The 70% rule is a quick way for flippers to set a maximum purchase offer: pay no more than 70% of the After Repair Value (ARV), minus estimated repair costs. It's the single most-quoted rule of thumb in house flipping, and it exists to answer one question fast — before you spend hours building a full cost breakdown, is this deal even in the right ballpark?
The 70% rule isn't a law, a lender requirement, or a formula backed by academic research — it's a widely used industry rule of thumb that experienced house flippers developed and passed along informally as a fast way to screen deals before doing a full cost breakdown. Its appeal is speed: with just two numbers — your expected After Repair Value and a repair estimate — you get an instant ceiling on what to offer, without first having to nail down holding costs, selling costs, and financing details. That speed is also its biggest limitation, which is covered further down this page.
Maximum Offer = (ARV × 0.70) − Estimated Repair Costs
A property with a $280,000 ARV and $35,000 in repairs: 70% of $280,000 is $196,000, minus $35,000 in repairs equals a $161,000 maximum offer. If a purchase price higher than $161,000 is on the table, that's a signal to negotiate, walk away, or double-check that the ARV and repair numbers are conservative enough to justify the added risk.
The same math applies at any price level, though the dollar amounts and margin for error change. A property with a $150,000 ARV and $18,000 in expected repairs: 70% of $150,000 is $105,000, minus $18,000 in repairs, sets a maximum offer of $87,000. Note that the 30% buffer here — $45,000 — has to cover the same categories of cost (holding, selling, financing, profit) as the $84,000 buffer in the first example, even though the property is worth almost half as much. This is part of why the 70% rule works less predictably at the low end of the market: fixed costs like closing fees and minimum agent commissions don't scale down proportionally with a cheaper home, so the buffer can feel tighter than the percentage suggests.
The 30% buffer covers holding costs, selling costs (agent commissions, closing costs), financing costs, and a profit margin — all the expenses beyond just the purchase and repairs. Skip any one of these categories in your mental math and a deal that "passes" the 70% rule can still lose money once the actual bills come in.
In hot markets with fast resale, some flippers use a slightly higher percentage; in slower markets or with higher financing costs, a lower percentage provides more safety margin.
Treat the 70% rule as a first filter, not a final answer. Use it to quickly screen out deals where the asking price is obviously too high relative to ARV and repair costs, then run the full profit calculation — which accounts for your actual expected holding costs, selling costs, and timeline — on anything that passes the initial screen. If a property passes the 70% rule but the full profit calculation shows a thin or negative margin, trust the fuller calculation; it's measuring the thing you actually care about, which is what happens to your money, not just whether you stayed under a percentage.