Beyond the 70% Rule: Choosing Your MAO Percentage for Different Deal Types and Markets

# Beyond the 70% Rule: Choosing Your MAO Percentage for Different Deal Types and Markets Every wholesaler knows the 70% rule: *MAO = (ARV × 0.70) − Repairs − Profit* But here's the problem: **70% only works in normal markets.** In hot, competitive markets, 70% is too high—you'll overpay and lose deals to other investors. In slow markets, 70% is too low—you're leaving money on the table and losing motivation to pursue deals. Successful wholesalers adjust their percentage based on market conditions and deal type. And they know **why** they're adjusting. This guide covers all three rules (65%, 70%, 75%), when to use each, and how to decide for your market. ## The Three Rules Explained ### The 65% Rule (Competitive Markets) **Formula:** MAO = (ARV × 0.65) − Repairs − Profit Margin **Example:** - ARV: $300,000 - Repairs: $30,000 - Profit target: $10,000 - **MAO = ($300k × 0.65) − $30k − $10k = $125,000** **When to use 65%:** - Multiple offers on every property (hot market) - Buyer competition is fierce - Properties sell fast (months, not weeks) - You need speed over profit margin - Goal: Quick assignment fees ($5-10k per deal) **Why it works:** 65% gives you lower entry price than competitors, making your offer more attractive. You buy below market, assign fast, and move volume. **Real estate investors are thinking:** *"If I can't get this deal at 65% max, someone else will—and I'll be back to no deals."* ### The 70% Rule (Standard/Normal Markets) **Formula:** MAO = (ARV × 0.70) − Repairs − Profit Margin **Example:** - ARV: $300,000 - Repairs: $30,000 - Profit target: $15,000 - **MAO = ($300k × 0.70) − $30k − $15k = $135,000** **When to use 70%:** - Balanced market (offers come in, but not 10 per property) - Mix of quick and slower sales - You can afford to hold 1-2 months if needed - Goal: $15-25k profit per deal (assignment or wholesale) **Why it works:** 70% is the "sweet spot" for most markets. It's competitive enough to win deals, but leaves enough margin to profit whether you assign or rehab. **Real estate investors are thinking:** *"I need to be in the game (70% is competitive), but I also need to make real money ($15-25k per deal)."* ### The 75% Rule (Slow Markets & Rentals) **Formula:** MAO = (ARV × 0.75) − Repairs − Profit Margin **Example:** - ARV: $300,000 - Repairs: $30,000 - Profit target: $12,000 (or hold for rental) - **MAO = ($300k × 0.75) − $30k − $12k = $153,000** **When to use 75%:** - Slow market (few buyers, slow sales) - Less competition from other wholesalers - You're holding for rental income (not quick flip) - Long-term perspective (5-10 year hold) - Goal: Cap rate income or long-term appreciation **Why it works:** In slow markets, you have fewer deals overall. 75% lets you pay more per deal and still make money. For rentals, the goal isn't quick assignment—it's monthly cash flow. **Real estate investors are thinking:** *"The market is slow, so I can be more selective. I'll pay more if the deal makes sense for a rental hold."* ## The Decision Matrix: Which Rule for Your Situation? | Factor | 65% Rule | 70% Rule | 75% Rule | |--------|----------|----------|----------| | Market competition | High (hot) | Medium (normal) | Low (slow) | | Properties available | Many | Balanced | Few | | Time to resale | 1-2 months | 2-4 months | 4-12+ months | | Strategy | Quick wholesale/assignment | Wholesale or flip | Hold/rental | | Profit per deal | $5-15k (quick) | $15-30k (varied) | $10-20k (ongoing) | | Buyer pool | Small/niche | Large | Hold yourself | | Confidence in ARV | Very high | High | Medium (values stable) | ## Real-World Examples: Different Markets, Different Percentages ### Example 1: Las Vegas Wholesaler (Hot Market = 65%) Dave operates in Vegas, where properties move fast and competition is fierce. **Property: SFH, ARV $320,000, Repairs $25,000** Dave's offer at 65%: - MAO = ($320k × 0.65) − $25k − $10k = $193,000 Competitor at 70%: - MAO = ($320k × 0.70) − $25k − $10k = $209,000 **Result:** Competitor's offer is $16k higher. Dave loses the deal. But Dave gets volume. He does 40 deals/year instead of 20, and still makes $8-10k per deal (assignment fee). **Annual profit: $360-400k** instead of $300-500k. **His rule:** "In Vegas, 65% = volume. I'm okay with $10k per deal because I close 40+/year." ### Example 2: Small-Town Real Estate Agent (Slow Market = 75%) Sarah is a realtor in rural Kentucky, selling mostly to local investors and owner-occupants. **Property: SFH, ARV $120,000, Repairs $15,000** At 75%: - MAO = ($120k × 0.75) − $15k − $10k = $75,000 At 70%: - MAO = ($120k × 0.70) − $15k − $10k = $69,000 **Result:** At 75%, Sarah can offer $6k higher and still make money. Sellers