run long
• Wholesale Fee: if buying from a wholesaler with an assignment fee, subtract that fee separately - it is a real cost on top of the price the seller receives.
• Extra Carry: when timeline stretches beyond 6 months OR rates are above 11%, add the additional carry months explicitly (do not bury them in the 30% buffer).

Standard MAO, step-by-step

Brighton Heights 3BR/1BA single-family. ARV $180,000 (median of multiple comparable single-family sales in the same condition). Rehab $42,000 (full mechanicals, kitchen, bath, paint, floors - line items, no contingency multiplier baked in).

MAO = ($180,000 x 0.70) - $42,000 = $126,000 - $42,000 = $84,000

If listed at $89,000, you are $5,000 over MAO. Negotiate to $84,000 or below, sharpen rehab honestly, or pass.

Wholesale assignment, step-by-step

Same property, but you are buying from a wholesaler with a $10,000 assignment fee. The wholesaler has it under contract with the seller at $74,000.

Adjusted MAO = ($180,000 x 0.70) - $42,000 - $10,000 = $74,000 total purchase price (which is exactly what the seller is getting; you are paying $74k purchase + $10k assignment = $84,000 all-in).

If the wholesaler is asking $85,000 assignment-included, you are $1,000 over MAO - negotiate the assignment fee down or pass.

Tight market, all cash, step-by-step

Same property in 2023's tighter market. Comps are clustered tightly, exits in this sub-market closed in <30 days. You are paying cash so no carry.

Adjusted MAO = ($180,000 x 0.75) - $42,000 = $93,000 - giving you room to bid up to win the deal.

Uncertain ARV, structural rehab, step-by-step

Same property but the walk-through uncovers a cracked sewer line and the comp set has a $25,000 spread (some at $165k, some at $190k).

Adjusted MAO = ($180,000 x 0.65) - $42,000 - $8,000 (extra buffer for the sewer line) = $67,000. The deal is dead at $89,000 list. Walk.

What does the 30% buffer actually cover?

On a typical $180k Pittsburgh flip with hard money:

• Hard money points + interest (6 months): ~$5,500
• Sale closing costs (transfer, title): ~$4,800
• Agent commissions (5%): ~$9,000
• Total non-profit costs: ~$19,300 = ~11% of ARV
• Remainder (~19% of ARV ≈ $34,200) is your gross profit before taxes

If your costs run higher (e.g. paying both buyer and seller agent at 6%, or longer hold), profit shrinks. If you reduce costs (cash purchase, FSBO exit), profit grows. The 30% buffer is an average - your real number depends on your cost structure.

Common MAO mistakes

• Treating MAO as the offer. MAO is the ceiling, not the opening offer. Open lower to leave negotiation room and walk away if the seller will not move below your MAO.
• Anchoring ARV on a single too optimistic comp. ARV should reflect recent comparable sales of single-family homes with similar bed / bath / square-footage and in the same condition - DealScanner's model already weights these together along with location and market trends. Trusting one high outlier inflates the headline MAO and shrinks real margin.
• Pulling comps from a better block or a renovated tier you cannot deliver. A comp from two streets over in a higher-tier neighborhood, or a fully high-end renovation when you are budgeting a B-class scope, both inflate ARV. Match condition, finish level, and micro-location.
• Forgetting wholesale fees. Always treat assignment fees as a cost on top of MAO, not within it. Your MAO to the seller plus the wholesaler's fee is what you are actually paying.
• Underscoping the rehab. "$40k rehab" should mean a real line-item budget for the scope you intend to deliver, not "$40k because that is what makes the deal pencil." DealScanner reports a clean line-item rehab estimate; if you want a contingency buffer, layer it explicitly on top.
• Same multiplier in every market. A 70% multiplier in Squirrel Hill (tight, fast exits) and Mon Valley (slow, uncertain exits) is the wrong tool. Tighten to 65% where exit liquidity, ARV confidence, or rehab certainty are weak; loosen to 75% only when exits are fast, comps are tight, and you have repeatable rehab pricing.
• Re-pricing the deal to make it pencil. If the only way the formula clears is by raising ARV $10k or shaving $5k off rehab, the deal does not work - your model just got loose. Changing the inputs to fit your wants is how flippers go broke.