Calculate your maximum offer price using the 70% rule: Max Offer = ARV × 70% minus estimated rehab costs. Essential for evaluating flip deals.
The 70% rule is the most widely used quick-screening formula in house flipping. It states that you should pay no more than 70% of a property's after-repair value (ARV) minus the estimated rehab costs. The remaining 30% covers your holding costs, selling costs, financing, and profit.
This calculator instantly computes your maximum allowable offer (MAO) for any deal. Enter the ARV and estimated rehab costs, and it shows you the ceiling price you should offer. Going above this number means you're eating into your profit margin or risking a loss if costs overrun or the property sells for less than expected.
While the 70% rule is a guideline — not an absolute law — it has proven remarkably effective as a first filter. Deals that pass the 70% test deserve deeper analysis; deals that fail it rarely work out. Some investors use 65% in expensive markets or 75% in markets with fast turnover.
Analyzing every potential deal in detail is time-consuming. The 70% rule lets you screen dozens of properties in minutes, instantly eliminating deals that don't have enough margin. It's the flipper's equivalent of a quick back-of-napkin test before running a full analysis. Instant recalculation lets you compare scenarios side by side, so every buying, selling, or investment decision is grounded in solid financial analysis.
Maximum Allowable Offer = ARV × Rule Percentage − Rehab Costs Built-in Margin = ARV × (1 − Rule Percentage) Implied Profit = ARV − MAO − Rehab Costs
Result: Max offer = $165,000
ARV of $300,000 × 70% = $210,000. Subtract $45,000 in rehab costs and your maximum offer is $165,000. The 30% margin ($90,000) covers holding costs (~$15K), selling costs (~$24K), financing (~$8K), and leaves ~$43K profit.
The genius of the 70% rule is its simplicity. With just two inputs — ARV and rehab cost — you can evaluate any deal in seconds. The 30% margin has been validated over decades of flipping experience as roughly the amount needed to cover holding, selling, financing, and profit on a typical 4–6 month flip.
In markets where homes sell within 30 days and carrying costs are low, 75% can work because you'll spend less time (and money) holding the property. In luxury markets or slow-moving areas where flips take 9–12 months to sell, 65% or even 60% is more prudent. The key variable is your expected hold time — longer holds eat more margin.
The 70% rule is a screening tool, not a replacement for full deal analysis. Use it to quickly filter your deal pipeline: if a property passes the 70% test, run the full fix-and-flip profit calculator to verify the numbers. If it fails the 70% test, move on unless you have a specific reason to believe your costs will be unusually low.
The 70% rule states that you should pay no more than 70% of a property's after-repair value (ARV) minus the cost of repairs. It's a quick formula to determine the maximum price you should offer on a flip. The remaining 30% covers all your other costs and profit.
No, it's a guideline, not a guarantee. In markets with high carrying costs, slow sales, or expensive agent commissions, you may need the 65% rule. In hot markets with fast sales and low holding costs, 75% may work. Always follow up with a detailed profit analysis.
The 30% margin typically breaks down to approximately 8–10% for selling costs (agent commissions + closing), 5–7% for holding costs (mortgage, taxes, insurance, utilities), 3–5% for financing costs, and 10–15% for profit. Exact allocations vary by deal.
The 70% rule is designed for flips, not rentals. For rental property purchases, use metrics like cash-on-cash return, cap rate, and the 1% rule instead. Rental investors can pay more because they earn long-term income rather than needing a quick profit.
MAO stands for Maximum Allowable Offer. In house flipping, MAO is typically calculated using the 70% rule: MAO = ARV × 70% − Repair Costs. It's the highest price you should offer to maintain acceptable profit margins.
Yes. New flippers should use 65% because they typically underestimate rehab costs and hold time. The extra 5% margin provides a buffer for the learning curve. As you gain experience and accuracy in estimating costs, you can move toward 70–75%.