prefer her higher offers. She closes 15 deals/year at 75% vs. 10 deals/year at 70%. **Her rule:** "In slow markets, I bid higher because inventory is scarce. More offers closed > fewer offers at lower prices." ### Example 3: Hybrid Investor (Mix of 65% and 70%) Michael operates in Phoenix, a medium market, but has different strategies: - **Quick assignments:** 65% (target $8-12k assignment fee, close in 45 days) - **Fix-and-flips:** 70% (target $25-30k profit, close in 4-6 months) **Same property, different MAO based on strategy:** - Property: ARV $250k, Repairs $35k - For assignment (65%): MAO = ($250k × 0.65) − $35k − $8k = **$125,000** - For flip (70%): MAO = ($250k × 0.70) − $35k − $25k = **$130,000** **His rule:** "I use 65% for flips I'll assign fast, and 70% for flips I'll hold. Gives me flexibility." ## How to Know Your Market's Real Percentage Don't guess. Test your market: **Step 1: Review last 10 deals** - What price did you pay (dollars)? - What was ARV? - Calculate your actual percentage: (Price Paid ÷ ARV) × 100 **Step 2: Calculate margin** - Did you make money at that percentage? - What was your profit after repairs? **Step 3: Ask yourself** - Did deals sell fast at that price? - Did you lose deals to competition at lower offers? - Could you have paid more and still profited? **Step 4: Adjust for next 10 deals** - If you lost deals: try lower percentage (65%) - If you sold fast but left money: try higher percentage (75%) - If you hit sweet spot: keep your percentage ## Common Mistakes When Choosing Percentages **Mistake 1: Using the same percentage everywhere.** Virginia and Texas markets behave totally differently. Vegas wholesale is different from Kentucky rentals. Test and adjust per market. **Mistake 2: Picking percentage before knowing ARV.** Get accurate ARV first (3-5 comparable sales), then apply your percentage. Bad ARV = wrong MAO. **Mistake 3: Using historical rules in changing markets.** Markets shift. If your market was slow for 5 years, then suddenly got hot, you need to adjust from 75% down to 70% or 65%. **Mistake 4: Not adjusting for deal type.** Same property, different strategy = different rule. Assignment deals can support 65%. Holds can support 75%. **Mistake 5: Forgetting the cost of capital.** If you're financing deals at 12% interest, your true cost per dollar borrowed is higher. You might need to use 65% even in slow markets. ## The Hidden Factor: Deal-Specific Adjustments Beyond market condition, these factors might move you up or down 2-3%: **Reasons to go LOWER (more aggressive, lower offer):** - Bad condition (major foundation, roof, electrical issues) - Weird location (highway noise, weird parcel shape) - Difficult tenants (need eviction or buyout) - Title issues (liens, boundary disputes) **Reasons to go HIGHER (less aggressive, higher offer):** - Premium location (walkable, near transit, desirable school) - Move-in ready (minimal repairs) - Great bones (solid structure, good layout) - Future upside (neighborhood improving, new development coming) ## Free Tool: MAO Calculator Stop guessing. Use our **[MAO Calculator](https://listcentral.us/pages/tools-mao-calculator-deal-analyzer)** to: - Input ARV, repairs, and profit target - See MAO for all three rules (65%, 70%, 75%) - Compare outcomes instantly - Export results for your deal analysis ## Related Tools & Resources MAO is step 2 in your wholesale workflow: 1. **[Motivated Seller Scorecard](https://listcentral.us/blogs/tools-for-real-estate-professionals/lead-prioritization-motivation-scoring)** — Find high-probability sellers first 2. **[Direct Mail ROI Calculator](https://listcentral.us/pages/tools-direct-mail-roi-calculator)** — Budget your outreach to find those sellers 3. **[MAO Calculator](https://listcentral.us/pages/tools-mao-calculator-deal-analyzer)** — Price your offers (this article) 4. **[Skip Trace Cost Estimator](https://listcentral.us/blogs/tools-for-real-estate-professionals/skip-trace-roi-vendor-comparison-cost-per-contact)** — Find contact info for your leads ## Next: Vendor Evaluation Once you know your MAO and find a deal, you need contact information to negotiate. Read our [Skip Trace ROI guide](https://listcentral.us/blogs/tools-for-real-estate-professionals/skip-trace-roi-vendor-comparison-cost-per-contact) to learn how to compare vendors by true cost-per-contact. --- **Key Takeaway:** The 70% rule is a starting point, not a gospel rule. Successful wholesalers adjust based on market speed, competition level, and deal type. Fast market = 65%. Normal market = 70%. Slow market or rentals = 75%. Test your market, know your numbers, and adjust accordingly. Start calculating with our **[free MAO Calculator](https://listcentral.us/pages/tools-mao-calculator-deal-analyzer)**.