The 70% rule is a guide for house flippers. It says: do not pay more than 70% of a home's fixed-up value, minus repair costs. It keeps a cushion for your costs and profit.
What flipping means here
Flipping is when you buy a home that needs work, fix it up, and sell it for more than you spent. The danger is simple: it is easy to fall in love with a project and pay too much, leaving no room for profit once the repair bills and selling costs roll in. The 70% rule exists to stop that. It hands you a number you should not go above, before your emotions get involved. Many experienced flippers swear by it for exactly that reason — it is a brake you set in advance.
The formula
Max offer = (ARV × 0.70) − repair costs.
ARV is the After Repair Value — what the home will be worth once it is fixed up. Repair costs are what you expect to spend on the fixes.
A worked example
Say a home will be worth 200,000 once renovated (that is the ARV), and it needs 30,000 in repairs.
- ARV × 0.70 = 200,000 × 0.70 = 140,000.
- Subtract repairs: 140,000 − 30,000 = 110,000.
So your max offer is about 110,000. Pay much more than that and the deal gets risky.
Notice how each piece pulls the offer down for a reason. Taking 70% instead of the full value sets aside money for the costs of buying, holding, and selling. Subtracting the repairs makes sure you are not paying for work you still have to fund yourself. What is left is the most you can pay and still expect the flip to work out. If the seller will not come down to that number, the smart move is often to walk away and find the next home rather than stretch and hope.
What the missing 30% is for
You are paying 70% of the fixed-up value, not 100%. That leftover 30% is your safety margin. It covers the costs the formula does not list directly — closing costs, loan interest, agent fees when you sell, surprises during the work, and your profit. Skip that cushion and a small surprise can wipe out your gain.
When to bend it
The 70% rule is a starting point, not a law. In areas where homes sell fast and steadily, some investors use 75%. If repairs are uncertain or the market is shaky, they use less. Always confirm your ARV and repair estimates first — the rule is only as good as those two numbers.
How Underlisted helps
Our free flip calculator runs this exact formula for you: enter the ARV and repairs, and it shows your safe max offer in one step. You can check any home free and test different repair budgets to see how each one changes the number you should offer.
Takeaway: max offer = (ARV × 0.70) − repairs. It builds in a cushion so a flip stays profitable.