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70% Rule Calculator

Real EstateMoving and Space Planning

What the house should sell for once the work is done, from recent comparable sales.

70% is the classic figure; buyers in hot markets sometimes stretch to 75–80%.

Optional. Compared against the ceiling.

Maximum allowable offer —
Reserved for costs and profit
—
Purchase plus repairs
—
Offer as share of ARV
—
Asking price minus ceiling
—

The 70% rule says a flipper should pay no more than 70% of a property's after-repair value (ARV) minus the cost of repairs. For a house worth $200,000 once renovated that needs $35,000 of work, the ceiling is $200,000 × 0.70 − $35,000 = $105,000. The 30% left over covers selling, carrying and financing costs plus profit.

About this tool

Investors who buy distressed houses to renovate and resell use the 70% rule as a first filter before spending money on inspections or contractor bids. Enter the after-repair value, your rehab estimate and, if you have it, the seller's asking price. The calculator returns the maximum allowable offer, how much of the ARV is held back for costs and profit, the total of purchase plus repairs, and how far the asking price sits above or below the ceiling. The percentage is adjustable from 50% to 90% because buyers in expensive or competitive markets often work with 75% or 80%, while cautious buyers on small deals go lower. The rule is a screening shortcut, not an underwriting model: it ignores your actual closing costs, holding period, agent commissions and tax, so a deal that passes still needs a line-by-line budget.

How to use it

  1. Enter the after-repair value

    Use recent sales of renovated homes nearby with similar size and features, not the current list price.

  2. Add the repair estimate

    Include materials, labour, permits and a contingency of 10–20% for surprises behind the walls.

  3. Set the rule percentage

    Leave the slider at 70% for the standard rule, or move it to match how much margin you want to keep.

  4. Compare with the asking price

    Type the seller's price to see the gap between what they want and what the rule allows.

Examples

$200,000 ARV, $35,000 of repairs

After-repair value (ARV)
200000
Estimated repair costs
35000
Rule percentage
70

Result Maximum allowable offer: $105,000
Reserved for costs and profit: $60,000
Purchase plus repairs: $140,000
Offer as share of ARV: 52.5%
Asking price minus ceiling: No asking price entered

  1. Cap = ARV × 70% = $200,000.00 × 0.7 = $140,000.00
  2. Maximum offer = cap − repairs = $140,000.00 − $35,000.00 = $105,000.00
  3. Reserved for costs and profit = ARV − cap = $60,000.00

The classic illustration of the rule: 70% of the resale value leaves $140,000, and the rehab budget comes off that.

Seller wants $180,000 on a $300,000 ARV

After-repair value (ARV)
300000
Estimated repair costs
50000
Rule percentage
70
Seller's asking price
180000

Result Maximum allowable offer: $160,000
Reserved for costs and profit: $90,000
Purchase plus repairs: $210,000
Offer as share of ARV: 53.3%
Asking price minus ceiling: $20,000

  1. Cap = ARV × 70% = $300,000.00 × 0.7 = $210,000.00
  2. Maximum offer = cap − repairs = $210,000.00 − $50,000.00 = $160,000.00
  3. Reserved for costs and profit = ARV − cap = $90,000.00
  4. Asking price − maximum offer = $20,000.00

With $50,000 of work the ceiling is $160,000, so the asking price sits $20,000 too high under the rule.

75% rule on a $100,000 house

After-repair value (ARV)
100000
Estimated repair costs
10000
Rule percentage
75

Result Maximum allowable offer: $65,000
Reserved for costs and profit: $25,000
Purchase plus repairs: $75,000
Offer as share of ARV: 65%
Asking price minus ceiling: No asking price entered

  1. Cap = ARV × 75% = $100,000.00 × 0.75 = $75,000.00
  2. Maximum offer = cap − repairs = $75,000.00 − $10,000.00 = $65,000.00
  3. Reserved for costs and profit = ARV − cap = $25,000.00

A buyer in a competitive market accepts a thinner reserve: 75% of $100,000 is $75,000, less $10,000 of repairs.

How it is calculated

MAO = ARV × p − R

MAO
maximum allowable offer (purchase price)
ARV
after-repair value, the expected resale price
p
rule percentage as a decimal, 0.70 by default
R
estimated repair and renovation costs

The ARV is multiplied by the rule percentage to give a cap on total acquisition plus rehab spend. Subtracting the repair budget leaves the purchase price. The withheld share, ARV × (1 − p), is meant to absorb buying and selling closing costs, commissions, insurance, utilities and taxes during the project, and the investor's profit. If repairs exceed the cap, the result is zero or negative and the rule supports no purchase.

Sources

When not to use it

  • Buy-and-hold rentals, which are judged on rent, operating costs and cap rate rather than resale.
  • Turnkey homes needing little work, where a 30% discount to value is unrealistic.
  • Final offers on a deal, which need a full budget with your real holding and selling costs.

Common mistakes

  • Using the current list price or a tax assessment as the ARV instead of renovated comparable sales.
  • Leaving out a contingency, so the repair figure only covers the visible work.
  • Applying 70% of ARV as the offer and forgetting to subtract the repairs.
  • Treating the 30% reserve as pure profit when selling and carrying costs often take half of it.

Frequently asked questions

Where does the 30% in the 70% rule go?

It is a buffer for everything except purchase and repairs: closing costs on the buy and sale, agent commissions that are commonly 5–6% of the sale price, property tax, insurance and utilities while the house sits, financing charges, and the investor's profit. On a $200,000 ARV the reserve is $60,000, and costs can easily use $25,000 to $35,000 of it.

Is 70% always the right percentage?

No. It is a rule of thumb that suits mid-priced houses. On expensive homes, the fixed costs are a smaller share of value, so buyers often use 75% to 80%. On cheap houses, fixed costs eat a larger share, and some investors drop to 60% or 65% to keep a workable profit.

How do I estimate after-repair value?

Look at three to six homes sold in the last three to six months within a short distance, with similar square footage, bedrooms, bathrooms and the finish level you plan. Adjust for differences such as a garage or an extra bathroom. An appraiser or an agent's comparative market analysis gives a more defensible figure.

What does a negative result mean?

The repair estimate is larger than the capped share of the ARV. Under the rule there is no purchase price that leaves enough room for costs and profit, so the project only works if repairs can be cut or the resale value is higher than estimated.

Does the rule apply to wholesaling?

Wholesalers often begin with the same ceiling and take their assignment fee out of it, since the flipper who buys the contract will judge the price against the rule. The figure shown is that end buyer's ceiling, before any wholesale fee comes off.

Are flip profits taxed differently from other home sales?

A flipped house is not your residence, so the home-sale exclusion does not apply. Gains on property held one year or less are short-term, and frequent flippers may be treated as dealers with ordinary income. IRS Topic 409 explains the holding-period distinction; repair costs added to the property increase its basis.