What is the 70% rule in real estate?

A screening shortcut for flips and BRRRR deals: pay no more than 70% of the after-repair value minus the rehab cost. On a $300,000 ARV with $50,000 of rehab, that is $160,000. It is designed to leave room for financing, holding costs, selling costs and profit without calculating any of them.

How do you calculate the 70% rule?

Maximum offer = (ARV × 0.70) − rehab cost. Most investors add a contingency to the rehab figure first, since renovation budgets overrun more often than they come in under.

Is the 70% rule always right?

No. It ignores your financing, how long you hold, selling costs and taxes — the things that actually consume the margin it reserves. In cheap markets 70% can be too generous because fixed costs are a larger share of a small ARV; in expensive markets experienced flippers often work at 75% or higher.

Does the 70% rule include closing costs?

Not explicitly. The 30% the rule holds back is meant to absorb buying costs, holding costs, selling costs and profit all at once, which is why it is a filter rather than an underwrite.

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70% Rule Calculator

The oldest screen in flipping: pay no more than 70% of the after-repair value, minus what the rehab costs. Two numbers give you a ceiling — and this page is honest about what that ceiling does and does not account for.

Your maximum offer

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The same deal at other rules

70% is convention, not arithmetic. Cheap markets often need a tighter rule because fixed costs eat a bigger share of a small ARV; experienced flippers in expensive markets frequently work at 75% or above.

What this number does not know

Your interest rate. How many months you hold. Loan points and closing costs on both ends. Agent commission when you sell. Tax on the profit. The 30% held back is meant to absorb all of it and leave you a margin — which is why two deals with the same ceiling can be a good flip and a disaster.

Where the 70% rule comes from

It is a reverse-engineered margin. On a typical flip, buying costs, six months of holding, and selling costs run somewhere near 15–20% of the sale price. Hold back 30% and what is left after those costs is roughly a 10% profit on the sale — enough to survive an appraisal coming in light or a rehab running over. The rule is that whole calculation, compressed into one number you can do in your head at an open house.

That compression is its value and its flaw. It is fast enough to screen fifty listings before breakfast, and blunt enough that it will wave through a deal with an expensive loan and a nine-month timeline while rejecting a cash purchase you could close in three weeks.

When it misleads

Cheap properties. On a $90,000 ARV, fixed costs — closing, commission, insurance, utilities — are a far larger share than on a $500,000 one. The same 30% buffer stretches much further in one case than the other.
Long holds. The rule has no concept of time. A rehab that runs nine months instead of three can consume the entire margin in interest and carrying costs while the ceiling stays exactly the same.
BRRRR rather than flip. If you are refinancing instead of selling, there is no commission and no capital-gains event, but there is a refinance and a tenant. The relevant ceiling is the one that lets the refinance return your capital, which is a different sum entirely.
An ARV you guessed. Every number here is a percentage of the ARV, so a 10% error there is a 10% error in your maximum offer. It is the input worth being most careful about.

Questions people ask

Should the rehab number include a contingency?: Yes, and this page adds 10% by default. Renovation budgets overrun far more often than they come in under, and a contingency applied before the rule is the cheapest insurance in the calculation.
Is 70% still realistic in a competitive market?: Often not, which is why the table shows 65 through 80. Experienced flippers with cheap money and reliable crews work at higher percentages because their real costs are lower than the rule assumes. The honest answer is to underwrite the actual deal rather than argue about the constant.
Does this need an account?: No. It runs in your browser and nothing you type leaves the page.

Underwrite it properly

The full analyzer takes the same deal and adds financing, holding time, selling costs and tax — then solves for the actual maximum offer against your return targets, not a rule of thumb. Holding instead of selling? Try the BRRRR calculator.

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This calculator is an estimate produced from the inputs you supply — not financial, investment, tax or legal advice. Verify every material number and consult licensed professionals before acting. Methodology · Terms · Privacy

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