70% Rule Calculator: What Your Maximum Offer Should Actually Be

Introduction

The 70% rule exists because a flipper standing in a house needs a number in their head, not a spreadsheet. It is a good heuristic. It is also a stand-in for a specific cost structure, and when your costs differ from the ones it assumes, it is wrong in a direction you should know about.

TL;DR: The rule says offer 70% of after-repair value minus repairs. Whether that is generous or conservative depends entirely on your hold length and selling costs. At a six-month hold and 8% selling costs it is conservative — it leaves 16.1% margin. Stretch to twelve months and 10% selling costs and the same offer misses a $60,000 profit target. This calculator shows both the rule's number and the number your actual target requires.

The formula

The rule itself:

Maximum offer = (ARV × 70%)
                − repair costs

That is all there is to it, which is the point. On a $320,000 after-repair value with $45,000 of repairs:

$320,000 × 0.70 = $224,000, minus $45,000 = $179,000

The 30% the rule holds back is meant to cover everything else — your profit, the selling costs, the financing, the holding costs, and the closing costs on both ends. Notice that it is a single number standing in for five variable ones.

What the rule is really assuming

Work backwards from the example. At a $179,000 purchase on a $320,000 ARV:

• Selling costs at 8% of ARV: $25,600
• Financing (85% advance at 11% for six months, plus 2 points): $11,411
• Holding at $650/month for six months: $3,900
• Closing to buy at 2%: $3,580
• Repairs: $45,000
• Total cost including purchase: $268,491

Profit at sale: $320,000 − $268,491 = $51,509, which is a 16.1% margin on ARV.

So at these inputs the 70% rule is not "70% for you, 30% for costs" — it is roughly 14% for costs and 16% for you. That is a healthy deal, and it is why the rule has survived.

When the rule overpays

Now change two things a real project routinely changes. Hold for twelve months instead of six because permits took longer than expected, and sell at 10% instead of 8% because you offered concessions in a slower market.

The rule still says $179,000 — it cannot see either change. But the costs are now:

• Selling costs at 10%: $32,000
• Financing over twelve months: $19,780
• Holding: $7,800

Profit at the same $179,000 purchase drops to $32,841, a 10.3% margin. If you wanted $60,000, the offer you could actually afford was $154,976 — some $24,000 below what the rule told you.

This is the failure mode. The rule does not degrade gracefully when costs rise, because the 30% buffer is fixed while the costs it covers are not. In a market where holds are lengthening and concessions are normal, a rule calibrated on a six-month flip quietly becomes an overpay signal.

The calculator reports the gap between the two offers directly, so you can see which way it points on your deal before you write it.

What ARV actually means, and how people get it wrong

After-repair value is what the property sells for once the work is done, and it is the input that determines everything else. Three rules for estimating it:

Use closed sales, not active listings. Listings are asking prices, which include the seller's optimism. Closed sales are what someone paid.

Match the finish level you are actually delivering. A comp with a $40,000 kitchen does not support your ARV if you budgeted $18,000. Comparable means comparable after your rehab, not after someone else's.

Stay inside the same submarket and property type. School district boundaries, arterial roads and even one side of a street versus the other can move value more than square footage does.

If you cannot find three closed sales within about 5% of each other, you do not have an ARV — you have a range, and you should run the calculator at the bottom of it.

Choosing the rule percentage

The 70 in the 70% rule is a convention, not a constant:

Percentage	When it applies
65%	Thin margins, slow markets, or inexperienced rehabbers needing more buffer
70%	The conventional default — moderate hold, standard selling costs
75%	Competitive markets where 70% loses every deal; requires tight cost control
80%+	Effectively no buffer. Only defensible on a very short hold with cash

Raising the percentage is not a way to win more deals — it is a way to win worse ones. If 70% is losing you every bid in your market, the honest conclusion is often that the market is not currently supporting flips at your cost structure, not that your rule is too strict.

Where this calculator is deliberately simple

One purchase loan, interest-only. The standard structure for a flip. For the full cost of that loan including its annualised effective rate, use the hard money calculator.

No rehab overrun modelled. Enter the budget you actually expect, then run it again 20% higher. For a line-by-line budget, use the rehab cost estimator.

No income tax. Flip profits are usually ordinary income, not capital gains, and often subject to self-employment tax. That can take a third or more of the profit shown here. It varies enough by entity and circumstance that a single rate would mislead more than it helps.

Selling costs as one percentage. Agent commission, transfer tax, title, concessions and any seller-paid closing costs, all rolled into one figure. In a buyer's market this line moves the most.

FAQ

Is the 70% rule still relevant?

As a screening tool at the front of your funnel, yes — it is fast and it is roughly right in normal conditions. As the basis for an actual offer, no. Use it to decide which properties are worth underwriting, then underwrite them properly. The gap between the two numbers in this calculator is exactly the error you take on by skipping the second step.

What is the difference between the 70% rule and MAO?

Maximum allowable offer is the concept; the 70% rule is one shortcut for computing it. A properly derived MAO works backwards from ARV through every cost to your required profit — which is what the "offer for your target profit" figure here does. The rule is an approximation of it.

Does the 70% rule include holding costs?

Implicitly, inside the 30% buffer, along with profit, selling costs, financing and closing. That bundling is the source of the problem: a long hold consumes buffer that the rule assumed was profit, and nothing in the formula tells you it happened.

Should repairs in the formula include contingency?

Yes. Enter the budget you expect to actually spend, contingency included. A repair figure that assumes nothing goes wrong makes the offer look affordable and the outcome look like bad luck.

What profit margin should I target on a flip?

Common targets are 10–15% of ARV, or a flat minimum — often $25,000 to $40,000 — whichever is greater on a given deal. The flat floor matters because a percentage of a small ARV can be too little to justify the risk and the months of work, and because your fixed costs do not scale down with the deal.

Can I use this for a BRRRR instead of a flip?

The offer logic is similar but the exit is not: BRRRR exits into a refinance rather than a sale, so there are no selling costs and the binding constraint becomes your refinance lender's LTV. Use the BRRRR calculator for that.

Conclusion

Use the rule to sort your leads, then use the target-profit number to write the offer. When the two disagree, the rule is telling you something about your cost structure — usually that the hold is longer or the exit more expensive than the version of flipping the rule was invented for.