What it is
The 70% rule packages an entire flip budget into one multiplication. Everything that stands between the resale price and your profit — agent commissions, closing costs on both ends, insurance and utilities during the hold, loan interest and points, and the margin that makes the project worth doing — is bundled into a flat 30% haircut off after-repair value. Subtract the rehab and what remains is the most you can pay. It is the discipline that keeps a flipper from talking themselves into a number, and it is why experienced buyers can quote an offer within a minute of seeing comparable sales.
How it is calculated
Start with after-repair value drawn from recent sales of genuinely comparable finished homes nearby. Multiply by 0.70, then subtract your rehab estimate. A property with a $200,000 ARV needing $30,000 of work supports an offer around $110,000. Move either input and the ceiling moves fast: the same house with $60,000 of work drops to $80,000, and a $180,000 ARV with that same $60,000 scope falls to $66,000. Small errors compound, which is why both inputs deserve more care than the arithmetic between them.
Maximum offer = (ARV × 0.70) − rehab. With a $200,000 ARV and $30,000 of repairs: $140,000 − $30,000 = $110,000.
How investors actually use it
The 70 is a dial, not a constant. In fast markets with cheap money and short days-on-market, buyers stretch to 75% and still clear their target. In slow markets, on high-price properties where a 30% spread is a very large absolute number, or when borrowing at hard money rates for a long rehab, disciplined buyers tighten to 65% or lower. The rule also drives negotiation directly: because it produces a hard walk-away figure before emotions enter, it is the number investors write down before the first counteroffer rather than after.
The common mistake
Inflating ARV to make a deal fit. A comparable sale must be genuinely comparable — similar size, condition, era, and school attendance area, sold recently, not listed. Pulling an ARV from active listings or from a renovated house two neighborhoods over is the single most common way flippers lose money, because ARV sits inside the formula twice over: it sets the ceiling and it sets the exit. The second mistake is a rehab number from a walkthrough rather than a scope, which reliably lands low once walls are opened.
Put it to work
Related terms
- ARV (after repair value) — The estimated market value of a property once renovations are complete, based on comparable recently sold homes.
- MAO (maximum allowable offer) — The highest price you can pay and still hit your target profit, most often derived from the 70% rule: ARV times 0.70 minus rehab.
- BRRRR — Buy, Rehab, Rent, Refinance, Repeat — a strategy for recycling one pool of capital across multiple rentals.
- Hard money — Short-term, asset-based financing from private lenders, secured by the property rather than your credit or income.