The 70% Rule in Real Estate — Your Fix and Flip Offer Formula

The 70% rule is the single most important formula in fix and flip investing. It tells you the maximum price you can pay for a property while still making a profit — accounting for rehab costs, holding costs, selling costs, and your profit margin.

The 70% Rule Formula

Maximum Purchase Price = (ARV × 0.70) − Estimated Rehab Costs

Real Example

Property ARV: $300,000 · Estimated rehab: $55,000
Max offer = ($300,000 × 0.70) − $55,000 = $210,000 − $55,000 = $155,000

At $155,000 + $55,000 rehab = $210,000 total in. Sell at $300,000. That $90,000 gross spread covers: agent commissions ($18,000), closing costs ($6,000), holding costs ($10,000-15,000), and leaves $51,000-57,000 in net profit.

Why 70% — Where Does the Number Come From?

The 70% accounts for the typical costs of selling a flipped property:

• Real estate commissions: ~6%
• Seller closing costs: ~2%
• Holding costs (6 months): ~3-4%
• Contingency buffer: ~3-4%
• Target profit margin: ~15-20%

Add these up and you need to buy at roughly 70% of ARV (after rehab) to hit your profit target. The formula builds all of this in automatically.

When to Adjust the 70% Rule

The 70% rule is a starting point, not an absolute. Adjust it based on:

• Use 65% in slow markets, expensive rehabs, or uncertain ARV comps
• Use 75% for minimal rehabs ($5-15K), strong comps, fast-moving markets, or if you're selling without an agent
• Use 60% for large commercial conversions or difficult properties

Running Your Numbers in 30 Seconds

Use our free fix and flip analyzer — enter your ARV, rehab estimate, purchase price, and financing terms and get a full profit projection, ROI, and AI verdict instantly.