The 70% Rule in House Flipping, Explained
The 70% Rule is a quick screen flippers use to decide what to offer. It says your purchase price should stay at or below 70% of the After-Repair Value (ARV), minus your estimated rehab cost.
Try the After-Repair Value (ARV) & 70% Rule calculatorThe formula
Maximum Allowable Offer (MAO) = (ARV × 70%) − rehab cost. If a home’s ARV is $300,000 and it needs $50,000 of work, the rule caps your offer at (300,000 × 0.70) − 50,000 = $160,000.
The 30% buffer is meant to cover holding costs, financing, closing costs, and your profit in one stroke — which is what makes it fast.
When to bend it
The percentage is not sacred. Investors use 75% in hot markets where resale is fast and certain, or 65% when they want more cushion on a risky rehab. On higher-priced homes, a flat 30% buffer can leave more profit than you need, so some investors switch to a fixed-dollar target instead.
Treat the 70% Rule as a screening tool, not a final answer. A full underwrite that accounts for your actual financing, hold time, and selling costs will always beat a rule of thumb.
Frequently asked questions
Why 70 percent specifically?+
The 30% gap below After-Repair Value is a rough all-in cushion for holding, financing, closing costs, and profit. It is a convention that works often enough to be useful as a first screen, not a precise calculation.
Does the 70% Rule include rehab?+
Yes — rehab is subtracted after applying the 70%. The formula is (ARV × 70%) − rehab cost = your maximum offer.
Authoritative source
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After-Repair Value (ARV) & 70% Rule calculator