What is the 70% rule in real estate?

The 70% rule states you should pay no more than 70% of a property's After Repair Value (ARV), minus your estimated rehab costs. Formula: MAO = (ARV × 0.70) − Rehab Costs. It's designed to ensure your total acquisition and renovation cost leaves room for profit, commissions, and carrying costs.

Is the 70% rule always accurate?

The 70% rule is a fast screening tool, not a guarantee. In high-cost coastal markets with lower holding costs, some investors use 75–80%. In slower markets, luxury flips, or high-risk deals, 60–65% provides more safety margin. Always follow up with full underwriting before making a final offer.

What does the 30% buffer in the 70% rule cover?

The 30% buffer is designed to cover your target profit margin (10–15%), real estate agent commissions (5–6%), buyer and seller closing costs (1–3%), holding costs like interest and taxes (3–5%), and a contingency for unexpected renovation overruns.

Can I use the 70% rule for rental properties?

The 70% rule is designed specifically for fix-and-flip deals where you're selling after renovation. For rental properties, the right metrics are cap rate, cash-on-cash return, and gross rent multiplier — not the 70% rule, which doesn't account for long-term income and debt service.

The 70% Rule in Real Estate Explained

The 70% rule is the fastest screening tool in real estate investing. It tells you the most you should pay for a fix-and-flip property in about 10 seconds. Here's how it works — and when to break it.

What is the 70% Rule?

The 70% rule states that a real estate investor should pay no more than 70% of the After Repair Value (ARV) of a property, minus the cost of repairs.

The formula:

Max Allowable Offer (MAO) = (ARV × 0.70) − Rehab Costs

The remaining 30% of ARV covers your acquisition costs, holding costs, selling costs, and — most importantly — your profit margin.

A Simple Example

ARV: $200,000
Estimated Rehab: $30,000
MAO = ($200,000 × 0.70) − $30,000
MAO = $140,000 − $30,000 = $110,000

If the seller wants $110,000 or less, the deal potentially works. If they want $130,000, you're $20,000 over the line — and depending on your costs, that difference likely wipes out your profit.

What Does the 30% Buffer Cover?

Experienced investors have learned that 30% of ARV is roughly what you need to absorb all the costs of a flip and still make money. Here's how it typically breaks down:

Acquisition costs (closing costs on purchase): 1–3%
Holding costs (financing, taxes, insurance, utilities): 4–8%
Selling costs (agent commissions, closing costs): 7–10%
Profit margin: 10–15%

Add those together and you get 22–36% — which is why 30% became the standard threshold. It's a simplification, but a well-calibrated one.

Try the 70% Rule on Your Deal

Plug in your ARV and rehab estimate below — the calculator applies the 70% rule and shows your maximum offer instantly. Adjust the multiplier to see how a 65% or 75% threshold changes the number:

MAO Calculator

MAO = (ARV × Multiplier) − Rehab Costs. Adjust the numbers to match your deal.

After Repair Value (ARV) Estimated Rehab Costs ARV Multiplier (%)

Your Maximum Allowable Offer: $110,000

Want scenario comparison, saved deals, and AI-estimated inputs? Open the full MAO Calculator or get repair numbers from the AI Rehab Cost Estimator.

If you're evaluating software that automates this screening across many deals, see our DealCheck alternative comparison and the best DealCheck alternatives for investors.

Why the 70% Rule Works as a Screening Tool

In a competitive market where you might evaluate 20–50 leads per week, you can't build a full financial model for every single one. The 70% rule lets you instantly categorize properties:

Asking price is at or below MAO? Dig deeper.
Asking price is $5–$15K above MAO? Maybe negotiate or pass.
Asking price is $20K+ above MAO? Skip it and move on.

The faster you can disqualify bad deals, the more time you have to focus on good ones.

When to Adjust the 70% Rule

The 70% rule is a guideline, not a law. Experienced investors adjust it based on their specific situation:

Use 65% When:

You're a beginner with less margin for error
The market is softening or prices are declining
Rehab costs are highly uncertain (deferred maintenance, unknown systems)
The property is in a slow-moving market where holding times will be longer

Use 75–80% When:

You're using cash (eliminating financing costs significantly reduces holding costs)
It's a high-ARV property ($400K+) where profit percentages translate to larger dollars
The market is hot and properties sell quickly, compressing holding costs
You're doing the work yourself and reducing labor costs

Limitations of the 70% Rule

The 70% rule is a starting filter — not a replacement for full underwriting. Its main limitations:

It doesn't account for financing structure. Hard money at 14% interest + 2 points is very different from using your own cash. Holding costs vary widely.
It doesn't factor in local market conditions. A 4-month average DOM market has different holding costs than a 45-day market.
It depends entirely on an accurate ARV. Garbage in, garbage out. If your ARV is wrong, your MAO is wrong.
It doesn't consider deal-specific opportunities. A property that needs only cosmetic work might be worth paying 75% for. One needing a full gut renovation might require 60%.

The 70% Rule for Wholesalers

Wholesalers use the 70% rule slightly differently. If your buyer (the rehabber) needs to buy at 70% of ARV, your assignment fee needs to come out of that number too.

Wholesaler MAO = (ARV × 0.70) − Rehab − Assignment Fee

Example: ARV $180,000, rehab $25,000, assignment fee $8,000:

MAO = ($180,000 × 0.70) − $25,000 − $8,000 = $93,000

If you can get the property under contract for $93,000 or less, you have a deal both you and your buyer can profit on.

Putting It All Together

The 70% rule is one of the most useful heuristics in real estate investing — but use it as a front-end filter, not a final decision. When a deal passes the 70% screen, that's your signal to run a full underwriting model with precise rehab costs, actual financing terms, and realistic holding period assumptions.

The rule is fast. Full underwriting is accurate. You need both.