@Diamonte ZarbaWelcome to BiggerPockets When figuring out MAO  I use the following numbers ARV x70%, - repairs -holding cost (10% of ARV), desired profit (20% of ARV) , cushion or oops factor (7% of ARV) = Maximum Allowed Offer Hope this helps Steve

It seems like this one has a good cushion - because something certainly will go wrong in the rehab, so having a good contingency is a pretty great - especially on your first.Good luck with the flip!

I'd recommend looking for a house that is priced $50k-$100k where the ARV might be $120-$150k so you have a good cushion.

Real estate is  mostly about location, holding when things get hairy and having  a nice cushion when things go bad.

However, I couldn't have pulled that off and made a profit if I had paid too much when I bought it.Leave yourself extra "cushion", knowing that you won't be able to sell or rent at market prices, you will have to likely lower your price to do something with it.

Being your first deal I find it wise to have cushion just in case. 

One thing is certain, you do not want to try so hard to be the cheapest bid that you don't have the money that it's going to take to do the work, and have some type of cushion for the unknowns, because we know there's always something.

I would offer in the range of $65 to $69 just to cover the repairs, which places you "after repairs" with a 30 % cushion.

@Rick Maningas I just found out I am not splitting net profits 50/50 at all; it was just the construction cost of $40K ($35K with $5K for cushion for unknown) and the 1% realtor fee for himself for when John sells the property.

I since have now kept a cash cushion of $1k in each account and focus on one item at a time since my debt are old items with no monthly installments.