The 70% Rule for House Flipping (With Example)
The 70% rule is the house flipper's guardrail — a fast way to know the most you should pay before a deal stops making sense. Here's the formula, a worked example, and its limits.
The formula
Maximum offer = (After-Repair Value × 0.70) − rehab costs.
The 30% you hold back covers your profit, holding costs, financing, closing on both ends, and a margin for surprises.
A worked example
Say a property will be worth $300,000 after renovation (its ARV), and needs $50,000 of work.
- $300,000 × 0.70 = $210,000
- $210,000 − $50,000 rehab = $160,000 maximum offer
Pay more than $160,000 and your margin starts eroding into the buffer that's supposed to be your profit.
The 70% rule builds in room for the costs beginners forget — holding, financing, double closing costs, and the surprises every flip produces.
Where the 70% rule breaks down
- High-value markets — on expensive homes, 70% can be too conservative; experienced flippers may use 75%.
- Cheap properties — on low-price homes, fixed costs eat a bigger share, so 65% may be safer.
- Bad ARV estimates — the whole rule collapses if your after-repair value is wrong. Comp it carefully.
- Underestimated rehab — always add contingency; renovations rarely come in under budget.
The takeaway
Use the 70% rule to set your ceiling fast, then confirm with a full flip analysis: total costs, holding time, financing and net profit. The rule keeps you disciplined; the full numbers tell you if it's actually worth doing.
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