For real estate investors focused on flipping houses, the 70% rule is a critical guideline to calculate the maximum price you should offer for a property. This formula helps protect profitability by factoring in repair costs and necessary margins.The rule states: Pay no more than 70% of a property's After Repair Value (ARV) minus estimated repair costs.<h2 id="cf21e505-623e-4073-81b7-dfac34947afb" data-toc-id="cf21e505-623e-4073-81b7-dfac34947afb">How to Calculate the 70% Rule</h2>Use this formula:Maximum&nbsp;Allowable&nbsp;Offer&nbsp;(MAO)=(ARV×0.70)−Repair&nbsp;Costs Maximum&nbsp;Allowable&nbsp;Offer&nbsp;(MAO)=(ARV×0.70)−Repair&nbsp;CostsFor example, if the ARV of a home is $300,000 and estimated repairs are $45,000:MAO=(300,000×0.70)−45,000=210,000−45,000=165,000MAO=(300,000×0.70)−45,000=210,000−45,000=165,000This means you should offer no more than $165,000 to maintain a buffer for other costs like closing fees, holding costs, and profit.<h2 id="680a92a9-60b1-4ede-a404-08d4453663ac" data-toc-id="680a92a9-60b1-4ede-a404-08d4453663ac">Why the 70% Rule Matters</h2>It’s a quick way to gauge if a deal offers enough margin to justify the risk and effort of flipping. However, accuracy in estimating ARV and repair costs is essential, as inaccuracies can erode profit margins.By following this rule, investors can make confident, data-driven offers and avoid overpaying.For detailed insights, Lima One Capital emphasizes the 70% rule as a foundational tool for house flippers to ensure deals are financially sound and profitable.

the 70% rule is a critical guideline to calculate the maximum price you should offer for a property. 

Understanding the 70% Rule: Calculating Maximum Allowable Offers for Flips

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Understanding the 70% Rule: Calculating Maximum Allowable Offers for Flips

Understanding the 70% Rule: Calculating Maximum Allowable Offers for Flips

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