What Is the 70% Rule in Real Estate?
The 70% rule is a quick-filter formula used by house flippers to determine the maximum price they should pay for a property. The idea is simple: if you buy at 70% of the ARV minus rehab costs, you'll have enough margin to cover all your expenses and still turn a profit.
Max Allowable Offer (MAO) = (ARV × 0.70) − Rehab Costs
The remaining 30% of ARV is meant to cover: buying closing costs (~2.5%), selling costs (~8%), carrying costs (loan interest, taxes, insurance), and your profit target (~10–15%).
Example: How to Use the 70% Rule
| Input | Value |
|---|
| After Repair Value (ARV) | $250,000 |
| 70% of ARV | $175,000 |
| Estimated Rehab | $40,000 |
| Max Allowable Offer | $135,000 |
At $135,000 or below, this deal passes the 70% rule filter. That doesn't guarantee a profit — you still need to verify your ARV and rehab estimates — but it gives you a quick ceiling for your offer.
Should You Always Use 70%?
The 70% figure is a starting point, not a law. In competitive urban markets, investors sometimes push to 75% and still profit because carrying costs are shorter and ARVs are more predictable. In rural or slower markets, 65% is more appropriate to account for longer hold times and less predictable comps. Adjust the percentage in the calculator above to match your market.
Limitations of the 70% Rule
The 70% rule is a screening tool, not a complete analysis. It doesn't account for:
Your specific financing costs (hard money vs. conventional), exact hold period, local tax rates, HOA fees, or your actual rehab scope. Before making an offer, run a full deal analysis with all your real numbers. That's exactly what FlipIQ's deal analyzer is built for.
Frequently Asked Questions
Why 70% and not 75% or 65%?
The 70% figure became the industry standard because it leaves enough margin to cover typical transaction costs (~10%) and still deliver a ~15–20% profit. It's a rule of thumb — always adjust for your local market and cost structure.
What if my offer is above the MAO?
You're not automatically losing money — it means your margin is tighter. Run a full analysis with your actual costs. If profit and ROI still look acceptable with realistic numbers, the deal may still work. If you're relying on best-case assumptions to make it pencil, pass.
Does the 70% rule work for BRRRR or rentals?
The 70% rule is specifically designed for fix-and-flip deals. BRRRR and rental hold strategies use different metrics — cash-on-cash yield, cap rate, and DSCR. FlipIQ's full analyzer compares all three exit strategies side by side.
How do I find ARV?
ARV is estimated from recent comparable sales (comps) of similar renovated properties within a half-mile radius, sold within the last 3–6 months. Pull comps from the MLS, Zillow, or work with a local agent or appraiser. Your ARV estimate is the most important — and most error-prone — number in any flip analysis.
What to Do With Your 70% Rule Result
Deal passes: Great start — now verify your ARV with our ARV calculator, then run the full numbers in the fix and flip calculator to confirm your profit and ROI before making an offer.
Deal fails: The 70% rule is a quick filter, not a final answer. If rehab costs are unusually low or the ARV estimate is conservative, model it in the full fix and flip calculator before passing.
Finance the deal: Use our hard money loan calculator to model your loan amount, monthly payments, and total carry cost.
Estimate your rehab: Not sure what to budget for renovation? Use our house flipping cost estimator to build a realistic rehab budget.