The 70% rule in real estate: how flippers price a deal in 60 seconds

What the 70% rule actually says

Pay no more than 70% of a property's after-repair value, minus what the repairs will cost. That is the entire rule. Investors write it as a maximum allowable offer, or MAO:

MAO = (ARV × 0.70) − repair estimate

Take a house that will appraise at $320,000 once it is fixed and needs $55,000 of work. Multiply: 0.70 × $320,000 = $224,000. Subtract the repairs and your ceiling is $169,000. Two inputs, one number, and you can say it out loud on a seller's porch without opening a laptop.

It stuck because it is fast and directionally right, not because anyone proved it. There is no published research behind the 30%. It is a trade convention that spread through investor meetups, forums and paid courses, and its real function is to stop new buyers from paying retail for a house that needs a roof. Use it as a filter. Then do the actual arithmetic before you sign.

Where the 30% actually goes

The expensive misreading is treating that 30% as profit. On the $320,000 house, the gap between ARV and your purchase-plus-repairs is $96,000, and six categories of cost get paid out of it before you do.

Add the low ends and friction takes about $37,000 of the $96,000. Add the high ends and it takes $66,400. The 70% rule, run cleanly on a deal that goes exactly to plan, is really a 9%-to-18%-of-ARV profit rule. Where you land depends on hold time and contractor scheduling, which you control, and on rates and days-on-market, which you do not. A February 2026 Clever survey of 533 agents put the average total commission at 5.70%, while sellers surveyed separately reported paying nearer 4.7%. Yours depends on what you negotiate and whether you hold a license.

The same deal, run end to end

Same house: $320,000 ARV, $55,000 in repairs, bought at exactly the $169,000 the rule allows, financed the way most flips are financed in 2026.

The money going out

• Purchase price: $169,000
• Rehab: $55,000
• Purchase closing costs at roughly 1.5%: $2,500
• The loan: 90% of purchase, which is $152,100, plus 100% of rehab drawn in stages, topping out at $207,100. Your down payment is $16,900.
• Origination at 2 points: $4,142
• Interest at 10.5% interest-only, on an average outstanding balance near $180,000 across six months: $9,450
• Holding at $600 a month: $3,600
• Commission at 5%: $16,000
• Seller-side closing and concessions at 2%: $6,400

Everything outside purchase and rehab totals $42,092. Sale at $320,000, minus $169,000, minus $55,000, minus $42,092, leaves $53,908. That is 16.8% of ARV. Good outcome. Roughly half of what the rule appears to promise.

Now let three ordinary things go wrong

None of these are disasters. All three happen constantly.

• Repairs run 20% over and land at $66,000. That is a mild overrun on a scope priced from one walkthrough. Minus $11,000.
• The hold stretches from six months to nine. Three more months of interest on the full $207,100 at 10.5% is $5,436, plus $1,800 of carry. ATTOM's Q1 2026 U.S. Home Flipping Report put the median time from purchase to resale at 165 days, which means half of all completed flips took longer than that. Minus $7,236.
• Your ARV was 5% optimistic and it sells for $304,000. You lose $16,000 of gross and save $1,120 on commission and closing. Minus $14,880.

Profit lands at $20,792, about 6.5% of ARV. Your cash in the deal was roughly $43,800 across down payment, points, interest and carry, so that is near 47% on cash over nine months. Nobody would call it a disaster. But the rule implied 30% and the deal paid 6.5% of ARV, and every one of those three misses was ordinary.

One more version. Say you got into a bidding situation and paid $185,000 rather than $169,000. Sixteen thousand more, plus $288 of extra points and about $1,134 of extra interest on the bigger loan. Profit falls to roughly $3,400. Nine months of work, six figures of borrowed money, and you cleared less than a used car. That gap is the whole argument for having a maximum number before you walk in.

What hard money does to the number

The rule was built for cash buyers and it shows. Every origination point and every month of interest comes out of the same 30% that is supposed to hold your profit, and the rule makes no room for either.

