Turn a $300K ARV Into a $170K MAO: 70% Rule for Investors

The 70 percent rule caps your maximum allowable offer (MAO) at around 70% of a property’s after repair value (ARV), minus repair costs. The formula is MAO = (ARV multiplied by roughly 70%) minus repairs. It covers holding costs, closing fees, selling costs, and financing before you ever see a dollar of margin.

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TL;DR:

• The 70 percent rule provides a quick ceiling for offers but leaves no margin for estimate errors or market changes, so careful budgeting is essential.
• Accurate ARV and repair cost estimates rely on recent comparable sales and contractor bids, with adjustments for condition and market timing, and should include contingency buffers.
• Market conditions, contractor bid reliability, and property-specific factors determine when the 70 percent rule becomes less effective, especially in unpredictable markets or for extensive rehabs.
• AI tools can automate and improve the accuracy of comp analysis and rehab estimates, significantly increasing the number of deals screened weekly with less manual effort.
• Always build a full, detailed budget before making an offer, and treat the 70 percent figure as a guideline—not the final decision—by confirming bids and market conditions.

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Table of Contents

• What the 70 Percent Rule Actually Means for Your Offer
• Formula and Example: Running the Numbers
• What the 30 Percent Buffer Actually Covers
• When 70 Percent Stops Working
• How to Estimate ARV and Repair Costs You Can Trust
• Running the Calculator: A Quick Walkthrough
• What to Do After the Deal Passes or Fails the Screen
• Where AI Tools Fit Into the 70 Percent Screen
• When the 70 Percent Rule Helps and When It Misleads
• Screen More Deals Without Guessing on the Inputs
• Sources
• FAQ

What the 70 Percent Rule Actually Means for Your Offer

The 70 percent rule exists to answer one question fast: is this deal even worth a closer look? You take the ARV, multiply it by 0.70, and subtract your repair estimate. Whatever’s left is the most you should pay.

That’s it. No financing math, no exit-strategy modeling, no spreadsheet with forty tabs. The rule works because it’s blunt. You run it in under a minute on a property you saw on Facebook Marketplace this morning, and you know instantly whether it deserves a second look or a pass.

Here’s the part flippers miss constantly: this number is a ceiling, not a target. Plenty of good deals close well under the MAO. If you’re offering exactly what the formula spits out, you’ve built in zero room for the estimate being wrong, and estimates are wrong more often than investors like to admit.

Formula and Example: Running the Numbers

The standard formula breaks into two inputs you control and one output you act on:

1. ARV — what the home will sell for once fully renovated, based on comparable sales.
2. Repair costs — your full rehab budget, from contractor bids or line-item estimates.
3. MAO — the result: (ARV × 0.70) − repairs.

Say a house will be worth $300,000 after renovation, and repairs run roughly $40,000. Multiply $300,000 by 0.70 to get $210,000. Subtract the $40,000 in repairs, and your MAO lands at about $170,000. Pay more than that, and you’re eating into the buffer meant to cover your costs and profit.

Wholesalers run a modified version. Since wholesalers assign the contract instead of renovating, they subtract their fee too: MAO = (ARV × 0.70) − repairs − wholesaler fee. Skip that step, and the flipper on the other end of your assignment inherits a deal that’s already too thin.

What the 30 Percent Buffer Actually Covers

It gets consumed by real, predictable costs before you close the books on a project.

• Holding costs: loan interest, property taxes, and insurance while the house sits
• Closing costs on both the purchase and the eventual sale
• Real estate commissions, typically 5% to 6% of the resale price
• Staging and marketing to move the finished product
• A contingency line for the repair surprises every rehab produces
• Whatever’s left over: your actual profit

Investopedia’s breakdown of flip economics confirms that financing structure changes this fast. A hard-money loan with points and a higher rate consumes buffer differently than an all-cash purchase, and a slow-moving market stretches holding costs in ways a 3-month flip timeline never accounts for.

When 70 Percent Stops Working

The rule breaks down hardest at the edges of the market.

Guidance bands help here:

• 65% or lower for heavy rehabs, unpredictable markets, or first-time flips with thin experience
• 70% as the default for a standard cosmetic-to-moderate rehab with solid comps
• 75% or higher only with tight contractor bids, a fast resale market, and a track record of hitting your numbers

Recent survey data puts the national average flipper purchase price near 67% of ARV, which tells you 70% is a benchmark, not a fixed law. Force yourself off the number entirely when the absolute profit is tiny even though the percentage checks out, when the timeline stretches past your financing runway, or when your comps are thin and disputable.

How to Estimate ARV and Repair Costs You Can Trust

The 70 percent rule is only as good as the two numbers you feed it.

1. Pull comps that actually match. Pick three to six recently sold properties within a half-mile, similar square footage, same bed and bath count, and comparable lot size. Adjust for finish level. A comp with quartz counters and a comp with laminate are not interchangeable data points.
2. Weight condition and timing. A comp that closed eight months ago in a shifting market tells you less than one that closed last month. Lean on the freshest sales.
3. Get contractor line-item bids for anything structural. Roof, foundation, electrical, and plumbing need real numbers from real contractors, not a per-square-foot rule of thumb. Save the unit-cost shortcuts for cosmetic work like paint, flooring, and fixtures.
4. Build in a contingency of 10% to 20% on top of your rehab total. Older homes and properties you haven’t fully inspected need the higher end of that range.

