What is the 70% rule in house flipping?

Don't pay more than 70% of a home's after-repair value (ARV) minus repair costs. Formula: ARV × 0.70 − estimated repairs = your maximum offer. The 30% cushion absorbs holding, financing, and selling costs.

Is the 70% rule accurate?

It's a fast screening tool, not a precise model. It works well in average markets but can be too conservative in hot ones. For a final offer, back it up with itemized closing, holding, and selling costs plus a target profit.

What if I pay more than 70% of ARV?

You can, but you're reducing the cushion that covers your costs and profit. Going above 70–75% on a first flip leaves little room for the rehab overruns and timeline slips beginners commonly hit.

Deal Analysis

The 70% Rule in House Flipping, Explained (+ Calculator)

One formula keeps beginners from overpaying. Here's how the 70% rule works and when to bend it.

June 15, 2026 · 6 min read

Quick answer

The 70% rule says you should pay no more than 70% of a home's after-repair value (ARV) minus repair costs. The formula is ARV × 0.70 − estimated repairs = your maximum offer. The 30% cushion covers closing, financing, holding, and selling costs — it is not your profit.

The formula

Maximum offer = (ARV × 0.70) − estimated repair costs

ARV is the after-repair value — what the home will sell for once fully renovated, estimated from recent comparable sales. Multiply it by 0.70, then subtract your rehab estimate. The result is the most you should offer.

A worked example

Step	Calculation	Result
After-repair value	—	$300,000
70% of ARV	$300,000 × 0.70	$210,000
Subtract rehab	$210,000 − $45,000	$165,000
Maximum offer	—	$165,000

Offer $165,000 or less and the deal has built-in room. Offer more and you're eating into the cushion that's supposed to cover your costs and profit.

What the 30% cushion actually covers

Beginners assume the 30% gap is profit. It isn't. It absorbs closing costs on both ends, lender points and interest, holding costs while you renovate, and 6–8% in selling costs. Whatever survives all of that is your profit — which is why a realistic rehab number and an accurate ARV matter so much.

When to break the rule

The 70% rule is a guideline, not a law. In hot, low-inventory markets, experienced flippers underwrite at 75–80% of ARV to win deals, accepting thinner margins. Others skip the shortcut entirely and work backward from itemized costs plus a target profit: ARV − rehab − closing − holding − selling − profit = maximum offer. Beginners should stay at or below 70% until they've done a few deals.

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Frequently asked questions

What is the 70% rule in house flipping?: Don't pay more than 70% of a home's after-repair value (ARV) minus repair costs. Formula: ARV × 0.70 − estimated repairs = your maximum offer. The 30% cushion absorbs holding, financing, and selling costs.
Is the 70% rule accurate?: It's a fast screening tool, not a precise model. It works well in average markets but can be too conservative in hot ones. For a final offer, back it up with itemized closing, holding, and selling costs plus a target profit.
What if I pay more than 70% of ARV?: You can, but you're reducing the cushion that covers your costs and profit. Going above 70–75% on a first flip leaves little room for the rehab overruns and timeline slips beginners commonly hit.