Every deal you look at costs you time. The faster you can tell if a deal works, the more leads you can evaluate, and the more deals you can close. The wholesalers running 5 to 10 deals a month are not smarter than everyone else. They have a repeatable system for running numbers quickly and confidently.
This is that system.
The MAO Formula
Everything in wholesale deal analysis comes back to one formula: the Maximum Allowable Offer, or MAO. This is the most you can pay for a property and still have a deal that works for everyone.
After Repair Value times 70%, minus your estimated repair cost, equals the most you should pay.
The 70% figure gives the rehabber buying from you enough room to cover their renovation costs, holding costs, closing costs, and profit. If you pay more than MAO, the math breaks down for your end buyer, and your deal will sit on the market unsold.
Your assignment fee comes out of the gap between your contract price and MAO. If MAO is $120,000 and you get the property under contract at $100,000, your spread is $20,000. After your assignment fee, the end buyer still pays at or below MAO and the deal makes sense for them.
Step 1: Estimate ARV
ARV is what the property will be worth after a full renovation, in retail-ready condition. This is not the current value. It is the post-fix value, based on what similar updated homes in the same area are actually selling for.
How to pull comps quickly
You are looking for sold properties, not listed. Listings are asking prices. Sold prices are reality. Use Zillow, Redfin, or your MLS if you have access. Filter for:
- Same zip code or within 0.5 miles (tighter in dense urban areas, broader in rural)
- Similar square footage: plus or minus 20 percent of your subject property
- Same number of bedrooms and bathrooms, or close
- Sold within the last 90 days (180 days in slower markets)
- Updated condition: you want to compare against renovated homes, not distressed ones
Pull 3 to 5 comps, weight the ones most similar to your property, and land on a number you feel confident defending to a buyer. This is your ARV.
Do not use Zestimate as your ARV. Automated valuations average everything in the area including distressed properties. Pull actual comps, look at photos of those comps, and compare their condition to your post-renovation vision for the subject property.
Step 2: Estimate Repairs
Repair estimation is where most new wholesalers get into trouble. They either guess too low (deal falls apart when the buyer gets a contractor quote) or they call a contractor for every lead (too slow, not scalable). The answer is a condition-based estimate you can run yourself from photos.
The condition tiers
Most distressed properties fall into one of three buckets:
- Light rehab: $15 to $25 per square foot. Cosmetic work only. Paint, flooring, fixtures, appliances, landscaping. Roof and mechanicals are functional.
- Medium rehab: $30 to $50 per square foot. Kitchen and bath updates, some mechanical work (water heater, HVAC service), possible roof repair.
- Heavy rehab: $55 to $85+ per square foot. Full gut or near-gut renovation. Roof replacement, HVAC replacement, foundation issues, significant structural work, or severe water damage.
On a 1,400 square foot house, a light rehab estimate is $21,000 to $35,000. A heavy rehab estimate is $77,000 to $119,000. These are starting points, not hard numbers. Adjust up if you see specific red flags.
Red flags that push estimates higher
- Roof over 15 years old or visibly damaged (add $8,000 to $18,000)
- HVAC unit over 12 to 15 years old (add $5,000 to $10,000)
- Water stains on ceilings or walls (investigate source, can mean $5,000 to $30,000+)
- Knob-and-tube or aluminum wiring (add $8,000 to $20,000 for electrical update)
- Foundation cracks or settling (highly variable, get a quote if you see signs)
This is exactly why property photos matter so much. You cannot estimate repairs on a property you have never seen. For virtual deals, that means getting complete, organized photos from the seller before you do your analysis. Guessing on repair costs and getting it wrong is how you lose money or lose buyers.
Step 3: Run the MAO Math
Once you have ARV and repairs, the formula takes 30 seconds:
- ARV: Based on comps, your property in renovated condition will sell for $150,000.
- 70% of ARV: $150,000 × 0.70 = $105,000.
- Estimated repairs: Medium rehab on a 1,300 sq ft house = $45,000.
- MAO: $105,000 − $45,000 = $60,000. That is the most you should pay.
- Your target contract price: $60,000 minus your desired assignment fee. If you want $10,000, you need to get it under contract at $50,000 or less.
Step 4: Sanity-Check the Seller's Number
Before you get to offer time, you have already asked the seller what they need to get out of it (covered in the seller call). Now you compare their number to your MAO.
If their number is at or below your contract price target, you have a potential deal. If they want $80,000 and your target is $50,000, that gap is probably too wide to close unless you can justify a lower ARV or higher repair estimate together.
Do not waste time trying to talk a seller from $80,000 to $50,000 in one call. Qualify fast, make your offer, and move on. Most no's are just leads that were not the right fit, not deals you failed to close.
What You Cannot Analyze Without Photos
The MAO formula is only as good as the inputs you put into it. ARV you can pull from comps in any market. But repairs require knowing what you are actually dealing with, and that requires seeing the property.
Specifically, you cannot reliably estimate:
- Roof condition and remaining life
- HVAC age and condition
- Water damage extent
- Flooring and kitchen condition
- Any deferred maintenance that is not visible from the street
For local deals, this is solved by a walkthrough. For virtual deals, it means getting a complete photo submission from the seller before you finalize your numbers. A thorough set of organized photos, including mechanical areas and all interior rooms, gives you enough to assign your deal to a condition tier and build a defensible repair estimate. See the full breakdown of what photos you need to wholesale a house.
Never present a deal to a buyer with a repair estimate you cannot support. If a buyer gets a contractor quote that is double your number, you lose the buyer and your credibility. Get the photos, then price the repairs.
Common Deal Analysis Mistakes
Using asking prices instead of sold comps for ARV
Listings do not tell you what homes sell for. Only sold prices do. Always pull closed sales from the last 90 days.
Underestimating repairs to make the deal work on paper
If the deal only works with an optimistic repair estimate, it is not a deal. Your buyer will find out the real number. When they do, they either back out or you have to cut your fee to keep it alive.
Using a flat 70% in markets where buyers expect more room
In slower markets or higher-risk properties, buyers may need to be at 65% of ARV minus repairs to feel comfortable. Know your buyers and what they need before you set your MAO target.
Skipping the comp photos
Looking at the sold price of a comp without looking at its photos is a mistake. A $150,000 sale might be a fully renovated home with granite and new flooring, or it might be a dated but functional flip. Those are different ARV baselines for your property.