The 70% Rule in Real Estate (2026 Guide) | How It Works

The 70% Rule Formula

Max Purchase Price = (ARV × 70%) - Repairs

This formula tells you the most you should pay for a flip property. Anything above this price cuts into your profit margin and increases risk.

What Does the 30% Cover?

The 70% multiplier leaves 30% of ARV for all your costs and profit. Here's the typical breakdown:

The 30% Breakdown

Profit margin: 10-15%
Selling costs: 6-10% (agent commissions, closing costs)
Holding costs: 2-5% (loan payments, taxes, insurance, utilities)
Buying costs: 1-3% (closing costs, inspections)
Buffer: Whatever's left for surprises

70% Rule Example

Let's say you find a property:

ARV (After Repair Value): $300,000
Repair estimate: $50,000

Max Price = ($300,000 × 0.70) - $50,000

Max Price = $210,000 - $50,000

Max Price = $160,000

If the seller wants $175,000, the deal doesn't work at 70%. You'd need to negotiate lower or walk away.

When to Use Different Percentages

Use 65% When...

You're new and want extra cushion
The market is uncertain or declining
Repair estimates are rough (haven't gotten contractor bids)
The property has potential hidden issues
Lower-priced markets where dollar margins are thin

Use 70% When...

Standard deals in stable markets
You have solid contractor estimates
You know the neighborhood well
Mid-priced properties ($150k-$400k ARV)

Use 75% When...

You're very experienced and efficient
Hot market with quick sales
Higher-priced properties where 25% still = big profit
Light rehabs with predictable costs
You're using private money with low carrying costs

70% Rule Limitations

The 70% rule is a quick filter, not a comprehensive analysis. It doesn't account for:

Time: A 6-month project needs more cushion than a 3-month flip
Financing costs: Hard money at 12% eats into margins
Market-specific costs: Transfer taxes, HOA fees, etc.
Your specific overhead: Team, office, marketing

Use the 70% rule for quick screening, then do detailed analysis with a deal analyzer before making offers.

70% Rule for Wholesalers

If you're wholesaling, you need to leave room for your buyer (the flipper) AND your assignment fee. Your formula becomes:

Wholesaler Max = (ARV × 70%) - Repairs - Assignment Fee

If the flipper's max is $160,000 and you want a $10,000 assignment fee, your max purchase price is $150,000.

Frequently Asked Questions

What is the 70% rule in real estate?

The 70% rule states that investors should pay no more than 70% of a property's After Repair Value (ARV) minus repair costs. This formula leaves room for profit, closing costs, and holding costs.

Why do flippers use the 70% rule?

The 70% rule provides a quick way to evaluate deals. The 30% cushion covers selling costs (6-10%), holding costs (2-5%), and profit margin (10-15%). It's a conservative approach that protects against unexpected expenses.

When should you use 65% or 75%?

Use 65% when: the market is risky, repairs are uncertain, or you're new and want more cushion. Use 75% when: you're experienced, the market is hot, or higher-priced properties where 70% profit is substantial.

Does the 70% rule work in all markets?

Not perfectly. In expensive markets, 70% may be too aggressive (you can profit at 75%). In cheap markets, you may need 65% or lower because dollar margins are thin. Adjust based on your market. Try FlipMantis free.

The 70% Rule in Real Estate