- The rule: maximum allowable offer = ARV × 70% − rehab. The other 30% of ARV has to pay for buying, financing, holding and selling costs, plus your profit.
- Rehab, flat fees and the dollar profit you need don't shrink with the house price, so 70% is too loose on a $140,000 flip and too tight on a $900,000 one.
- Lenders published loan caps of 70–80% of ARV in October 2026, and 60–70% for new investors or heavy rehab. Pay above the cap and every extra dollar comes from your cash.
- For a real offer, work down from the sale price: ARV minus selling costs, target profit, rehab and contingency, holding, financing and buying costs.
The 70 percent rule house flipping investors use to screen deals says you should pay no more than 70% of the after-repair value (ARV), minus the cost of the rehab. It's fast, it needs two inputs, and it stops you paying retail for a house that needs a roof. It is also blunt: it treats every cost as a fixed share of the sale price, and most of them aren't.
On a house that will sell for $300,000 after a $45,000 renovation: $300,000 × 70% = $210,000, minus $45,000, gives an MAO of $165,000. Pay that and your purchase plus rehab equals exactly 70% of the sale price.
The 30% isn't profit. It pays for everything except the house and the rehab.
The rule sets aside 30% of ARV for the costs that sit outside the purchase price and the renovation budget, and for the margin you're working for. On the $300,000 example that's $90,000, and it has to cover five things:
- Buying costs: title, escrow, recording, and any wholesale assignment fee if you didn't buy direct.
- Financing: points and lender fees up front, then monthly interest. Fix-and-flip lenders published 0–2 points plus fees such as a $1,995 doc fee in October 2026, and the median rate on 2025 non-bank short-term investor loans was 10.45%.
- Holding: property taxes, insurance, utilities and yard care for every month you own the house.
- Selling: agent commissions plus seller closing costs, which Redfin puts at 1–3% of the price before commissions.
- Profit: whatever is left, and your only cushion against a rehab overrun or a slow sale.
With the cost assumptions used below, the first four come to about 14–15% of ARV, which leaves a profit of 15–16% of the sale price if you buy at exactly 70%. That holds at any price. The trouble is that a percentage profit means very different things at $140,000 and at $900,000.
Why 70% is too loose on a $140,000 flip and too tight on a $900,000 one
A roof, a furnace and a kitchen cost roughly the same whether the finished house is worth $140,000 or $350,000, so rehab eats a bigger share of a cheap house. Lender fees have flat parts. And the profit that justifies six months of risk is a dollar figure. Run the rule through three markets and the right answer moves.
| Feature | Low-cost market | Mid-priced market | High-cost market |
|---|---|---|---|
| ARV | $140,000 | $350,000 | $900,000 |
| Rehab bid | $45,000 | $60,000 | $150,000 |
| 70% rule MAO | $53,000 | $185,000 | $480,000 |
| Profit at the 70% price | $21,000 | $55,700 | $147,000 |
| Profit if rehab runs 15% over and the sale takes 2 months longer | $12,100 | $41,800 | $112,200 |
| Full-cost MAO for the profit target | $40,000 | $198,000 | $518,000 |
| Purchase + rehab at the full-cost MAO | 61% of ARV | 74% of ARV | 74% of ARV |
| Verdict on 70% | Too loose by $13,000 | Too tight by $13,000 | Too tight by $38,000 |
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Assumptions for all three: a 6-month hold; a loan of 90% of the purchase price plus 100% of the rehab, within a 75% ARV cap; an assumed 10.25% interest on drawn funds, with rehab drawn evenly; 2 points plus a $1,995 doc fee; buying costs of 2% of the price; selling costs of 7% of ARV; and taxes, insurance and utilities of $450, $750 and $1,800 a month. The profit target is $30,000 or 10% of ARV, whichever is larger, after spending a 10% rehab contingency. Illustrative only, not a quote.
Low-cost markets: the rule overpays
At $140,000, the 70% price leaves $21,000 of profit on a house where the rehab is 32% of ARV, against 17% in the mid-priced deal. A 15% overrun and two slow months cut it to $12,100. Clearing a $30,000 floor with a contingency means offering $40,000, about 61% of ARV all-in. Small deals also hit lender floors: in October 2026 Lima One published a $100,000 minimum purchase price or as-is value, and New Silver required a $100,000 as-is value and a $150,000 ARV, which this deal misses.
Mid-priced markets: the rule is close
At $350,000, the rule and the full-cost method land $13,000 apart. That is the rule's real value: in the middle of the market, 70% is a fair stand-in for a full analysis, which is why investors still quote it. Buying at the 70% number here simply gives you a second contingency.
High-cost markets: the rule loses deals
At $900,000, the 30% margin is $270,000. Costs take about $123,000, leaving $147,000, or 16% of the sale price. If 10% of ARV ($90,000) is enough for you, you can pay $518,000, which is $38,000 over the 70% number. Anyone who runs the full numbers and accepts that margin will outbid a buyer who holds to 70%.
