The 70% Rule for House Flipping, Explained
5 min read
What the 70% rule is, the formula, a worked example, and where it breaks — the fast sanity check flippers use to set a max offer.
What the 70% rule says
The 70% rule is a back-of-the-napkin ceiling for what a flipper should pay for a property. It says your maximum purchase price should be no more than 70% of the after-repair value (ARV) minus the rehab budget.
The 30% gap is not your profit — it is the cushion that absorbs holding costs, closing costs on both ends, agent commissions, financing, and the estimate misses that happen on every project. What is left after all of that is profit.
The formula
Maximum Allowable Offer (MAO) = (ARV × 0.70) − estimated rehab.
Example: a house that will be worth $300,000 renovated, needing $50,000 of work. MAO = ($300,000 × 0.70) − $50,000 = $210,000 − $50,000 = $160,000. Pay more than that and the 30% buffer starts eating into your margin.
Where the rule breaks down
The 70% rule assumes an average market, average holding time, and hard-money-style costs. In a hot, low-inventory market investors routinely go to 75–80% because competition is fierce and resale is fast. On a slow, high-carry deal you may need 65% or less to stay safe.
It is a filter, not a decision. Use it to reject obviously bad deals quickly, then underwrite the survivors properly — real comps for ARV, a line-item rehab budget, and actual holding and financing costs.
Getting ARV and rehab right
Both inputs matter more than the 70% multiplier. ARV should come from three to five recently sold, comparable, nearby properties — not the optimistic list prices of what is still sitting on the market. Rehab should be a room-by-room estimate, not a guess per square foot.
Because a small error in either input swings your max offer by thousands, run the number both ways — conservative and optimistic — and only bid where the deal still works on the conservative side.
Run your own numbers
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