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.
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.