The 70% rule is a popular guideline used by house flippers and rookie investors to determine the maximum price they should pay for a property. The rule states that you should never pay more than 70% of a property’s After Repair Value (ARV) minus the estimated repair costs. This helps maintain healthy profit margins by accounting for all expenses including renovation, holding costs, and sales commissions.<h2 id="23fe7e9c-751c-4deb-9414-417ff2b5bcdb" data-toc-id="23fe7e9c-751c-4deb-9414-417ff2b5bcdb">How to Calculate the 70% Rule</h2>The formula is straightforward:Maximum&nbsp;Allowable&nbsp;Offer=(ARV×0.70)−Repair&nbsp;CostsMaximum&nbsp;Allowable&nbsp;Offer=(ARV×0.70)−Repair&nbsp;CostsFor example, if a property has an ARV of $75,000 and estimated repairs cost $30,000:MAO=(75,000×0.70)−30,000=52,500−30,000=22,500MAO=(75,000×0.70)−30,000=52,500−30,000=22,500This means you should not offer more than $22,500 to ensure room for profit and other costs.<h2 id="09528f41-a59c-4f64-b579-d1036aee6022" data-toc-id="09528f41-a59c-4f64-b579-d1036aee6022">Why the 70% Rule Matters</h2>This rule balances risk and reward, helping investors avoid overpaying for properties that may not yield enough profit. However, accurate estimates of ARV and repair costs are crucial; errors here can lead to underestimating expenses.By using the 70% rule as a quick evaluation tool, novice investors can make faster, smarter offers while protecting their bottom line.

The rule states that you should never pay more than 70% of a property’s After Repair Value (ARV) minus the estimated repair costs. 

Applying the 70% Rule: Calculating Maximum Offer Prices

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Applying the 70% Rule: Calculating Maximum Offer Prices

Applying the 70% Rule: Calculating Maximum Offer Prices

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