70% Rule Calculator

Understanding the 70Percent Rule

The 70% rule is the house flipper's guardrail: never pay more than 70% of a property's after-repair value minus the cost of repairs. It exists to protect the one thing that keeps flippers solvent — margin — by baking in room for holding costs, selling costs, and the profit that makes the whole risky exercise worthwhile.

How it actually works

Enter the after-repair value (ARV) and your estimated repair costs. The rule multiplies ARV by 0.70 and subtracts repairs to give your maximum offer. On a house that will be worth $300,000 renovated and needs $50,000 of work, the math is $300,000 × 0.70 − $50,000 = $160,000. Pay more than that and you're eating into the buffer the rule is designed to preserve.

The deeper context most people miss

The 30% the rule holds back isn't profit — it's everything that eats a flip alive. Roughly 8-10% goes to buying and selling costs (agent commissions, closing, transfer taxes), several percent to holding costs (loan interest, insurance, utilities, property tax during the months you own it), and what's left is your actual profit. The rule bundles all of that into one blunt 30% cushion so you don't have to itemize it at the offer stage, and so a deal that looks thin on paper gets rejected before it drains your bank account.

Where the 70% rule came from

The 70% rule crystallized in the American house-flipping community as a way to make fast offers without spreadsheeting every deal. Flippers competing at auctions and estate sales needed a number they could compute in their head and trust, and 70% emerged as the figure that reliably left room for the messy middle of a flip — the months of carrying costs, the inevitable repair surprises, and the transaction friction on both ends. It's deliberately conservative because the failure mode in flipping is catastrophic: overpay, hit a repair overrun, watch the market soften, and a flip flips you. The rule's blunt simplicity is the point. It's not meant to maximize any single deal; it's meant to keep you in business across many deals by refusing the ones that don't leave enough margin to absorb the things that always go wrong.

A third example: how a repair overrun erases the margin

Take a $300,000 ARV property you buy at the rule's $160,000 max offer with a $50,000 repair estimate. Your total in is $210,000, leaving a $90,000 gross buffer against the $300,000 sale. Now suppose repairs run 30% over — a common outcome when walls open up and reveal old wiring or water damage — turning $50,000 into $65,000. Your total in jumps to $225,000, and after roughly $27,000 in selling and holding costs on the $300,000 sale, your profit shrinks from a healthy figure to about $48,000. Still workable, because the rule built in the cushion. But if you'd ignored the rule and paid $185,000 for the same house, that same overrun leaves you barely breaking even after costs. This is exactly what the 30% holdback is for: it's not extra profit you're forgoing, it's the shock absorber that keeps a normal repair surprise from turning a flip into a loss.

When the 70% rule is too strict — or not strict enough

The 70% figure isn't sacred; it's calibrated for typical markets and should flex. In a hot, fast-moving market with low holding costs and quick sales, experienced flippers sometimes stretch to 75% because their carrying period is short and their ARV estimates are reliable. In a slow or declining market, or for a major gut renovation where repair estimates are uncertain, 65% or even lower is wiser, because holding costs pile up and repair overruns are likelier. Higher-priced properties also change the math — the fixed selling costs are a smaller percentage, so the buffer can be tighter, while very cheap properties may need a larger buffer because fixed costs loom large relative to the price. The rule is a starting point that assumes an average deal; adjust the percentage for your market's speed, your confidence in the ARV, and the scale of the renovation before treating the output as your true ceiling.

ARV is the number that makes or breaks the rule

The 70% rule is only as good as the after-repair value you feed it, and ARV is where flippers most often deceive themselves. ARV should come from actual recent sales of comparable renovated properties within a tight radius — not from listing prices, not from automated online estimates, and not from optimistic assumptions about what your finishes will command. Overestimate ARV by 10% and every downstream number inflates: your max offer rises, your perceived margin balloons, and you talk yourself into overpaying. A $300,000 ARV that's really $270,000 turns a $160,000 'safe' offer into an actual 74% deal with far less cushion than you think. Disciplined flippers pull three to five genuine comps, weight toward the conservative end, and treat a too-good-to-believe ARV as a red flag rather than a green light. The rule's arithmetic is trivial; the judgment that matters is being honest about the ARV before you multiply it by 0.70.

Variations: the 70% rule versus full deal analysis

The 70% rule is a screening shortcut, and it has cousins for different strategies. Buy-and-hold rental investors use the 1% or 2% rule to screen for cash flow rather than flip margin. The BRRRR strategy layers a refinance step on top, changing what 'enough margin' means. And serious flippers eventually graduate from the 70% rule to a full deal analysis that itemizes every cost — purchase, financing points, monthly carrying costs times the expected hold, the specific renovation budget, agent commissions, closing on both ends, and a target profit — rather than trusting a blanket 30% buffer. The rule is best understood as training wheels and a fast filter: it lets you reject obviously bad deals in seconds and make competitive offers without paralysis. But for a deal you're serious about, especially a large or unusual one, replace the rule of thumb with a line-by-line pro forma, because the 30% cushion is an average that can be too generous on some deals and dangerously thin on others.

Using the rule to make disciplined offers

Treat the 70% rule as a ceiling that generates your opening discipline, not a target to hit. Start by nailing the ARV from real comparable sales, biased conservative. Estimate repairs carefully and then pad them 15-20%, because renovation costs overrun far more often than they come in under. Run the rule to get your maximum offer, then ask whether your market conditions justify the standard 70% or call for a stricter percentage — slow markets, big renovations, and uncertain ARVs all argue for buying at 65% or below. Never let competition push you above your calculated max; the deals you lose by staying disciplined are cheaper than the one that wipes out your capital. And remember the rule bundles holding and selling costs into its 30% buffer, so if your specific costs are unusually high — a long expected hold, high local transaction taxes — verify the buffer actually covers them rather than trusting the standard percentage blindly.

What people get wrong

• Treating 70% as universal — hot markets may justify 75%, risky renovations demand 65% or less.
• Feeding in an inflated ARV from listings or online estimates instead of real comparable sales.
• Underestimating repairs; overruns are the norm, so pad the estimate before applying the rule.
• Forgetting the 30% buffer must cover holding and selling costs, not just be profit.

Where the math comes from

Maximum offer = (ARV × 0.70) − repair costs. The 0.70 factor reserves 30% of the after-repair value to cover buying and selling costs (typically 8-10%), holding costs during the renovation and sale, and the flipper's profit margin. Adjust the percentage down in slow markets or for uncertain repair estimates.

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