The 70% Rule in House Flipping: How to Calculate Your Maximum Offer

The 70% rule says the most you should pay for a flip is 70% of the after-repair value minus the repair costs. The maximum allowable offer (MAO) formula is ARV × 0.70 − repairs. On a house worth $320,000 after a $48,000 rehab, that is $176,000. It is a rule of thumb: fast, useful as a filter, and silent about half of your real costs.

What is the 70% rule in house flipping?

ARV (after-repair value) is what the house should sell for once the work is done. The 70% rule takes that number, keeps 70% of it, and subtracts what the repairs will cost. The result is the highest price at which the rule says the deal still works.

Maximum allowable offer = ARV × 70% − Repair costs

The 30% you hold back is not profit. It is one bucket for everything the rule does not name: your closing costs when you buy, holding costs while you own the house, the cost of borrowed money, the commissions and closing costs when you sell, a contingency for surprises — and, after all of that, your profit.

That is why the rule works as a first filter and fails as a final answer. It is quick to apply at the curb or on a listing page. It cannot tell you what your margin actually is.

How to calculate your maximum offer with the 70% rule

Take the example house used across this site: 1,600 sq ft, 3 bed 2 bath, built in 1978. Comparable sales put the ARV at $320,000 and a zone-by-zone walk-through puts repairs at $48,000. (If you still need the first number, read how to calculate ARV from comps.)

The free Maximum offer calculator in Flip Investor OS does exactly this: ARV × the rule percentage − repairs − any other cost you want taken off the top (a wholesale fee, your closing costs), rounded down to the dollar, with the 65% and 75% figures shown next to it for reference.

Notice how much the percentage matters. Moving from 65% to 75% on this house is a $32,000 swing in the offer — on a profit that, as you will see below, is around $35,000. The percentage is not a detail.

When 65% or 75% fits better than 70%

The rule has no idea what your costs are. The percentage is where you tell it. A lower percentage holds back more money for costs and profit; a higher percentage assumes the costs are small.

Lean towards 65% when:

• You borrow hard money. Two points and 11% a year on a six-month loan is roughly 7.5% of the loan amount before you have fixed anything.
• The hold is long: a permit-heavy rehab, a slow market, a winter sale.
• You sell with full agent commissions (around 5–6% of ARV, plus seller closing costs).
• The price bracket is low. Fixed costs like title, inspections and utilities are the same on a $150,000 house as on a $400,000 one, so they eat a larger share of a cheap ARV.
• Prices in the area are flat or falling.

Lean towards 75% only when:

• You buy with cash and sell quickly.
• The house is in a higher price bracket, where the fixed costs are a small share of ARV.
• You know your selling costs are low (a flat-fee listing, a buyer already lined up).
• Your repair estimate is firm: a contractor's bid, not a guess.

If you are not sure which case you are in, the honest answer is that the rule cannot tell you. A full cost-by-cost maximum offer can.

What the 70% rule leaves out

Every cost below is real, and the rule treats all of them as "somewhere in the 30%". On the example house, with the defaults Flip Investor OS uses, they add up like this:

Costs vary by market, lender and season, so your own numbers will differ — but they will never be zero. Holding alone depends on taxes, insurance, utilities and the loan; see holding costs on a house flip for how to build that monthly figure.

Two more things the rule ignores:

• Contingency. A rehab estimate is a forecast. If you do not add a reserve, every surprise comes straight out of profit.
• Data quality. $48,000 from a walk-through with photos per zone is one thing; $48,000 from a guess on the driveway is another. The rule gives both the same offer.

The full maximum offer: every cost counted

A full maximum offer starts from ARV, subtracts every cost and the profit you want to keep, and what remains is the most you can pay. Because purchase closing costs are a share of the price, the last step divides by 1 + purchase costs % instead of subtracting them.

Maximum offer (cash) = (ARV − Selling costs − Holding costs − Rehab − Contingency − Target profit) ÷ (1 + Purchase costs %)

Flip Investor OS uses a target profit of 10% of ARV by default — $32,000 on this house. Here is the cash case:

Check it: at $202,941 the purchase costs are $4,059; 202,941 + 52,800 + 4,059 + 9,000 + 19,200 = $288,000; 320,000 − 288,000 = $32,000 of profit. Every dollar is accounted for.

With hard money the same formula also subtracts the financing cost on the rehab part of the loan and divides by a bigger number, because every extra dollar of price is borrowed at 90% and costs points and interest. On the app's defaults (90% of price + 100% of the rehab budget borrowed, 11% a year, 2 points, 6 months) the financing cost per borrowed dollar is 0.02 + 0.11 × 6 ÷ 12 = 7.5%, and the maximum offer drops to $186,703. See how a hard money loan changes the numbers for the loan math line by line.

You can open the free calculator with your own ARV, repairs and assumptions; the same math runs in the deal analysis of every property you add.

Rule of thumb vs full maximum offer on the same house

The profit column is the full calculation at each price: ARV − price − rehab with contingency − 2% purchase costs − holding − selling − financing where there is a loan. Read the table two ways.

First, on this particular house the 70% rule is stricter than a 10%-of-ARV target: a cash buyer who insists on 70% would walk away from a deal that still leaves $32,000 at $202,941. A hard money buyer, though, is already down to 13.6% of ARV at the rule's price and to 8.2% at 75%. Same house, same rule — different margin, because the rule does not see the loan.

Second, the percentages are not interchangeable. 75% with hard money on this house leaves less than the app's default target. That is the whole argument for running the full offer before you sign anything: it shows the margin, and the stress tests in a flip profit calculation show how fast it disappears when the ARV comes in 5% lower or the rehab 20% higher.

How to use the maximum offer when you make an offer

The maximum offer is a ceiling, not an opening bid. Three habits keep it useful:

1. Run the rule first, the full offer second. The rule tells you in a second whether a listing is worth an hour. The full offer, with your own holding, financing and selling numbers, tells you where to stop.
2. Keep the rehab honest. The offer moves dollar for dollar with the repair estimate. An estimate where an unknown line is marked "Unpriced" instead of $0 — which is how Flip Investor OS handles it — keeps you from offering on a number that was never finished.
3. Offer below the ceiling and negotiate towards it, never past it. If the asking price is far above your maximum, the house is not a flip at that price. It becomes one only if the price drops, the repairs shrink or the ARV is really higher — and the last two are the ones people fool themselves on.

No formula decides for you. What it does is show the margin of safety at a given price, so the decision is yours with the numbers in front of you, not after closing.