Pro Tip: Never finalize a repair budget from a walk-through alone. A 20-minute look tells you what’s visible; it says nothing about what’s behind the drywall.

Tools that pull comparable sales automatically and analyze property photos, like the ARV calculator from Dealanalyzerai, cut the manual research time down significantly. For the mechanics of comps adjustment itself, this breakdown of ARV calculation walks through the adjustment logic step by step, and neighborhood comps affect renovation decisions in ways worth understanding before you set a finish level.

Running the Calculator: A Quick Walkthrough

Plug ARV and repair costs into any 70% rule calculator, and the readout gives you MAO along with your implied margin against the asking price. That instant comparison is the entire point.

If MAO comes in below the seller’s asking price, you have three moves: negotiate down, get tighter contractor bids to shrink the repair number, or walk. Quick calculators are built for fast triage, not final underwriting, so treat the output as a starting point.

Watch for these red flags in the readout:

• MAO sits far below asking with no negotiation room in a hot seller’s market
• Your repair estimate is a round guess, not a bid, and the gap to MAO is thin
• The implied margin barely clears your buffer costs before profit even enters the math

What to Do After the Deal Passes or Fails the Screen

A passing MAO isn’t a green light to write an offer. It’s a green light to do the real work.

1. If it passes: build the full budget, soft costs and contingency included, before you put a number in writing. Get your contractor bids locked and your lender pre-check done.
2. If it fails: pull better comps, tighten the rehab estimate with real bids instead of guesses, or pass. A deal that fails twice with honest numbers is telling you something.
3. Set an absolute-dollar floor, not just a percentage. A deal can clear 70% and still hand you $8,000 for four months of risk. Decide your minimum acceptable profit in dollars before you run a single formula.

Pro Tip: *Keep a simple deal log. Track your MAO, your final offer, and your actual profit on every closed flip.

Where AI Tools Fit Into the 70 Percent Screen

It’s the inputs. ARV estimates swing based on which comps you pick, and repair estimates swing based on who’s bidding and how thorough the walk-through was.

AI-powered deal analysis tools narrow that swing. They pull comparable sales automatically, analyze uploaded property photos to flag renovation scope, and output an ARV range alongside a calculated MAO instead of a single guessed number. Dealanalyzerai builds its property analysis tools around exactly that gap, aiming for:

• Faster screening across multiple properties in a week instead of a handful
• Tighter ARV ranges pulled from real comp data rather than a gut-check estimate
• Photo-based rehab flags that catch scope issues before a contractor walk-through
• Risk flags that surface deal-breaking issues earlier in the process

If you’re screening several properties a week, the time saved on comps research alone changes how many deals you can actually evaluate.

When the 70 Percent Rule Helps and When It Misleads

It works cleanly on a standard $150,000 to $400,000 ARV cosmetic rehab in a market with solid comps.

The habit that actually protects your capital isn’t memorizing a percentage. It’s refusing to finalize an offer until you’ve got contractor bids in hand and a full budget built out, every single time, no exceptions for deals that “feel” right. Run your numbers through a calculator before you get emotionally attached to a property, because the formula doesn’t care how much you like the house.

— Sam

Screen More Deals Without Guessing on the Inputs

It gets slow fast when you’re evaluating a dozen listings a week and manually pulling comps for each one. Some free tools handle the ARV research and rehab estimation automatically, then provide a calculated MAO, an ARV range, and a rehab cost breakdown by line item.

The rehab side is where most manual screens fall apart, since a hallway photo tour and a spreadsheet guess rarely match what a contractor eventually bids. Dealanalyzerai’s rehab cost estimator analyzes uploaded property photos to generate a more grounded starting number, which matters most when you’re screening properties you haven’t walked through yet. That’s the exact use case for active investors and wholesalers moving through multiple properties weekly rather than evaluating one deal at a time. Try the free deal analyzer on your next property and compare the output against your own manual math.

Sources

• What is the 70% rule in house flipping? | Rocket Mortgage
• Using 70% Rule To Calculate Max Allowable Offer | BiggerPockets
• How to Successfully Flip a House | Investopedia
• 70% rule in real estate investing: Formula, example & 2026 data | Kiavi

FAQ

How do you calculate the 70 rule?

Multiply the ARV by 0.70, then subtract your total repair estimate. The result is your maximum allowable offer, and wholesalers subtract their fee as an additional step.

Can I sell my house for $1 to a family member?

You can legally sell property to a family member for any price, but selling far below market value can trigger gift tax reporting requirements and affects the buyer’s cost basis for future capital gains.

How many houses can a person flip in a year?

Investors using AI tools like Dealanalyzerai’s use-case platform to speed up screening can often evaluate more properties per week than manual research allows.

Recommended

• 70% Rule Calculator — Maximum Allowable Offer (MAO)
• Estimating ARV: A Practical Guide for Fix-and-Flip Investors
• How to Calculate MAO in Real Estate (Maximum Allowable Offer)
• ARV Calculation Methods Compared for Real Estate Investors