What is the 70% rule in house flipping?

Offer no more than 70% of the after repair value minus the rehab budget. On a property worth $300,000 finished that needs $50,000 of work, the maximum offer is $160,000. It is a screening filter, not a full underwriting model.

Is the 70% rule still accurate?

It works as a first filter. The 30% it holds back has to absorb financing, both closings, holding costs, selling costs, and profit. In high cost markets or on long holds that 30% is not enough, and 65% is the safer figure.

What is the maximum allowable offer formula?

MAO equals ARV multiplied by 0.70, minus the rehab budget. Serious buyers replace the fixed 0.70 with their actual costs: financing, closing on both sides, carry over the hold, selling costs, and a required profit.

BlogGuide

The 70% rule in house flipping, and the deals where it lies to you

The 70% rule is a filter, not an underwriting model. Here is what it assumes, and the four situations where following it loses money.

July 16, 2026 · 4 min read

The rule is one line. Offer no more than 70% of after repair value, minus the rehab budget.

A property that will be worth $300,000 finished and needs $50,000 of work prices out at $300,000 times 0.70, which is $210,000, minus $50,000, which gives a maximum offer of $160,000.

That is useful. You can run it in your head at a showing, and it will keep you out of a lot of bad deals. What it will not do is tell you whether a deal makes money, and the difference matters more than most people realise.

What the 30% is actually paying for

The rule holds back 30% of ARV. That gap is not profit. It is everything that happens between buying and banking, and profit is only what survives it.

On a $300,000 exit, the withheld $90,000 has to cover:

Points on the loan. One to three points at origination.
Interest over the hold. At 12% on $180,000 for five months, roughly $9,000.
Buy side closing. Title, legal, and recording, commonly near 2%.
Holding costs. Taxes, insurance, utilities, and any HOA, every month.
Sell side costs. Commission and concessions, commonly around 6% of the sale price, so about $18,000 here.
Your profit. Whatever is left.

Add the middle items and you are frequently at $40,000 to $50,000 of pure cost before anyone is paid. The rule is really saying: keep costs and profit inside 30% of exit. Whether that is generous or impossible depends entirely on your market and your hold.

The four situations where it lies

1. High price markets

The rule is proportional, but several of the largest costs are not.

At a $700,000 ARV, 30% is $210,000. Your closing costs, insurance, and interest did not scale up nearly that much. The rule is leaving money on the table and you will lose bids you should have won.

At a $120,000 ARV, 30% is $36,000. Fixed costs like title work, legal, permits, and a dumpster do not shrink to match. The rule is now too loose, and files that pass it lose money.

2. Long holds

The formula has no time in it at all. A three month cosmetic refresh and a fourteen month gut with a zoning variance both price identically under the rule, and one of them is carrying interest and taxes for eleven extra months.

Every month of hold is roughly your monthly interest plus taxes plus insurance, straight off profit. On a $200,000 loan at 12%, that is $2,000 a month before you have paid a single tax bill.

3. Soft ARV

The rule multiplies ARV. Every error in ARV is amplified by 0.70 and lands directly in your offer.

Being 10% optimistic on a $300,000 ARV moves your maximum offer by $21,000, which on most flips is the entire profit. This is why how you calculate ARV deserves more care than the offer formula that consumes it.

4. Rehab budgets that are really guesses

Rehab enters the formula as a subtraction, so it is treated as though it is known. It is a forecast, made before walls are open.

Structural work, unpermitted additions, knob and tube wiring, and failed sewer laterals do not appear in a walkthrough. If your budget has no contingency, the rule has no contingency either. Ten to fifteen percent is a reasonable contingency on a property that has been opened up, more on one that has not.

What to use instead

Keep the rule as a filter at the showing. Use it to decide what deserves an hour of real work. Then run the actual arithmetic before you offer.

Real underwriting works backwards from the exit:

Start at ARV, defensible from comparable sales.
Subtract selling costs, commission and concessions.
Subtract the full rehab budget with contingency.
Subtract financing: points, interest across the realistic hold, and both closings.
Subtract holding costs across that same hold.
Subtract the profit you require for the risk.
What remains is your maximum offer.

That number is specific to your financing, your market, and your timeline, which is exactly why it beats a fixed percentage. The flip calculator runs this in full, including the points, carry, and selling costs the rule folds into a single approximation.

A working adjustment

If you want a rule of thumb that survives more deals, use 65% rather than 70% in markets under about $200,000 ARV, and on any hold expected to run past six months. The extra 5% is roughly the fixed costs the proportional rule fails to see.

And treat every output as a ceiling, never a target. The rule tells you the most you can pay. It has never once told anyone what the property is worth buying for.

When your numbers do clear, send the deal over. Written terms inside 24 to 48 hours, and a straight answer if it does not work.

Common questions

What is the 70% rule in house flipping?: Offer no more than 70% of the after repair value minus the rehab budget. On a property worth $300,000 finished that needs $50,000 of work, the maximum offer is $160,000. It is a screening filter, not a full underwriting model.
Is the 70% rule still accurate?: It works as a first filter. The 30% it holds back has to absorb financing, both closings, holding costs, selling costs, and profit. In high cost markets or on long holds that 30% is not enough, and 65% is the safer figure.
What is the maximum allowable offer formula?: MAO equals ARV multiplied by 0.70, minus the rehab budget. Serious buyers replace the fixed 0.70 with their actual costs: financing, closing on both sides, carry over the hold, selling costs, and a required profit.

Have a deal like this

Run your numbers.

The calculators charge the costs this piece describes: points, interest over the hold, closing on both sides, carry, and the cost to sell. It takes about a minute.

Run your numbers Submit a deal