The 70% Rule for House Flippers, Explained

The 70% rule is the house flipper's back-of-the-envelope answer to one question: what's the most I can pay for this property and still make money? It's not a law and it's not precise — it's a fast screening filter that keeps a bad deal from ever reaching your spreadsheet.

The formula

Two inputs, both of which you should already have:

• ARV — the after-repair value, estimated from comparable sales. See how to calculate ARV.
• Repair costs — your renovation budget, ideally itemized. See how to estimate rehab costs.

A worked example

A property with a $322,000 ARV that needs $45,000 of work:

If the seller wants $210,000, the deal fails the rule by $30,000 — a signal to negotiate hard, cut the rehab scope, or walk.

Where the 30% goes

The rule reserves 30% of ARV. That buffer is not your profit — it's everything a flip costs that isn't the purchase price or the visible renovation:

• Selling costs — agent commissions, closing costs, concessions (often 6–9% of sale price)
• Holding costs — loan interest, property taxes, insurance, utilities while you own it
• Buying costs — closing costs and financing points on the way in
• Your profit margin — whatever's left is the reward for the risk

On a $322,000 ARV, 30% is about $96,600 to cover all of that. In a high-cost or slow market it evaporates fast — which is exactly why the percentage isn't sacred.

Why 70% isn't a law

The rule is a convention, and good investors adjust the percentage to their market and deal:

• Hot, low-inventory markets push investors toward 75% or even 80% just to win deals — accepting thinner margins because competition is fierce.
• Expensive markets often justify a higher percentage: fixed selling costs are a smaller share of a $700,000 ARV than a $200,000 one.
• Risky, slow, or uncertain deals call for a lower percentage — 65% or less — to widen the safety buffer.

That's why our 70% rule calculator lets you set the percentage yourself rather than hard-coding 70.

What it can't do

The 70% rule screens; it doesn't analyze. It bakes every soft cost into one flat percentage, so it can't tell you your actual holding period, your specific financing, or your true profit. Treat a passing number as permission to run a full flip profit analysis — not as a green light on its own.