Deal Analysis & The MAO Formula

Three numbers decide whether a deal makes money or loses it. After Repair Value, rehab costs, and your profit margin. Get any one of them wrong and the whole thing falls apart.

ARV is what the property sells for after renovation. Not what Zillow says. Not what the seller thinks. What similar, recently renovated properties actually sold for within a half mile. That's your target number, and you need real comp data to back it up.

Rehab costs are what it takes to get the property from its current condition to that post-renovation ARV. Roof, HVAC, kitchen, bathrooms, flooring, paint, landscaping. The big items are predictable if you learn the ranges. A roof runs $8,000-18,000 depending on size. A full kitchen is $15,000-35,000. Cosmetic-only work on a 1,500 sq ft house runs $15-25 per square foot. Add 10-20% contingency because something behind a wall is going to surprise you.

Profit margin depends on your exit strategy. Wholesalers need room for their fee ($5K-25K) plus enough spread for the end buyer to profit. Flippers need to cover holding costs (insurance, loan payments, utilities, taxes for however many months the rehab takes) plus their target return. For BRRRR investors, the total investment needs to stay below 75% of ARV so they can refinance out their capital.

The interplay matters. If your ARV is aggressive and your rehab estimate is light, you think you have a $30,000 spread when you actually have a $5,000 loss. Conservative inputs protect you. Optimistic inputs bankrupt you.

MAO stands for Maximum Allowable Offer. It's the ceiling on what you can pay for a property and still make your target profit.

The formula for wholesalers: ARV times 70%, minus rehab costs, minus your assignment fee. Take a property with a $250,000 ARV that needs $40,000 in work. You want a $10,000 fee. $250,000 times 0.70 is $175,000. Subtract $40,000 for repairs. Subtract $10,000 for your fee. Your MAO is $125,000. Offer at or below that number.

The 70% multiplier accounts for the end buyer's closing costs, holding costs, and profit. It's a starting point. In competitive markets where buyers accept thinner margins, you might go to 75%. In slower markets or on properties with major structural issues, drop to 65% or lower. You need to know what percentage your buyers actually work at. Ask them.

For flippers, the math is tighter because you're eating the holding costs yourself. Six months of insurance, loan interest, utilities, and property taxes on a $250K property adds up to $12,000-18,000 depending on your financing. That comes out of your margin.

FlipMantis runs this calculation automatically. Pull a property address, enter your rehab estimate, and the underwriting tool shows your MAO for wholesale, flip, and BRRRR side by side. Change one input and all three scenarios update in real time. It also flags when your ARV seems high compared to recent sales in the area, which keeps you honest when you're excited about a deal.

Garbage comps produce garbage ARVs. And a garbage ARV will cost you more money than any other mistake in this business.

In FlipMantis, enter the subject property address and the comp tool pulls recent sales from ATTOM data. You'll see them plotted on a map with sale prices, dates, and property details. Start filtering: sold within six months, within a half-mile radius, same property type, similar bed/bath count.

Three to five comps is your target. If you can only find one or two, your data isn't strong enough to make an offer. Either expand your search radius slightly or wait for more sales activity in the area.

Adjustments are where beginners mess up. Your subject property has three bedrooms. The best comp has four. That's a $10,000-20,000 adjustment depending on the market. Your property is 1,200 square feet. The comp is 1,600. At $30 per square foot, that's a $12,000 adjustment. The comp has a two-car garage, yours has a carport. Another $15,000-20,000.

FlipMantis lets you make these adjustments line by line and saves them to your underwriting file. When you're done, take the median of your adjusted comps. Not the average, because one outlier can pull the average way off. Not the highest, because that's probably the outlier. The median is your ARV.

The Mantis Score cross-checks your work. If you've set an ARV that's higher than what the data supports, the score drops. It's not telling you the deal is bad. It's telling you to double-check your numbers before you commit.

The deal you don't do can save you more money than the deal you close. Knowing when to walk is a skill, and the market doesn't reward stubbornness.

Foundation problems are the number one deal killer for a reason. Hairline cracks in the drywall are cosmetic. Stair-step cracks in brick, doors that won't latch, and floors that slope? That's structural movement. Repairs start at $10,000 and can blow past $30,000 with no hard ceiling. If there's no engineer's report, don't guess. Walk.

Title issues kill deals quietly. Liens from unpaid contractors, IRS tax liens, unresolved probate, boundary disputes. Order your title search early so you find these before you've invested weeks into a deal. If the seller can't clear the title, it doesn't matter what the numbers look like.

The biggest red flag is your own math. If you need the highest comp, the lowest rehab estimate, and a best-case timeline to make the deal pencil, it doesn't pencil. Deals should work with conservative inputs. If you need everything to go right to break even, one surprise wipes out your profit.

FlipMantis surfaces risk indicators in the property data. Flood zone designation, permit history, environmental flags. Pay attention to them. They're not there to talk you out of deals. They're there to make sure you're walking in with your eyes open.