Lender ARV caps are a separate limit, and they decide your cash
The 70% rule protects your profit. A lender's ARV cap protects the lender. In October 2026, fix-and-flip lenders published maximum loans of 70–80% of ARV: Kiavi 80%; Roc, Civic, Easy Street and New Silver 75%; RCN 60–75% depending on experience and rehab scope. They also cap the purchase portion at 85–100% of the price and finance up to 100% of the rehab.
Buy at the 70% price and a 75% cap never bites; the purchase limit does. Pay more and the cap takes over, and every dollar above it comes out of your pocket. Same $350,000 ARV and $60,000 rehab, with 90% of the purchase and 100% of the rehab financed, up to 75% of ARV ($262,500):
| Purchase + rehab | Purchase price | Loan | Your cash for purchase and rehab |
|---|---|---|---|
| 70% of ARV | $185,000 | $226,500 | $18,500 |
| 75% of ARV | $202,500 | $242,250 | $20,250 |
| 80% of ARV | $220,000 | $258,000 | $22,000 |
| 85% of ARV | $237,500 | $262,500 (capped) | $35,000 |
| 90% of ARV | $255,000 | $262,500 (capped) | $52,500 |
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Between 80% and 85% the loan stops growing and your cash jumps $13,000 on a $17,500 price increase. New-investor caps move that line lower: RCN published 70% of ARV for borrowers with no flips on light or moderate rehab, and 60% on heavy rehab. The ARV in the cap is also the lender's valuation, not yours. If it comes in $20,000 under your number, a 75% cap cuts the loan by $15,000.
A better maximum allowable offer: work down from the sale price
The full-cost method replaces the 30% guess with line items. Start at the ARV, subtract what it costs to sell, the profit you require and every dollar you'll spend getting there. What's left is the most you can pay.
Financing and buying costs depend on the price, so compute them at a trial offer, then adjust once. Here is the mid-priced deal from the first table, with a $35,000 target (10% of ARV):
| Line | Basis | Amount |
|---|---|---|
| After-repair value | Closed comps, checked against the lender's valuation | $350,000 |
| Selling costs | 7% of ARV: commission plus seller closing costs | −$24,500 |
| Target profit | 10% of ARV | −$35,000 |
| Rehab | Contractor bid, line by line | −$60,000 |
| Contingency | 10% of rehab | −$6,000 |
| Holding | $750 a month × 6 | −$4,500 |
| Interest | 10.25% on drawn funds: $178,200 at closing, rehab drawn evenly | −$10,670 |
| Points and doc fee | 2% of a $238,200 loan, plus $1,995 | −$6,759 |
| Buying costs | 2% of the price | −$3,960 |
| Left for the purchase | $198,611 | |
| Maximum allowable offer | Rounded down | $198,000 |
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At $198,000 your purchase plus rehab is 74% of ARV, and you still keep $35,000 after spending the whole contingency. You'd bring about $51,700: $19,800 down, $10,719 in buying costs, points and fees, $15,170 in interest and holding, and the $6,000 contingency.
Get the inputs right
- ARV: use closed sales, not listings, matched on size, age and finish. New Silver, for example, asks for six comparable sales within 5 miles from the past 12 months.
- Hold time: count permits, rehab, listing and the buyer's closing, then add a month. Published fix-and-flip terms run 6–24 months, and a slip past yours means an extension.
- Rate and points: use a lender's term sheet, not an advertised floor. Ask whether interest accrues on the full loan or only on drawn funds; on a rehab-heavy deal the difference is real money.
- Selling costs: price your actual commission and your state's transfer taxes. The 7% used here is a placeholder.
- Profit target: set a dollar floor for small deals and a percentage for large ones, and decide it before you fall for a house.
If you'll keep the house, the refinance sets the ceiling
The 70% rule assumes a sale. If you plan to rent the house and refinance, the limit comes from the new loan instead. LendingOne published refinance leverage of about 75% of ARV on its fix-to-rent program in October 2026. To pull all your cash back out at 75%, the purchase, rehab and every closing, carry and financing cost have to fit inside 75% of the appraised value: $262,500 on the $350,000 house. A DSCR lender (one that qualifies the loan on the debt service coverage ratio: rent divided by the monthly payment) will also check that the rent covers the new payment, so run the rent numbers before you count on the refinance.
Use both: the rule to screen, the full-cost MAO to offer
- Screen every lead at 70%. If the asking price is far above it, move on, unless the house is in a high-cost market where the rule runs tight.
- For leads that survive, run the full-cost MAO with real rehab bids and a lender quote.
- Check the loan: purchase limit, ARV cap and rehab financing. Price the cash you'll need, including the first phase of work you'll pay for before the first draw.
- Stress it: rehab 15% over and two extra months. If the deal still clears your floor, make the offer.
Fix-and-flip loans are business-purpose loans for investment property that neither you nor your family will live in. A house you plan to live in needs a residential mortgage.