What Is 70% Rule?
The 70% rule is a fix-and-flip screening formula: pay no more than 70% of a property's after-repair value (ARV), minus the estimated repair costs. The remaining margin is meant to cover holding costs, selling costs and profit, so it is a conservative starting point rather than a guaranteed return.
70% Rule in plain English
The 70% rule gives flippers a quick maximum offer: take 70% of the after-repair value and subtract the repair budget. The 30% left over is meant to pay for holding costs, selling costs and profit.
It is a screening rule of thumb. Expensive markets, small projects or high selling costs can make 70% too generous or too strict.
Formula
Maximum Offer = (ARV × 70%) − Estimated Repair Costs- ARV
- After-repair value: what the property should sell for once renovated, based on renovated comparable sales.
- Estimated Repair Costs
- The full renovation budget, including a contingency.
Worked example
Estimating ARV from three renovated comps
Illustrative example - round numbers, not current market data. Calculated with Reaixo's calculator engines.
Assumptions
- Comp 1
- sold for $305,000; adjustment +$5,000
- Comp 2
- sold for $318,000; adjustment −$8,000
- Comp 3
- sold for $300,000; adjustment +$10,000
- Planned renovation
- $60,000
| Step | Calculation | Result |
|---|---|---|
| 1. Adjusted comp 1 | $305,000 + $5,000 | $310,000 |
| 2. Adjusted comp 2 | $318,000 − $8,000 | $310,000 |
| 3. Adjusted comp 3 | $300,000 + $10,000 | $310,000 |
| 4. ARV estimate (average of adjusted comps) | ($310,000 + $310,000 + $310,000) ÷ 3 | $310,000 |
| 5. Maximum offer under the 70% rule | $310,000 × 70% − $60,000 | $157,000 |
ARV: $310,000. If the finished house matches the comps, it should be worth about $310,000. A flipper using the 70% rule would offer no more than $157,000 for it today.
What this calculation leaves out
- Adjustments for size, condition, lot and location are judgment calls - an appraiser may make different ones.
- Comps must be recent, nearby and renovated to the same standard you plan.
- The 70% rule is a screening rule of thumb, not a valuation; it does not replace a full budget of financing, holding and selling costs.
Calculate 70% Rule
70% rule maximum offer
ARV × 70% − Repair Costs
Why it matters
The 30% buffer is meant to cover holding costs, selling costs, and profit margin — it's a conservative starting point, not a guarantee of a specific return.
An optimistic ARV or a low repair estimate inflates the maximum offer dollar for dollar, which is why conservative inputs matter more than the percentage.
Common mistakes
- Using the best comp in the neighbourhood as ARV.
- Leaving the contingency out of repair costs.
- Applying 70% without checking actual holding and selling costs.
1% Rule vs. 70% Rule
A buy-and-hold rental screening test — monthly rent should be at least 1% of purchase price.
A fix-and-flip screening formula — maximum offer is 70% of after-repair value, minus repair costs.
Both are fast first-pass filters for very different strategies — a property can fail one and still be a good deal under the other, depending on the investor's intended hold.
Compare and common questions
70% Rule: frequently asked questions
Does the 70% rule still work?
As a quick screen, yes. In high-priced markets or with low holding costs some investors use 75% or more; in slower markets less. Always check the real budget.
Does the 70% rule include closing costs?
Not directly, no. The 30% margin is meant to cover buying and selling costs, holding costs and profit, so large costs can make it too generous.
Should I use the 70% rule for rentals?
No. Rentals are judged by income - cash flow, cap rate and cash-on-cash return - rather than resale margin.
Related Terms
Where it fits
- Investing, Deal Sourcing: before this, 1% Rule; next, Wholesaling.
More Investing Terms
Recommended next step
Compare 65%, 70% and 75% rules with your repair budget.
Maximum allowable offer calculator →Sources and review
No regulator defines this term; the page follows common industry practice.
Where this applies: Not regulated. Investment ratios and budgeting conventions are industry practice; lenders and analysts may define inputs differently.
Last reviewed: · Updated:
Examples use illustrative figures; rules of thumb are labelled as such. Rates, limits and program rules change - confirm current figures with your lender or a qualified professional.
This definition is provided for general educational purposes and is not financial, legal, tax, or real estate advice. Verify important decisions with appropriately qualified professionals.
Apply these investment calculations to a real property
Run the numbers with the free calculator, or get a property-specific analysis built on the same calculations.
- Free calculatorMaximum Allowable Offer Calculator →Runs in your browser; nothing to sign up for.
- Paid reportFix and Flip Analysis →Project ARV, renovation costs and flip profit. Price shown before checkout.
Or analyze a specific property: Essential Property Analysis, $19 · Property Decision Analysis, $49 · Professional Property Analysis, $99. You choose the depth before you pay.