Short-term fix-and-flip lending in 2026 generally prices in the 9% to 12% range with 1 to 3 points, interest-only, on terms of 6 to 24 months, with loan-to-cost commonly capped near 90% and loan-to-ARV near 70%. Those numbers move by lender, state, track record and collateral structure. Get a real term sheet before you underwrite; a website rate is not a commitment. For backdrop, Freddie Mac's Primary Mortgage Market Survey had the 30-year fixed at 6.69% on August 6, 2026. Private construction money prices well above that, and your buyer's financing costs shape your resale price too.

Duration matters more than rate. On the deal above, points and interest were $13,592 at six months and $19,028 at nine. A borrower at 12% who exits in four months pays about $8,000 on a $200,000 balance; a borrower at 9.5% who sits for eight pays about $12,700. Cheaper money that you hold twice as long is more expensive money. If your contractor is slow, shop for speed, not basis points.

Where the rule breaks, concretely

The 70% rule is wrong at both ends of the price scale, and it is wrong in opposite directions.

Expensive houses: 70% is too conservative

Costs do not scale with price the way the rule assumes. On an $800,000 ARV the rule reserves $240,000 for costs and profit. Your commission grows in dollars, but title work, permit fees, the yard service and your own project management hours barely move. Mark Ferguson, who has written for years about his own flips at InvestFourMore, says he rarely uses the rule and is comfortable at about 80% of ARV minus repairs on a $400,000 property, targeting roughly $40,000 of profit. Hold 70% on an $800,000 house and you will not win contracts, because the person underwriting to a fixed profit figure will pay $60,000 more than you and still get paid.

Cheap houses: 70% is far too aggressive

Reverse it and the fixed costs eat you alive. ATTOM found that flips of homes purchased under $50,000 produced a typical 14% loss in Q1 2026, while the $100,000 to $200,000 band produced the strongest margins in the country at 32%. Run the rule on a $90,000 ARV with $30,000 of repairs: your maximum offer is $33,000, and after $12,000 or so of commission, closing and carry you are working for about $15,000 on a full gut. Below roughly $120,000 of ARV, most operators drop to 60% or 65%, or abandon the percentage entirely and price to a fixed dollar profit.

Flat-spread metros

Price spread, not purchase percentage, decides whether a market supports flipping at all. In the joint ATTOM and Backflip analysis of Q1 2026 fix-and-flip returns, Boston flips averaged a $647,456 purchase and an $831,456 resale for a 28.4% return. Dallas-Fort Worth averaged $418,856 in and $437,003 out. An $18,147 spread. A 4.3% return, before a dollar of rehab is counted. No purchase multiplier rescues you in a submarket where resale prices have flattened against acquisition prices, and Dallas-Fort Worth is not a small or obscure market. Pull the spread on your own recent flips before you trust any rule of thumb.

What experienced flippers use instead

Two replacements. Most veterans run both.

First, move the multiplier deliberately. Same formula, different number, chosen before you walk the house so you are not negotiating with yourself in the driveway.

Second, throw out the percentage and solve for profit. This is what most people who flip more than four houses a year end up doing, because it forces you to price the specific deal rather than the average deal. Take the same $320,000 house:

• ARV: $320,000
• Minus repairs: $55,000
• Minus selling costs at 7%: $22,400
• Minus holding and financing: $21,000
• Minus your required profit: $45,000
• Maximum offer: $176,600

That is $7,600 more than the 70% rule allows, and it still pays you $45,000. In a market where three other buyers are circling the same house, $7,600 is often the difference between signing and losing. The percentage rule cost you the deal to protect a margin you did not need. Set your profit floor first, by deal size rather than by feel: many operators use $25,000 minimum under $150,000 of ARV, $35,000 to $50,000 in the middle, and 10% of ARV above $500,000. Pick yours and write it down, because the number you invent mid-negotiation is always lower.

