This One Number Could Save -- or Sink -- Your Next Deal

July 02, 2025

This One Number Can Make or Break Your Deal

Imagine falling in love with a property.

The curb appeal? Sweet

The neighborhood? Quiet, walkable, maybe even a little bougie.

You’re halfway through mentally placing the welcome mat when—WHAM!—you realize you’ve ignored the one number that decides whether you’re flipping a winner or marrying a money pit:

Your maximum allowable offer. (A.K.A. your MAO.)

Yes, that’s the number. Not the ARV, not the repairs, not your cousin’s gut feeling. Your MAO is the financial line in the sand. Cross it, and your profit vanishes like drywall in a termite convention.

How to Get It Right (Without Guessing)

The MAO formula isn’t rocket science, but ignore it at your peril:

MAO = (ARV × Discount Rate) – Repairs – Holding Costs – Misc. Costs

The key here is the discount rate—your margin of safety. For flips, it’s often 70%, though market conditions may push that up or down. For rentals, it might be more generous. But no matter what kind of exit strategy you’re planning, if you don’t calculate your MAO first, you’re just guessing with expensive consequences.

But But But …, I Just Feel Like It’s a Good Deal…

Cool. Do you also “feel” like writing checks at closing?

Because that’s what happens when you skip the math.

Emotions make great HGTV. They make terrible partners in due diligence.

The Bottom Line:

  • Always know your MAO.

  • Always stick to it.

  • Always walk away when the numbers don’t work.

And don’t fret. As world famous investor and mentor, Gordon Catts says, “Real estate deals are like street cars — another one will be along in 5 minutes.”

News you’re not getting—until now.

Join 4M+ professionals who start their day with Morning Brew—the free newsletter that makes business news quick, clear, and actually enjoyable.

Each morning, it breaks down the biggest stories in business, tech, and finance with a touch of wit to keep things smart and interesting.