70% Rule House Flip Calculator
Calculate your maximum purchase price based on the 70% rule: Max Offer = (ARV × 0.7) - Repair Costs
Your Maximum Offer Price
Important: The 70% rule is your safety net. It accounts for:
- 6-8% selling fees (agent commissions, closing costs)
- Carrying costs (taxes, insurance, utilities)
- Unexpected issues ($12k roof repair, $7k HVAC, etc.)
- 4-6 month holding period costs
When people talk about flipping houses, they often sound like they’re making easy money. Buy low, fix up, sell high. But the truth? Most beginners lose money because they don’t account for the hidden costs. That’s where the 70% rule comes in - a simple, proven formula that keeps flippers from overpaying and underprofiting.
What Exactly Is the 70% Rule?
The 70% rule says you should never pay more than 70% of a property’s after-repair value (ARV), minus the cost of repairs. It’s not a guess. It’s a safety net. If a house will be worth $300,000 after you fix it up, and repairs will cost $60,000, then the max you should pay is:
($300,000 × 0.7) − $60,000 = $210,000 − $60,000 = $150,000
That’s it. You cap your purchase price at $150,000. Anything higher, and you’re risking your profit - or worse, losing money.
Why 70%? Why Not 80% or 60%?
Why 70%? Because real estate flipping isn’t just about materials and labor. There are hidden costs that eat into your profit:
- Selling fees (agent commissions, closing costs - usually 6-8%)
- Carrying costs (property taxes, insurance, utilities while you wait to sell)
- Contingency funds (unexpected issues like mold, foundation cracks, or plumbing disasters)
- Marketing and staging
- Financing interest (if you’re using a hard money loan)
That’s why 70% works. It leaves 30% as a buffer for all those expenses. If you go above 70%, you’re gambling. If you stick to it, you’re building a repeatable system.
How to Find the After-Repair Value (ARV)
You can’t apply the 70% rule without knowing the ARV. That’s the estimated market value of the home after all repairs are done. Here’s how to get it right:
- Look at recently sold homes in the same neighborhood - within the last 90 days.
- Focus on homes that are similar in size, age, number of bedrooms, and condition.
- Use online tools like Zillow’s Zestimate or Redfin’s estimate - but don’t trust them blindly. They’re averages, not exact values.
- Ask a local real estate agent for a Comparative Market Analysis (CMA). Most will do it for free.
- Adjust for unique features. A finished basement? A new roof? A pool? These add value. A bad layout or outdated wiring? They subtract it.
Example: You find a house that needs $45,000 in repairs. Nearby homes sold for $280,000-$310,000. You estimate ARV at $295,000. Your max offer? ($295,000 × 0.7) − $45,000 = $161,500.
Real-World Example: What Happens When You Ignore the Rule
Last year, a flipper in Columbus, Ohio, bought a house for $180,000. The ARV was estimated at $320,000. Repairs were budgeted at $50,000. At first glance, it looked profitable. But here’s what happened:
- The roof leaked during winter - $12,000 extra.
- The HVAC system died - $7,000 more.
- They couldn’t sell for 4 months - $4,000 in property taxes and utilities.
- They paid 10% commission to the agent - $32,000.
Final sale price: $305,000. Total costs: $180,000 + $50,000 + $12,000 + $7,000 + $4,000 + $32,000 = $285,000. Profit? $20,000. But they spent 8 months on the project. That’s less than $2,500 per month. Not worth it.
Using the 70% rule: Max offer should’ve been ($320,000 × 0.7) − $50,000 = $174,000. They paid $6,000 over. And that $6,000 was swallowed by the hidden costs.
When the 70% Rule Doesn’t Work
The 70% rule is a guideline, not a law. There are exceptions:
- High-demand markets: In cities like Austin or Nashville, where homes sell fast, you might stretch to 75% if you’re confident in speed and demand.
- Wholesaling: If you’re flipping without owning the property (assigning contracts), the rule doesn’t apply the same way.
- Long-term rentals: If you’re not flipping to sell, but to rent, you care about cash flow, not ARV. The 70% rule isn’t relevant here.
- Foreclosures with cash buyers: If you’re paying all cash and the seller is desperate, you might negotiate below 70% - and still make a killing.
Bottom line: The 70% rule is your starting point. Use it to filter deals. Don’t use it to force a bad one.
How to Use the Rule Like a Pro
Here’s how experienced flippers use the 70% rule daily:
- Calculate it before even touring the house.
- Walk away from any deal that breaks it - no exceptions.
- Build a spreadsheet with ARV, repair costs, and max offer. Update it with every new listing.
- Track your past flips. Did you follow the rule? Did you make money? Adjust your numbers based on real results.
- Use it to negotiate. If the seller asks $170,000, but your max is $150,000, you have leverage. Say: "Based on repairs and market value, I can offer $150,000."
The best flippers aren’t the ones who find the most deals. They’re the ones who walk away from the wrong ones.
Common Mistakes That Break the Rule
Even smart people mess this up:
- Overestimating ARV: "This house will be worth $400,000!" - but comparable homes sold for $310,000. Be conservative.
- Underestimating repairs: "It’s just cosmetic." Then you find $20,000 in electrical issues. Always get a professional inspection.
- Ignoring holding costs: You think you’ll sell in 3 months. It takes 6. Every extra month costs you hundreds or thousands.
- Using emotional logic: "I love this house." That’s not a business decision.
Flip houses like a business. Not a hobby. Not a dream. A business.
Tools to Help You Apply the Rule
You don’t need fancy software. But these tools make it easier:
- Realestate.com - free ARV estimates and recent sales data
- HouseFlipping.com Calculator - free online tool that auto-calculates 70% rule
- Google Sheets - build your own template with formulas: =(ARV * 0.7) - RepairCost
- Local MLS access - if you have a real estate agent, ask for sold comps
One flipper in Atlanta saved $18,000 in 6 months just by using a simple spreadsheet. No app. No guru. Just math.
Final Thought: The Rule Is About Discipline
The 70% rule isn’t magic. It’s a filter. It stops you from falling in love with a bad deal. It forces you to think coldly about numbers. In a business where 70% of flips lose money, this rule is the difference between surviving and thriving.
Don’t chase the biggest profit. Chase the safest one. The 70% rule doesn’t guarantee success - but it guarantees you won’t go broke trying.
Is the 70% rule the same for commercial properties?
No. The 70% rule is designed for single-family residential flips. Commercial properties (like retail spaces or office buildings) have different valuation methods based on income potential, tenant leases, and zoning. Most flippers use a cap rate or cash-on-cash return instead.
Can I use the 70% rule if I’m using a loan?
Yes - and you should. In fact, the rule becomes even more important if you’re using a hard money loan with high interest. Those loans cost 10-15% annually. If you stretch beyond 70%, your monthly payments can eat your profit before you even sell.
What if I can’t find homes that fit the 70% rule?
Then wait. There’s no shame in sitting out. The market will change. New listings appear. You can also expand your search area, look for motivated sellers (foreclosures, estate sales), or partner with someone who has cash. But never break the rule just to make a deal.
Do I need a contractor to estimate repair costs?
Yes. DIY estimates are almost always too low. A licensed contractor can spot hidden problems - plumbing behind walls, foundation shifts, code violations - that you can’t see. Most charge $100-$300 for a quick walk-through. That’s cheaper than losing $20,000 on a bad flip.
Is the 70% rule used outside the U.S.?
It’s less common. In countries like Canada, the UK, or Australia, real estate markets operate differently. Property taxes, legal fees, and buyer expectations vary. Some flippers adapt the rule to 65-75% based on local costs. But the core idea - leave a buffer - is universal.
