The 70 Percent Rule in Real Estate: How to Price a Flip the Right Way

Most flips are won or lost on the day you buy. Not on demo day. Not on the day you list. The purchase price sets the ceiling on your profit before you swing a single hammer. Pay too much, and even the nicest finishes won’t save the deal.

So what’s the right number to offer?

Experienced investors lean on a quick check called the 70 percent rule, a fast way to find the most you can pay and still come out ahead. Below, we’ll cover what it is, how the math works, when it fits, and when it doesn’t.

What Is the 70% Rule in Real Estate?

Real estate developers use the 70 percent rule as a simple cap. The idea is you shouldn’t pay more than 70% of a home’s after-repair value (ARV) after subtracting repair costs. Investors sometimes refer to it as the 70% rule in real estate, because that single number drives the entire formula.

ARV is what the home will be worth once the work is done and it is ready to sell. The 70 percent rule takes that future value, trims it down to 70%, and then removes your repair budget. What is left is the highest price you should offer to buy the property.

The other 30% is not random. The 30% covers carrying costs (mortgage payments, insurance, property taxes), closing costs on both the buy and sell side, agent commissions, and your profit margin. It is a cushion. The 70 percent rule keeps all of that built into the number from the start, so you do not get surprised later.

The 70% Rule Formula

Here is the formula investors use:

Maximum offer = (ARV x 0.70) − repair costs

That maximum offer is sometimes called your Maximum Allowable Offer, or MAO. It is the line you should not cross when you make a bid.

Working through it takes three steps:

• Step 1. First, figure out the ARV. Look at what similar homes nearby have sold for after being fixed up. These are your comps.
• Step 2. Second, multiply the ARV by 0.70. This gives you 70% of that future value.
• Step 3. Third, subtract your full repair budget. The result is your maximum offer.

A Real Example of the 70 Percent Rule in Real Estate

Numbers make this easier to see. Say you find a tired single-family home. After studying recent sales on the same street, you believe it will sell for $280,000 once it is fixed up. That is your ARV. You also walk the property and estimate $35,000 in repairs.

Plug those into the formula:

After Repair Value = $280,000

$280,000 x 0.70 = $196,000

Maximum offer = $196,000 − $35,000 = $161,000

So $161,000 is your ceiling/maximum offer. Stay at or under that, and you’ve got room to make money. If the seller’s asking $185,000, the 70 percent rule is basically suggesting you walk, or go back and renegotiate, because the margin’s gotten too thin.

This is why the rule matters. One quick calculation, and you know if it’s a go or a no.

Why Investors Trust the 70 Percent Rule in Real Estate

Speed is the biggest reason. Good deals don’t sit around, and when inventory is tight, whoever can price a property fast and put in a clean offer usually wins. The 70% rule turns what could be a messy decision into one quick calculation, something you can do in your head or on your phone.

The formula also acts as a quick check. Maybe the house has charm, maybe the location is perfect, but none of those factors go into the math. And that’s the point. It keeps you from overpaying just because you’ve fallen for a property.

And finally, it’s a buffer. Things go wrong on almost every flips , whether it’s plumbing nobody saw coming or a roof that’s worse than it looked. Holding back that 30% means a surprise like that doesn’t sink the whole project.

The 2 numbers that make or break the 70 percent rule in real estate:

The 70 percent rule is only as good as the numbers you feed it. Two figures carry the whole formula: ARV and repair costs. Get either one wrong, and your maximum offer is wrong too.

Nailing the ARV

Good comps make or break your ARV. Find homes that recently sold and actually resemble the one you’re evaluating, similar size, age, layout, and in the same area. Comparing a three-bedroom ranch to a two-story across town just won’t give you an accurate number.

Don’t overlook finishes. Quartz counters and new floors sell higher than builder-grade basics, plain and simple. Your ARV needs to match the real scope of work you’re planning, not a fantasy version of the renovation.

Estimating Repairs Honestly

Repair costs trip up new flippers more than anything else. Shaving the budget down so a deal “works on paper” is tempting, but it’s also how careers end.

Be thorough during your walkthrough. Painting, flooring, and landscaping are the easy, visible costs. What’ll get you are the hidden ones: foundation, old wiring, plumbing, a dying HVAC system, and an aging roof. These can quietly add tens of thousands to your repair bill. If you don’t catch them, they’ll eat your margin. The safer move is to overestimate slightly. 

What costs does the 70 percent rule account for?

The 30% you set aside is not just profit waiting to be collected. It is a budget for every expense that stands between your purchase price and your final check at closing. Investors who treat it as pure profit are the ones who end up losing money. Here is what that 30% actually needs to cover.

Carrying costs

Holding costs start the day you close and don’t stop until the buyer closes on their end. Mortgage, taxes, insurance, utilities, it all adds up monthly. Run two months over on the rehab timeline, and you could be looking at thousands in extra carrying costs.

