The 70% rule says an investor shouldn't pay more than 70% of a property's after-repair value (ARV) minus the cost of repairs. In one formula: Maximum Allowable Offer (MAO) = (ARV × 0.70) − repair costs. It's the fastest sanity check in real estate investing. Here's how to use it, a worked example, and when to ignore it.
This is education, not investment advice. The 70% rule is a guideline, not a law of nature.
The formula
MAO = (ARV × 0.70) − Repairs
That 30% cushion (the gap between 70% of ARV and full ARV) is what covers a flipper's holding costs, closing costs, agent commissions on the resale, and profit. As Rocket Mortgage explains, it's a quick way to keep from overpaying once you know two things: the ARV and the estimated repairs.
A worked example
A house will be worth $300,000 fixed up (that's your ARV) and needs $50,000 in repairs.
- ARV × 0.70 = $300,000 × 0.70 = $210,000
- Minus repairs = $210,000 − $50,000 = $160,000
Your maximum offer is $160,000. Pay more than that and you're eating into the margin that's supposed to cover costs and profit.
Wholesalers: subtract your fee too
If you're wholesaling, your cash buyer needs the deal to still work after they pay you. So carve your assignment fee out of the MAO:
Wholesaler's offer = (ARV × 0.70) − repairs − your fee
Using the numbers above with a $10,000 fee, you'd offer the seller up to $150,000 and assign at $160,000 — the buyer still hits the 70% mark.
When the 70% rule breaks
It's a guideline that flexes with the market and the strategy (BiggerPockets covers this well):
- Hot, high-value markets often use 75–80% because thin margins on a $700k flip still leave real dollars, and competition is fierce.
- Cheap markets may need a lower percentage (60–65%) because fixed costs (closing, commissions) eat a bigger share of a small ARV.
- Different exits change the math — a buy-and-hold or BRRRR investor cares about cash flow and refinance value, not a quick resale, so the 70% frame may not apply at all.
- Light rehabs vs. full guts carry very different risk, so some investors adjust the percentage for scope.
The two inputs that actually matter
The rule is only as good as your two numbers:
- ARV — get it from sold comps, conservatively. See How to Calculate ARV.
- Repairs — estimate honestly and pad for surprises. Optimistic repair numbers are how "70% rule" deals still lose money.
Be conservative on both. A deal that only works if everything goes perfectly isn't a deal — it's a bet.
The come-up move
The 70% rule turns a gut feeling into a number in ten seconds: (ARV × 0.70) − repairs. Use it to filter fast, then dig into the deals that pass.
Start free on Squatters — our tools run ARV and max-offer math on real off-market properties, so you can practice the discipline before real money is on the line. Squat it. Fund it. Own it. 🦝