What is the 70% Rule in House Flipping?
The 70% rule is a widely-used formula that helps real estate investors quickly determine the maximum price they should pay for a property. The rule states:
Maximum Offer = (ARV × 70%) − Repair Costs
For example, if a property has an ARV of $350,000 and needs $50,000 in repairs: ($350,000 × 0.70) − $50,000 = $195,000 maximum offer.
Why 70%?
The 30% margin accounts for:
- Holding costs — mortgage payments, insurance, utilities, taxes during the rehab
- Closing costs — both when you buy and when you sell (typically 2-5% each)
- Realtor commissions — typically 5-6% of the sale price
- Profit margin — your actual return on the deal
- Buffer for surprises — unexpected repairs always come up
When to Adjust the Percentage
The 70% rule is a starting point. Experienced investors adjust based on market conditions:
- Hot markets — Some investors go to 75-80% in competitive markets where properties sell fast and appreciation is strong
- Soft markets — Drop to 65% or less in markets with longer holding times
- Large projects — For expensive properties ($500K+ ARV), even 70% can leave a comfortable profit cushion
- Wholesale deals — Wholesalers often need to be at 65% to leave room for the end buyer's margin too
Need a more detailed analysis? Try our free ARV calculator or our full deal calculator to factor in holding costs, financing, and closing costs.