70% Rule
A house-flipping rule of thumb: don't pay more than 70% of a property's ARV minus repair costs. Max Offer = (ARV × 0.70) − repairs. The 30% spread covers costs and profit.
The 70% rule is the most widely used rule of thumb in house flipping. It caps what you should pay for a property so the deal leaves enough room for costs and profit:
Maximum Offer = (ARV × 0.70) − Repair Costs
In plain terms: don't pay more than 70% of the after-repair value, minus what the repairs will cost.
A worked example
A property will be worth $300,000 renovated and needs $50,000 of work:
Max Offer = (300,000 × 0.70) − 50,000
= 210,000 − 50,000
= $160,000
So $160,000 is the most you'd pay. If you can buy it for less, even better; if it costs more, the deal likely won't hit your margin.
Where the 30% goes
The genius of the rule is that the 30% discount built into the 0.70 multiplier isn't all profit — it absorbs every cost between buying and selling:
| Use of the 30% spread | Rough share |
|---|---|
| Financing (points + interest) | A chunk |
| Closing costs (buy and sell) | Several % |
| Holding / soft costs (taxes, insurance, utilities) | Time-dependent |
| Selling costs (≈6% agent commissions) | Several % |
| Profit | What's left |
That's why the rule works as a quick filter: hit the 70% number with an accurate ARV and repair estimate, and there's usually room for a reasonable profit after all costs.
How lenders mirror it
The 70% rule isn't just an investor heuristic — lenders apply the same discipline. Most fix-and-flip and hard money lenders cap total loan exposure at roughly 65–75% of ARV. So the rule that protects your profit also reflects how much a lender will advance, keeping borrower and lender interests aligned.
When to adjust the percentage
70% is a starting point, not a law. Investors flex it by market and deal:
- Hot, low-margin markets sometimes force a higher percentage (75–80%) to win deals — thinner profit, more risk.
- Higher-risk or slower markets, or big-ticket flips, warrant a lower percentage (60–65%) for more cushion.
- Wholesalers effectively use a lower number, since the price must also leave room for their fee plus the end buyer's profit.
The caution
The rule is only as good as its inputs. An optimistic ARV or a lowball repair number makes the formula spit out a too-high offer. Pull conservative comps, budget repairs with a contingency, and treat the 70% rule as the disciplined first filter it's meant to be — then verify with a full deal analysis before you commit.
Frequently asked questions
What is the 70% rule in house flipping?
A rule of thumb that you shouldn't pay more than 70% of a property's after-repair value (ARV) minus the repair costs: Max Offer = (ARV × 0.70) − repairs. The 30% discount built into the multiplier covers financing, closing, holding, and selling costs, plus your profit.
Why 70% and not some other number?
70% leaves a 30% spread that historically covers the typical costs of a flip — financing, two sets of closing costs, holding costs, and roughly 6% selling costs — with profit left over. It's a starting point: investors use a higher percentage in hot, low-margin markets and a lower one for more cushion.
Do lenders use the 70% rule too?
Effectively yes. Most fix-and-flip and hard money lenders cap total loan exposure at about 65–75% of ARV, mirroring the rule's discipline. So the number that protects your profit also reflects how much a lender will advance, which keeps borrower and lender risk aligned on a rehab deal.