Max Allowable Offer for Fix and Flip

[Choon Yee Dee]

What’s up everyone!? I have a question regarding max allowable offer.

(ARV x 0.70) - rehab cost = max allowable offer

Example: ($900,000 x 0.70) - $100,000 = $530,000.

My question is, why do I have to subtract the rehab cost? It seems like the spread is large enough to still profit without subtracting the rehab cost.

Maybe I’m misunderstanding this. Thank you!!