The 70% Rule in House Flipping, Explained
Ask a room of flippers how much to pay for a house and someone will say "70% of ARV minus repairs." It's the most quoted shortcut in fix-and-flip investing, and for good reason: it turns a messy pile of costs into one fast ceiling price.
It's also easy to misuse. Here's what the 70% rule actually says, how to run it step by step, a worked example with hypothetical numbers, and the situations where you should adjust it or set it aside.
What Is the 70% Rule?
The 70% rule is a rule of thumb for screening flips. It says your maximum allowable offer (MAO) should be no more than 70% of the after repair value, minus the cost of repairs:
MAO = ARV × 0.70 − repair costs
The 30% of ARV you leave on the table isn't profit. It's a cushion meant to cover everything else a flip costs: closing costs on the purchase, holding costs while you work, financing, selling costs, and finally your profit. The rule doesn't list those costs one by one. It assumes they'll fit inside that 30%.
How to Run It, Step by Step
Estimate ARV from sold comps. ARV is what the house should sell for after the work, based on recent, similar, nearby closed sales. If you're new to this, start with our guide on how to calculate ARV on a fix and flip.
Estimate repairs, with a contingency. Walk the property, list the work, and price it. Add a contingency line for surprises, especially in older homes.
Multiply ARV by 0.70.
Subtract repairs. The result is your MAO, the most you should pay.
Compare with the asking price. If the price is above your MAO, the deal doesn't pass the screen at that price. You can negotiate, adjust your plan, or move on.
Stress-test anything that passes. Run the full numbers with a longer timeline and higher repair costs before you commit.
A Worked Example (Hypothetical Numbers)
These numbers are made up to show the math. They are not a market estimate for any city or property.
ARV from sold comps: $200,000
$200,000 × 0.70 = $140,000
Estimated repairs, including contingency: $35,000
MAO: $140,000 − $35,000 = $105,000
Now check whether the 30% cushion really holds, using hypothetical costs:
Purchase price at MAO: $105,000
Repairs: $35,000
Buying closing costs at 2% of price: $2,100
Holding costs, 5 months at $1,200/month (taxes, insurance, utilities, loan interest): $6,000
Selling costs at 8% of ARV (commission and closing): $16,000
Total project cost: $164,100
Estimated profit: $200,000 − $164,100 = $35,900
In this example the rule leaves room for a profit. Now suppose the rehab runs 20% over ($7,000 more) and the project takes three extra months ($3,600 more in holding). Estimated profit drops to $25,300. Same rule, same purchase price, a very different outcome. That's why the rule is a screen, not a final answer.
What the 30% Has to Cover
Buying costs: closing costs, title work, and any fees on the purchase.
Holding costs: property taxes, insurance, utilities, and loan interest for every month you own the house.
Financing costs: points and fees if you use a hard money or private loan.
Selling costs: agent commission, seller closing costs, and any concessions to the buyer.
Profit: what's left for the risk and work you took on.
If your own costs are higher than average, for example expensive financing or a long permit timeline, there's less left for profit at the same 70%.
When 70% Doesn't Fit
Lower-priced houses. Many costs don't shrink with the price. Take a hypothetical $90,000 ARV with $25,000 in repairs: MAO is $38,000. Using the same cost assumptions, with holding at $900/month, estimated profit is about $14,540 for five months of work and risk. Some investors use a lower percentage on cheaper houses for exactly this reason.
Higher-priced houses. On an expensive house, 30% of ARV can be a large dollar cushion, so some investors go above 70% when their numbers support it.
Heavy or uncertain rehabs. Old systems, foundation questions, or unknown permits mean more risk. A bigger contingency or a lower percentage gives you room.
Different exit plans. The rule is built for flips. If you might keep the house as a rental instead, run rental numbers too. In Cleveland, that also means planning for the city's rental registration and Lead Safe certification steps; our Cleveland rental registration and Lead Safe checklist walks through them.
Wholesale deals. If a wholesaler assigns you a contract, their fee comes out of your MAO, not on top of it. In our example, a hypothetical $10,000 assignment fee means the wholesaler's contract price would need to be $95,000 or less for you to stay at $105,000 all in.
Keeping it as a rental? Run the cash flow with our free rental cash flow calculator to see cap rate, cash-on-cash return and DSCR.
Common Mistakes With the 70% Rule
Using list prices as ARV. ARV comes from closed sales of finished homes, not from what sellers are asking.
Light repair budgets. Every dollar you underestimate on repairs comes straight out of profit. Get written bids when you can.
Treating MAO as your opening offer. MAO is your ceiling. Start lower and leave room to negotiate.
Ignoring time. Each extra month adds holding costs. A rehab that drags on can turn a good deal into a thin one.
Double counting. If you subtract closing and holding costs separately, don't also expect the 30% to cover them. Pick one method and stick to it.
The 70% Rule vs. Running the Full Numbers
Think of the 70% rule as a filter. It helps you say no quickly to deals that are clearly too expensive. For anything that passes, line up the real costs: purchase, rehab with contingency, closing, holding, financing, and selling. Our free fix and flip profit calculator does that math in your browser, including a max-offer line where you can set the percentage yourself.
If you're investing in Cleveland from out of town or need help managing the work, see how ACC handles rehab project coordination in Cleveland.
Get a Fast First Read on Any Deal
The 70% rule is only as good as the ARV and repair numbers you feed it. The A.I. Deal Assistant from ACC Software lets you paste an address or listing link and get ARV from recent comps, a rehab estimate built from square-footage logic plus national and local cost data, projected flip profit, and a property snapshot. It works on desktop and mobile, and it gives you fast estimates to screen deals before you dig deeper. Always confirm with your own due diligence.
The free plan gives you 10 searches over 72 hours, with no credit card needed. Investor Pro is $47/month for 3,000 searches, with automatic updates and batch search support.
Questions? Email support@accmgmtsolutions.com or call (216) 238-5999.
