Every flipping course on the internet teaches the 70 percent rule. Most of them teach it like it’s a law of physics.
It isn’t. It’s a screen. A fast, rough filter that tells you whether a house deserves the next hour of your time. Used that way, it’s one of the most useful tools you’ll have. Used as your final offer price, it will eventually hurt you.
I’m Ben Lovro, a South Carolina investor who buys and renovates houses in the Midlands. Here’s how the 70% rule works, what’s hiding inside it, and when I tighten it.
The 70 percent rule formula
Written out in words:
Maximum allowable offer (MAO) = (ARV × 0.70) − repairs
- ARV is the after repair value — what the house will sell for once it’s renovated, supported by sold comps.
- Repairs is your full renovation estimate, including a contingency.
- 0.70 means you’re reserving 30% of the ARV for everything that isn’t the purchase or the renovation.
That’s it. Multiply, subtract, and you have the most you should pay.
If you’re the one bringing the deal to a flipper — or you’re buying from someone who is — there’s one more line:
MAO = (ARV × 0.70) − repairs − your fee
The maximum allowable offer page covers variants of this formula for flips, wholesale deals and rentals.
What the 30% has to cover
Here’s where beginners get burned. They look at that leftover slice and assume it’s what they get to keep.
No. That 30% has to pay for all of this first:
- Buying costs — closing costs, title work, attorney fees on the purchase
- Financing costs — points, lender fees, interest for every month you own the house
- Holding costs — taxes, insurance, utilities, lawn, any HOA, for the full project
- Selling costs — agent commissions, seller-paid closing costs, any buyer concessions
- Surprises that blow through your contingency
- Market risk — the chance prices soften between when you buy and when you sell
- Your margin — what’s left for you after all of the above
Line those items up on a real deal and you’ll see the truth. The 30% disappears faster than you’d think. Your profit is whatever survives the list — and on a deal that runs long or comes in light, that can be nothing.
The two inputs that make or break it
The math is simple. The inputs are not.
ARV: prove it with comps
I don’t let anyone on my team use an online estimate as an ARV. We prove it with sold comps:
- Closed sales only, no older than three to six months
- Inside roughly half a mile, stretching to one mile if needed
- Inside the subject’s school zone
- Not separated from the subject by an interstate, highway or rail line
- Matching bedroom and bathroom count
- Square footage within ±20% of the subject
- Comparable in age, architecture and story count
- At least three of them
Then we think in ranges, not single points. If the comps cluster in a band, I underwrite toward the low-middle of the band — not the top. The full ARV method, adjustments included, is in calculate ARV the right way.
Repairs: walk it by system
Repairs come from walking the house with a sheet split by system — the big-ticket items like the roof, HVAC, wiring, plumbing and foundation first, then windows, kitchen, baths, floors, paint and the exterior. Price each line with local ranges you’ve built with a contractor, then add a contingency — roughly 15% is my default.
See estimating rehab costs for the detailed approach.
When I tighten the 70% rule
Some deals deserve a smaller multiplier. I’ll use something more conservative — call it ARV × a number below 0.70 — when:
- The ARV is uncertain. Thin comps, mixed comps, or a house that doesn’t quite match the neighborhood.
- The scope is heavy or unclear. Major systems, foundation questions, or a house I couldn’t fully inspect.
- The timeline is long. Bigger renovations mean more holding cost and more exposure to market shifts.
- The market is soft or shifting. Longer days on market for renovated homes means more risk.
- The price point is low. At lower ARVs, fixed costs like closing fees and commissions eat a bigger share of the 30%.
- My financing is expensive. Higher-cost money means the financing line takes more of the room.
The point isn’t to hit a magic number. The point is to make sure the cushion fits the risk.
When investors loosen it
You’ll also hear experienced flippers say they’ll go above 0.70 on certain deals. Usually that’s a lighter cosmetic job, very strong and recent comps, a fast timeline, and cheap or no-cost capital. That’s a judgment call for people who’ve done enough flips to know their real costs. If you’re new, don’t loosen it. Earn that right with data from your own completed projects.
Why I still use it as a first screen
When a lead comes in, I don’t have time to build a full line-item budget on every house. The 70% rule tells me in a minute whether it’s worth a second look.
Here’s the order:
- Rough ARV from a quick comp check.
- Rough repair estimate from photos, the seller conversation, and my experience with similar houses.
- Run the 70% formula.
- If the seller’s number is nowhere close, I note it and keep following up.
- If it’s close or under, I go deeper: full comps, a walk-through with a repair sheet, a line-item budget for holding and selling.
- Then let the paper make the decision.
The 70% rule is step three. Not step six.
The 70% rule vs. a full deal analysis
A full analysis replaces the 30% shortcut with real line items: your actual closing costs, your actual financing, your actual holding cost per day times your realistic timeline, your actual selling costs. What’s left is your projected margin, and you decide if it’s worth the risk.
Once you’ve done a few flips, you’ll know your own numbers well enough that the full analysis takes twenty minutes. Until then, treat the 70% rule as a gate — a deal that fails it rarely gets better with more analysis.
The full underwriting sequence lives on the how to analyze a real estate deal page. And if you’re comparing flipping to selling the contract instead, the wholesale assignment fee page explains why that fee has to fit inside the flipper’s numbers.
Run it on real houses this week
Pick five houses in your area that recently sold after a renovation. Pull their comps with the rules above. Estimate what each one needed. Then work the formula backward and ask: would I have bought it at that number?
Doing this on paper is free. Doing it wrong on a live deal isn’t.
If you want the one-page analyzer I use to run this math, it’s part of the free investor playbook. And for the rest of the flipping sequence, start at the flipping houses guide.
Questions people ask
What is the 70% rule in real estate?
It’s a quick screen for flips: your maximum allowable offer equals the after repair value times 0.70, minus estimated repairs. The remaining 30% of ARV is meant to cover buying, holding, financing and selling costs, plus risk and your margin.
Does the 70% rule include closing costs?
Yes — closing costs on both the purchase and the sale are supposed to come out of the 30%. That’s exactly why that slice is not what you keep. Once you list every cost it has to absorb, the room left is much smaller than beginners expect.
Is the 70% rule still valid?
As a screen, yes. As a final answer, no. In some markets and price ranges you’ll need to tighten it, and investors sometimes loosen it on lower-risk projects. Always back it up with a full line-item analysis before you sign.
Should a wholesaler use the 70% rule?
A wholesaler or anyone selling to a flipper has to subtract their own fee too: MAO = (ARV × 0.70) − repairs − your fee. If you don’t, the flipper’s numbers won’t work and the deal won’t sell.