What Is the 70% Rule in House Flipping? A Numbers Guide

What is the 70% rule in house flipping?

The 70% rule in house flipping says you should pay no more than 70% of a property's after-repair value (ARV), minus the estimated repair costs. It's a fast screening formula that keeps enough spread in the deal to cover your holding costs, selling costs, and a profit margin — without you having to build a full underwriting model on every listing.

The formula:

Maximum Allowable Offer (MAO) = (ARV × 0.70) − Repair Costs

That's it. One line of math that tells you the ceiling on what you can pay and still have a realistic shot at a profitable flip.

How the 70% rule works, step by step

Work a real example. Say you're looking at a tired 3/2 in a solid suburban neighborhood.

1. Establish the ARV. Pull recent, truly comparable sales — same neighborhood, similar size, beds, baths, and condition after renovation. Assume finished comps support an ARV of $300,000. Getting this number right is everything; if you're shaky on it, read ARV meaning in real estate and how to get it right on a flip.
2. Estimate repairs honestly. Walk the property and price the scope. Assume a full cosmetic rehab plus a roof and HVAC lands at $55,000. If you're new to scoping, how to estimate rehab costs before you buy a property breaks down the line items.
3. Run the formula. ($300,000 × 0.70) − $55,000 = $210,000 − $55,000 = $155,000.
4. That $155,000 is your maximum offer. Pay less and your margin grows. Pay more and you start eating into the buffer the rule is designed to protect.

The 30% you're shaving off ARV is not pure profit. It's a bucket that has to absorb several real costs.

What the 30% spread actually covers

• Holding costs — hard money interest, property taxes, insurance, utilities during the rehab and listing period.
• Buying costs — closing costs, inspections, and any loan points.
• Selling costs — agent commissions, seller-paid closing costs, and concessions, often 6–8% of the sale price.
• A contingency — for the surprises behind the walls.
• Your profit — what's left after everything above.

On a $300,000 exit, selling and holding costs alone can easily run $30,000–$40,000. The 70% rule bakes a rough version of all of that into a single multiplier so you can triage deals fast.

When the 70% rule works — and when it lies to you

The rule is a screening tool, not an underwriting model. Treat it that way.

It works well when:

• You're flipping in the low-to-mid price band where the standard cost percentages hold.
• Rehab scope is moderate and predictable.
• Comps are plentiful and tight, so ARV is defensible.

It breaks down when:

• You're flipping high-end homes. On a $900,000 ARV, 30% is $270,000 of buffer — far more than you actually need. Rigid adherence means you'll never win a bid. Experienced flippers often shift to 75–80% on higher price points.
• You're in a low-cost market. On a $120,000 ARV, the same 30% is only $36,000, which can be too thin once fixed selling costs eat in. You may need a tighter multiplier like 65%.
• Repairs are extensive or structural. The rule assumes repairs are captured in your estimate. Foundation, additions, and permit-heavy work introduce risk the multiplier doesn't price in.
• Your money is expensive. Financing at high rates for a long timeline demands more spread than a cash deal.

Best practices seasoned flippers follow

• Never trust a single comp. ARV is the input the whole formula rests on. Use multiple recent sales, adjust for condition, and throw out outliers. How to choose real estate comps that won't lie to you is worth your time here.
• Pad the rehab, not the ARV. Optimists inflate ARV and underestimate repairs — the two mistakes that turn a paper profit into a real loss. Do the opposite: be conservative on ARV, generous on repairs.
• Add a 10–15% rehab contingency. On a $55,000 scope, budget for $60,000–$63,000 in your worst case.
• Adjust the percentage to your market and cost of capital. The "70" is a starting point, not scripture. Run 65%, 70%, and 75% and see how each changes your ceiling.
• Confirm profit in dollars, not just the multiplier. A deal can "pass" the 70% rule and still net thin profit after real holding and selling costs. Always follow the screen with a full profit calculation.

The biggest pitfalls to avoid

• Garbage inputs. The formula is only as good as your ARV and repair numbers. Guess high on value or low on repairs and the rule will happily green-light a money-loser. This is the single most common way flippers lose money on a deal that "penciled out."
• Ignoring days on market. The 70% spread assumes a reasonable sale timeline. In a slowing market, a longer hold burns your buffer through carrying costs.
• Treating it as your only test. The 70% rule tells you the max to offer. It doesn't tell you your return on cash, your break-even sale price, or how the deal performs if the market softens 5%.

Move from screening to a real decision

The 70% rule earns its keep as a 30-second filter. But the deals that actually make money are the ones you underwrite fully — stress-testing ARV, repair overruns, holding time, and selling costs against current market data rather than back-of-napkin assumptions.

That's exactly where analyzing a deal with real, verified data beats a static formula. Instead of typing in guesses for value, taxes, and insurance, tools like PropertyWiz AI pull live market data and pre-populate those inputs, then stress-test the flip in real time — so you go from a rough MAO to a defensible offer in seconds. For the full workflow around exit thinking and margins, see the seasoned investor's playbook for fix and flip profit.

Use the 70% rule to decide what deserves a closer look. Use real underwriting to decide what deserves your money.