The 70% Rule for Fix-and-Flip Investing (With Examples)
The 70% rule is the back-of-the-napkin formula experienced flippers use to answer one question fast: what is the most I can pay for this property and still make money? It won't replace a full deal analysis, but it's the best first filter there is.
What the 70% rule says
The rule states that an investor should pay no more than 70% of a property's after-repair value (ARV), minus the cost of repairs.
As a formula:
Maximum purchase price = (ARV x 0.70) − estimated repair costs
That 30% you're holding back isn't profit alone. It's the buffer that absorbs everything a flip actually costs beyond the purchase and the rehab.
A worked example
Say a renovated home in the neighborhood sells for $300,000 (your ARV), and the property needs $50,000 in repairs:
- ARV x 70% = $300,000 x 0.70 = $210,000
- Minus repairs = $210,000 − $50,000 = $160,000
So your maximum offer is $160,000. Pay more than that and you start eating into the margin that's supposed to cover your costs and your profit.
What that 30% buffer actually covers
The gap between 70% of ARV and what you pay is there to absorb:
- Financing costs — interest and points on your loan
- Holding costs — taxes, insurance, and utilities while you own it
- Closing costs — on both the purchase and the eventual sale
- Selling costs — agent commissions and concessions
- Your profit — the reason you took the risk
How to nail your ARV
The formula is only as good as your ARV estimate. Build it from recent, comparable sales — similar size, condition, and location, sold in the last few months — not from listing prices or wishful thinking. When in doubt, be conservative; an inflated ARV is the most common way flippers talk themselves into a bad deal.
When to adjust the rule
The 70% rule is a starting point, not a law. Reasons to flex it:
- Hot, low-inventory markets may push experienced operators toward 75% to win deals.
- Higher-priced properties sometimes work at a tighter percentage because fixed costs are a smaller share of the total.
- Lower-priced properties often need a wider margin (65% or less) because fixed costs eat a bigger slice.
- Heavy or uncertain rehabs deserve a more conservative number to protect against surprises.
The limitations
The 70% rule ignores deal-specific realities: an unusually long timeline, a tricky scope, or soft local demand. Treat it as the filter that tells you which deals are worth a full analysis — then run the real numbers before you commit.
Fast, draw-based financing is what makes the math work in practice. See how our fix-and-flip loans fund purchase and rehab so projects stay on schedule and on budget.
FAQ
What does ARV mean? After-repair value — the projected market value of the property once renovations are complete, based on comparable sales.
Does the 70% rule include my loan costs? Yes, indirectly. The 30% buffer is meant to cover financing, holding, closing, and selling costs plus your profit.
Is the 70% rule still accurate? It remains a useful first filter, but competitive markets and deal specifics mean many investors adjust the percentage up or down.
Have a flip in mind? Start an application or explore fix-and-flip financing.