The wholesaler's version of the rule

Wholesalers run the same formula with one more subtraction: (ARV × 0.70) − repairs − your assignment fee = what you offer the seller. Your buyer needs the 70% deal, so your fee comes out of the seller's side, not your buyer's.

On the $320,000 house with $55,000 of repairs and a $13,000 fee, your offer to the seller is $156,000. That is 48.75% of ARV, and it is why most wholesale conversations end in about ninety seconds. Real Estate Bees surveyed more than 1,000 wholesalers for its average assignment fee study and reported a $13,000 national average, with North Carolina and Georgia around $22,000 and Arizona near $5,000. Sizing your fee at your market's average and then discovering no seller will take the resulting offer is the most common way new wholesalers stall out.

What fixes that is not a smarter formula. It is talking to sellers who have a reason to take $156,000, which usually means genuine time pressure rather than a price preference. Finding those owners is where most of the work lives. That is the problem Farmrix is built for: it scores every owner in a market on how likely they are to sell in the next 6 to 12 months and mails the ranked top of that list, so the offers you make are going to people who might actually say yes. Assignment rules also vary by state, and several states now regulate or license wholesaling activity, so check your state's rules before you build a business on assignments. Our guide to wholesaling walks the contract mechanics.

Your inputs are the risk, not the percentage

Arguing 70 against 72 is a rounding error next to a bad estimate. On the worked deal, moving the multiplier two points changes your offer by $6,400. Being 15% wrong on a $55,000 rehab changes profit by $8,250. Being 5% wrong on ARV changes it by nearly $15,000. The percentage is the least important variable, and the one people argue about most.

ARV. Use three closed sales, not active listings, within half a mile, sold in the last 90 days, within about 20% of your square footage, same school attendance zone, same style. Then subtract for what the comps have and your house does not: a garage, a second bathroom, a lot that does not back onto a six-lane road. If you cannot find three real comps, you cannot price the deal, and that is a reason to walk rather than a reason to guess. County records and sold data are the starting point; see property data for what is publicly available.

Repairs. Walk the property with your general contractor for your first five deals and pay for the hour if you have to. Add a 10% to 20% contingency on top of the bid, always. Houses built before 1978 fall under the EPA's Lead Renovation, Repair and Painting rule, which requires certified firms for most disturbance of painted surfaces, and that certification requirement narrows your contractor pool and raises your bid. Sewer laterals, foundations, panel upgrades and permit timelines are where the $20,000 surprises live, and none of them are visible from a photo. Permits add weeks, not days, and the delay costs you interest whether or not the work costs more.

How to put it to work this week

Concrete steps, in order.

1. Write down your profit floor. One number for deals under $150,000 of ARV, one for the middle, one for anything above $500,000. Do it today, while no deal is in front of you.
2. Build a one-page cost sheet with your actual lender's rate and points, your county's tax rate, your insurance agent's vacant-property quote and your real commission. Use it on every deal. It takes about twenty minutes to build and it replaces the 70% rule permanently.
3. Use 70% as a screening filter only. Run it in your head to decide whether a lead is worth thirty more minutes. Never use it to set the offer you actually sign.
4. Track your last five deals against your estimates. Write down what you predicted for repairs, hold time and ARV, and what happened. Correcting your own bias is worth more than any formula.
5. Fix the top of the funnel. The rule only produces income if you are running it on enough deals. Most people underwriting well are still stuck because they see four properties a month.

That last point is the one that actually limits most investors. Underwriting is a solved problem. Deal flow is not. If you are generating your own, driving for dollars costs almost nothing but hours and works fine at small scale. If you would rather have the list built and mailed for you, that is what Farmrix does: score every owner in your market, rank them by how likely they are to sell in the next 6 to 12 months, and print and mail postcards to the top of that list. A 500-owner package with 500 postcards runs $1,195, or about $2.39 per owner reached. See pricing and then go run the numbers on something real.