The 60-second deal screen: napkin math & your maximum offer
MAO = ARV × 70% − repairs. Learn to run it in your head at a stoplight, know exactly where the missing 30% goes, and never again wonder whether a lead deserves your evening.
Every profitable flipper owns one reflex: hearing an address and a price, and knowing within a minute whether it's worth a walk-through. That reflex is one formula plus the discipline to obey it — and by the end of this lesson it's yours.
The formula
Maximum Allowable Offer = (ARV × 70%) − repair costs.
House worth $260k fixed up, needing $40k of work: MAO = $182k − $40k = $142k. Anything above that number, you walk — not negotiate, walk. The formula's power isn't precision; it's that it makes walking automatic.
Where the 30% actually goes
The missing 30% isn't profit — it's everything the TV shows edit out, and internalizing this table is what makes the rule yours instead of a rumor:
| The 30% of a $260k ARV ($78k) | Roughly |
|---|---|
| Selling costs — commission, closing, concessions (~8%) | $21k |
| Financing — hard money interest + points, 6 months | $12k |
| Holding — taxes, insurance, utilities | $5k |
| Your profit (what's left) | $30–40k |
Squeeze the buy price $10k above MAO and look at that table: the squeeze comes out of exactly one line. Yours.
When to flex the 70: it's a mid-market rule of thumb, not physics. High-priced markets run 75–80% (the fixed costs shrink relative to price); sub-$100k houses need 65% (they don't). Calibrate once to your market, then obey your number the way you'd have obeyed 70. → The full teardown
The napkin repair bands
You'll learn real estimating in Module 4 — for the 60-second screen, per-square-foot bands are enough: cosmetic $15–30/sqft · moderate $30–60 · gut $60–100+ (mid-market; coastal runs double). A 1,400 sqft house that "just needs paint and floors" is ~$30k; the same house with a 1987 kitchen and original baths is ~$55k. Screen with the band, offer only after the walk-through. → The three levels of rehab math
Run it live
Wholesaler texts you: "3/2, 1,350 sqft, ARV $240k, needs $35k, asking $145k."
- MAO: $240k × 0.70 − $35k = $133k. Asking is $12k over. Not a no — a negotiation with a hard ceiling you now know before you call back.
- Sanity-check their inputs, because they're selling: is $240k a median-of-three ARV or the best sale on the street? Is $35k a real band for that vintage, or a brochure number? (Module 3 makes you dangerous at exactly this.)
The pitfall to skip: reverse-engineering the formula — nudging ARV up and repairs down until the deal you want passes the screen. The formula only protects people who feed it honest inputs; the deals that ruin first-timers all passed a massaged MAO.
Do this now: Open the Flip Calculator and run five real listings from your market through it — watch where the 30% goes on each. Then run the next three deals you hear about in your head first, calculator second. The reflex builds in about twenty reps.