Closing costs on the purchase

Buying the property comes with its own set of fees, title insurance, attorney fees, and recording fees, and they add up. Depending on your state and how the deal’s structured, expect somewhere between 2% and 5% of the purchase price.

Closing costs and commissions on the sale

Selling the finished home costs money too. The buyer’s agent commission, any seller concessions, transfer taxes, and closing fees on the sell side can easily total 6% to 8% of the resale price. These are not optional, and they come straight out of the margin you built with the 70 percent rule.

Financing costs

If you are funding the deal with a hard money or private money loan, your lender’s fees are part of this equation. Many hard money lenders charge origination fees of 1 to 5 points on the loan amount. On a $200,000 loan, that is $2,000 to $10,000 taken off the top before you swing a hammer. Accolend has charged zero origination points since 2016, which means that portion of the 30% stays in your pocket rather than going to your lender.

Your profit margin

After all of the above, what remains is your actual return. The 70 percent rule in real estate is designed so that, with accurate ARV and repair numbers, a reasonable profit is still left after every cost is paid. How much depends on how tight your estimates are and how well you control costs during the rehab.

Tracking each of these line items from day one is how investors protect their margins and make the 70 percent rule real estate math work in practice, not just on paper.

When You Can Bend the 70 Percent Rule

The 70% rule is a guideline, not a law, and seasoned investors adjust it based on whatever deal’s in front of them. Here are some of the common reasons to flex that number.

On higher-priced homes, the percentage can shift a bit. A $700,000 flip bought at 75% of ARV can still leave plenty of room in raw dollars, even with that higher percentage. Just keep in mind, bigger deals also mean bigger risk if something goes wrong.

Market heat matters too. In a hot seller’s market, sticking rigidly to 70% may mean you never win a property. Some investors stretch a few points to stay competitive. In a slow buyer’s market, you can often demand a deeper discount and go below 70%.

Your own setup can change the math. An investor with a real estate license saves on agent commissions, which frees up a little more room on the buy side. A flipper with a proven crew and tight cost control may run leaner margins than a beginner can safely handle.

The key with every exception is the same: the further you push past 70%, the thinner your safety net gets. Bend the rule with eyes open, not out of wishful thinking.

Where the 70% Rule Falls Short

The rule has limits worth knowing.

It leans hard on experience. The formula only works when your ARV and repair numbers are accurate, and that skill takes time to build. Newer investors should double-check their figures with a contractor, an agent, or a mentor before they rely on the result.

It also does not fit every strategy. The 70% rule is built for fix and flip deals. Beyond house flipping, the 70% rule does not translate well to long-term rentals, where the math depends on rent and cash flow rather than a quick resale. For rental analysis, ratios like the debt service coverage ratio matter far more.

Treat the 70% rule as a strong starting point, then layer real research on top of it. The number opens the conversation, but it doesn’t end it.

How to Find Deals That Fit the 70% Rule in Real Estate

Properties that clear the 70% rule are rarely just sitting on the open market with a for-sale sign out front. You usually have to go find them.

Many investors start in their own backyard by driving for dollars, looking for distressed or neglected homes, then tracking down the owners to make a direct offer. Foreclosure and pre-foreclosure listings, both at local auctions and on online auction sites, are another steady source. Off-market channels, such as direct mail to absentee owners, can also turn up motivated sellers who will accept a price that works with the formula.

The more deals you run through this, the faster you’ll get at spotting the ones worth chasing. The 70 percent rule keeps that screening quick, so you can go through a lot of properties without getting bogged down in any one of them.

How the Right Loan Supports the 70% Rule

Buying at the right price is step one. Funding the deal fast enough to close is step two, and the two go together. A seller who accepts a low offer often wants a quick, certain close in return. Slow financing can cost you the deal even when your numbers are perfect.

This is where your lender becomes part of the strategy. Accolend offers fix and flip loans built for investors who move quickly. We charge no origination points, a program we have kept in place since 2016, which keeps more cash in your pocket on every deal. Our team delivers same-day term sheets and instant pre-approvals, and we close in 7 to 15 business days so you can act when a property that fits the 70% rule comes along.

Accolend funds deals from $115,000 to $8,000,000 across fix and flip, bridge, DSCR rental, and ground-up construction, and with in-house underwriting and draw management, you’re working with one team from offer to payoff. Since 2016, we’ve funded more than $950 million  hard money loans across over 1,450 transactions in 40 states.

Our team will thoroughly review your project scope and budget to ensure all pricing is completely accurate. If we find any mismatches, we will immediately bring them to your attention.

The Bottom Line on the 70% Rule

At the end of the day, the 70 percent rule gives flippers a fast, honest answer to the most important question there is: how much can I pay and still make money? Run the formula, get your ARV and repair numbers right, and use it to screen deals quickly. Treat it as a guide you can adjust, not something carved in stone, and pair it with financing that actually lets you close on time.

Ready to fund your next flip? Get a quote from Accolend and see how far your buying power can go.

Frequently Asked Questions About the 70% Rule in Real Estate