The 70% rule is the flipper's quick filter: Maximum offer = 70% of ARV − rehab cost. It is not a law, but it keeps you from overpaying in the excitement of a deal.
A Worked Example
| Item | Amount |
|---|---|
| After-repair value (ARV) | $300,000 |
| 70% of ARV | $210,000 |
| Rehab estimate | $60,000 |
| Maximum offer | $150,000 |
What the Other 30% Pays For
The 30% isn't all profit. On a typical flip it covers:
- Buying costs: about 2% of the price (title, closing, inspections).
- Holding costs: taxes, insurance, utilities and upkeep for the months you own it.
- Financing: hard-money interest (often 10–12% a year) plus 1–3 points up front.
- Selling costs: about 6–8% of the sale price (commissions and seller closing costs).
- Profit and a cushion for surprises — what's left, often 10–15% of ARV on a well-bought flip.
When to Bend It
- Higher-priced homes: selling costs are a smaller share, so 75–80% can still work.
- Light cosmetic rehabs with short holds: less risk, less carrying cost.
- Cheaper homes and heavy rehabs: tighten it to 60–65% — small mistakes are a bigger share of the profit.
Price vs ARV at a Glance
Under 50% of ARV is rare and usually means heavy work or a problem to solve. 50–70% is the classic flip zone. 70–80% can work for light rehabs in strong areas. Above 80–90% the numbers rarely leave room for profit unless the rehab is minimal.
The Rule Depends on Two Estimates
The 70% rule is only as good as your ARV and rehab numbers. A generous ARV or a thin rehab budget makes any deal pass. Get both checked before you make the offer.