70% Rule
The 70% rule says a house flipper should pay no more than 70% of a property's after-repair value (ARV) minus repair costs. It builds in roughly a 30% margin to cover holding costs, selling costs, financing, and profit.
The formula is: Maximum purchase price = (ARV × 0.70) − estimated repair costs. The 30% that remains is not pure profit — it has to absorb agent commissions, closing costs on both ends, loan interest, taxes, insurance, and utilities during the hold, with profit being what's left.
It's a screening tool, not underwriting. In fast-appreciating or low-priced markets experienced flippers sometimes stretch to 75%; in slow or expensive markets they tighten to 65%. Always follow the rule-of-thumb screen with a full deal analysis.
Worked example
ARV = $300,000 and repairs = $40,000. Maximum offer = ($300,000 × 0.70) − $40,000 = $170,000. If the seller wants $195,000, the deal fails the screen unless repairs can be trimmed or the ARV is provably higher.
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