What is the 70% rule in house flipping?

The 70% rule says an investor should pay no more than 70% of a property's after-repair value (ARV), minus the cost of repairs. The formula is: Maximum Allowable Offer = (ARV × 0.70) − Repair Costs.

Why 70% and not some other number?

The 30% that the rule holds back is not profit. It covers closing costs on the purchase, holding costs while you own the property, selling costs including agent commission, and only what is left over is profit. On a typical flip those costs consume roughly half of the 30%.

When does the 70% rule not work?

Competitive markets often push investors to 75–80%. Wholesalers must also subtract their assignment fee. In high-price markets the rule is overly conservative, because 30% of a $900,000 ARV is far more cushion than the deal actually needs.

How do I find the ARV to use in the formula?

ARV comes from comparable sales: recently sold properties in the same area with a similar bedroom and bathroom count and similar size. It is not the same as an automated home value estimate, which reflects the property's current condition rather than its value after renovation.

The 70% Rule in House Flipping

The 70% rule says you should pay no more than 70% of a property's after-repair value, minus what the repairs will cost. It gives you a maximum allowable offer — the number you walk away from.

MAO = (ARV × 0.70) − Repair Costs

Calculator

Maximum Allowable Offer

After-repair value (ARV)

Repair costs

Maximum allowable offer $160,000

70% of $300,000 is $210,000, less $50,000 of work.

A worked example

Say the comparable sales tell you a renovated three-bed in the area sells for $300,000. You walk the property and price the work at $50,000.

Step	Amount
After-repair value (ARV)	$300,000
× 0.70	$210,000
− Repair costs	−$50,000
Maximum allowable offer	$160,000

Offer $160,000 or less and the deal works. Offer $185,000 because you like the house, and you have spent your entire margin before you own it.

Why 70%, and where the other 30% goes

The 30% the rule holds back is not your profit. Most of it is spent before you ever list the property:

Closing costs on the purchase — title, escrow, lender fees if you are financing.
Holding costs — loan interest, taxes, insurance and utilities for every month you own it. On hard money this is the line that quietly ruins slow flips.
Selling costs — agent commission, concessions, closing costs on the sale. Commonly 6–8% of the sale price on its own.
Profit — whatever survives.

That is the point people miss. The 30% is not margin, it is margin and every cost the formula does not itemise. Push the multiplier to 80% and you have not gained 10% of profit — you may have removed all of it.

When the rule breaks down

Competitive markets

Where inventory is scarce, 70% offers do not get accepted. Many investors work at 75% or even 80% and accept the thinner margin. That is a deliberate trade, not a reason to stop calculating.

Wholesaling

If you are assigning the contract rather than doing the work, your assignment fee comes out too: MAO = (ARV × 0.70) − Repairs − Assignment Fee. Leaving it out prices you out of your own deal.

High-price markets

30% of a $900,000 ARV is $270,000 of cushion. Holding and selling a $900,000 property does not cost three times what it costs on a $300,000 one, so the rule gets more conservative as prices rise. Above roughly $600,000 most investors switch to costing the deal out line by line.

Very light or very heavy work

A cosmetic refresh carries little risk of surprises. A gut renovation carries a lot. The same multiplier applied to both understates the risk of one and overstates the risk of the other.

The formula is the easy part

Multiplying by 0.7 is not what makes a deal work. Two inputs decide everything, and only one of them is under your control.

Repair costs you can learn. Walk enough properties, get enough contractor quotes, and your estimates converge on reality.

ARV is the one that hurts. It is not the current value and it is not an automated home value estimate — those describe the property as it stands today, unrenovated. ARV is what it sells for after the work, which means finding recent sales that genuinely compare: same area, similar bed and bath count, similar size, recent enough to reflect today's market. Get the ARV wrong by 10% and, on the example above, your maximum offer moves by $21,000. That is the whole margin.

PropGlimmer does the ARV part

Enter an address and it pulls comparable sales, filters them to genuinely matching properties, and returns the ARV, the repair estimate, and this exact maximum offer — the same formula on this page. Free to start, on iOS, Android and the web.

Try PropGlimmer Free

Common questions

Is the 70% rule based on the purchase price or the ARV?

The ARV — what the property will be worth once renovated. The purchase price is the answer the formula produces, not an input to it.

Does the 70% rule include closing costs?

Yes, implicitly. They come out of the 30% the rule reserves, along with holding costs, selling costs and profit. You do not subtract them separately.

Can I use the 70% rule for rentals?

It is built for resale, so it is a poor fit for buy-and-hold. A rental is judged on cash flow and return on capital, not on resale margin. The BRRRR strategy is closer, since it depends on the refinance appraisal, but even there the 70% figure is a rough screen rather than the decision.