The 70% rule for flipping houses (and why it's not the whole story)
2 min read
Ask ten flippers how they decide what to offer and at least one will say "the 70% rule." It's a great starting point. It just isn't a finish line.
What is the 70% rule?
The 70% rule says you shouldn't pay more than 70% of the after repair value (ARV), minus your rehab costs.
Maximum offer = (ARV × 70%) − rehab budget
An example
- ARV: $350,000
- Rehab budget: $55,000
($350,000 × 0.70) − $55,000 = $190,000 maximum offer
The 30% that's left over is meant to cover your costs and your profit.
What the 70% rule leaves out
That 30% has to cover a lot more than people expect:
- Financing costs: origination points and monthly interest
- Carrying costs: interest payments, utilities, insurance and HOA dues for every month you hold the property
- Closing costs to buy: attorney and title fees, plus prorated taxes
- Selling costs: realtor fees and closing costs, which together are often 4% or more of the sale price
- Surprises: the rehab that runs over or the house that sits on the market an extra month
On a lower-priced property, those fixed costs eat a bigger share of the 30%, so the rule can make a thin deal look better than it is. On a higher-priced property, you may be able to pay a little more and still profit.
Use the rule to screen, then underwrite properly
Use the 70% rule to quickly filter deals. When one passes, run it through a full analysis that includes every cost. My fix & flip calculator does this for you and shows your real projected profit and ROI.
Frequently asked questions
Does the 70% rule include closing costs?
Not directly. The 70% rule only subtracts your rehab budget from 70% of the ARV. The remaining 30% is expected to cover closing costs, financing, carrying costs and your profit, so you need to check those separately.
Is the 70% rule still realistic?
In competitive markets, many investors pay 75% or more of ARV and still profit, while others need to stay below 70% on lower-priced homes. Treat it as a quick screening tool, then run a full analysis on every deal.
How do I calculate ARV for the 70% rule?
ARV is based on recent sold comparable properties nearby that match your property's size, condition and features after renovation. See my guide on how to calculate ARV.
Ready to check a deal? Run it through the calculator.
Written by Jasmine Brown
Jasmine specializes in financing flips, new construction, DSCR, and multifamily nationwide. As an investor, she brings first-hand experience and strategic insights to her clients. Fund your next deal