How Investors Determine Their Offer

 The formula you provided (ARV * 70% - Repair Cost = MAO) is commonly used in real estate investing to determine the maximum allowable offer (MAO) for a property.

ARV stands for After Repair Value, which is an estimate of what the property will be worth after any necessary repairs or renovations have been completed. The 70% is typically used as a rule of thumb to determine the maximum offer, as it allows the investor to cover the cost of the repairs and still make a profit.

The formula works as follows:

1. Take the ARV and multiply it by 70% to get the maximum offer,
2. Subtract the cost of repairs from the maximum offer obtained in step 1,
3. The result will be the MAO, which is the highest amount the investor should offer for the property.

For example:

• If the ARV of a property is $200,000 and the estimated cost of repairs is $30,000, then: $200,000 * 70% = $140,000 (maximum offer) $140,000 - $30,000 = $110,000 (MAO)

It's important to note that this is just a general rule of thumb, and actual offers will vary depending on the specific market conditions and the investor's goals and strategy. Additionally, this formula does not take into account other expenses such as closing costs, holding costs, and realtor commission which can impact the final offer.