House flipping guide
The 70% Rule in House Flipping
Written by Alexis Briseno Serrano · Last reviewed August 2026
Ask an experienced flipper how much to pay for a project house and the first answer you will hear is the 70% rule: pay no more than 70% of the after repair value, minus the cost of repairs. It is the fastest screen in real estate investing, one line of arithmetic that separates leads worth underwriting from leads worth archiving.
This guide explains what the rule actually protects you from, works a full example, shows when disciplined investors flex the percentage up or down, and is honest about where the rule stops being useful. By the end you will know how to use it the way professionals do: as a screen that earns a deeper look, not as the underwrite itself.
What the rule says
The 70% rule sets a ceiling on your purchase price. Take the property's after repair value, keep 70% of it, then subtract what the renovation will cost. Whatever remains is your maximum allowable offer, or MAO. Offer less and your margin grows; offer more and you are spending your own profit at the closing table.
The rule works because it prices the two numbers that decide a flip before you ever talk terms: what the house will be worth done (ARV) and what it costs to get it there (repairs). Everything else about a deal is negotiation detail by comparison.
Why 30%? What the discount actually covers
The 30% you hold back is not all profit, and misunderstanding that is the most common beginner mistake. That slice has to fund your buying costs (closing, lender fees), your holding costs (loan interest, taxes, insurance, utilities for every month you own it), your selling costs (agent commissions and seller-side closing), and only then your profit. On a typical flip those transaction and carry costs consume a meaningful share of the 30%, which is why the rule feels conservative on paper and merely sensible in practice.
Seen that way, the rule is really a cost buffer expressed as a discount. It exists because flips run long, markets soften, and repair lists grow. The buffer is what lets a project absorb those hits and still close in the black. It is also why experienced investors read an offer at 72% of ARV as thin rather than fine: the margin looks generous only until real costs start subtracting from it.
When investors use 65% or 75% instead
Seventy is a default, not a law of nature. Two situations justify moving it, and one rule governs both:
- Use a tighter 65% when risk is elevated: slower resale markets, longer expected holds, older houses where the repair list tends to grow, or price points where a small ARV miss wipes out the margin.
- Some investors stretch to 75% in fast, competitive markets on lighter cosmetic projects, accepting a thinner buffer to win more deals. Stretch deliberately and only when your ARV and repair numbers are strong, because the buffer you give up is the same one that absorbs surprises.
- Whatever percentage you choose, choose it before you fall in love with a specific house. Adjusting the rule to make one deal pencil is how the rule stops protecting you.
Where the rule breaks down
The 70% rule is a screen, and screens have blind spots. In expensive markets the formula can demand discounts sellers will never accept, filtering out every deal including good ones. On very cheap houses the flat percentage under-reserves for fixed costs that do not scale down with price. And the rule says nothing about time: a six-month project and a fourteen-month project look identical to the formula while their holding costs diverge by thousands.
That is why the rule earns a deeper look rather than replacing one. Once a lead passes the screen, a full underwrite prices the actual costs: real loan terms, real months of carry, real commissions, and a repair budget built line by line instead of guessed. The rule filters; the underwrite decides.
The 70% rule versus a full underwrite
Run the screen on every lead and the underwrite on the survivors, and the two tools stop competing and start compounding: the rule protects your time, the underwrite protects your money.
It helps to be precise about what the screen skips, because those are exactly the items a full underwrite prices. The rule compresses every cost into one flat discount. The underwrite un-compresses them:
- Financing reality: points, interest rate, and how many months of payments your timeline actually implies.
- Transaction detail: title, escrow, transfer taxes, and both sides of closing costs on the buy and the resale.
- Carry: taxes, insurance, and utilities for the true hold period, not the hoped-for one.
- Exit assumptions: commission structure and the concessions buyers in your market currently expect.
From MAO to an actual offer
Your MAO is a ceiling, not an opening bid. Most negotiations should start below it, leaving room to move while a counteroffer war stays inside your math. The discipline that matters is refusing to cross the ceiling when the bidding gets emotional. A deal you overpaid for does not become profitable because you wanted it more than the other buyer did.
In FlipperPro, that ceiling follows the deal around. The AI Deal Underwriter proposes a preliminary MAO from its draft ARV and rehab estimate, and Buying Offers grades every bid and counter against it: at MAO, under it, or over it, with the dollar gap displayed. When a seller counter would push you past the ceiling, you see it before you sign it.
Making ARV and repairs worthy of the formula
The rule's output is only as honest as its two inputs. An inflated ARV or a hopeful repair number produces a confident-looking MAO that is simply wrong. Build the ARV from renovated sold comps using the price-per-square-foot method, and build the repair figure category by category (kitchen, baths, roof, systems) rather than as a single round guess. Both take minutes with the right process, and both are covered step by step in the companion guides linked below.
A worked example
- After repair value (from comps)
- $300,000
- Keep 70% of ARV
- $210,000
- Repair estimate
- $40,000
- Maximum allowable offer (MAO)
- $170,000
If the seller wants $200,000, this deal fails the screen by $30,000. Either negotiate toward $170,000, find savings in the scope, or archive the lead and move on.
Frequently asked questions
Is the 70% rule still used in 2026?
Yes, though experienced investors treat the percentage as an adjustable default rather than gospel. Higher financing costs and longer hold times in recent years pushed many flippers toward the conservative end, closer to 65% in slower markets, while competitive metros still see disciplined investors winning at 75% on light cosmetic projects. The formula's job is unchanged: screen fast, then underwrite properly.
Does the 70% rule work for BRRRR or rental deals?
Not directly. The rule's 30% buffer is sized for a flip's exit: agent commissions, seller closing costs, and a resale profit. A BRRRR exit is a refinance, where the number that matters is the loan-to-value your lender will refinance at and how much cash stays in the deal. Investors running both strategies screen flips with the 70% rule and screen BRRRR deals against the refinance math instead.
What is a maximum allowable offer (MAO) in practice?
MAO is the highest purchase price at which the deal still meets your margin requirements. It is a private ceiling, not an opening bid: you negotiate below it, and you walk away rather than cross it. Writing the number down before negotiations start, and grading every counteroffer against it, is what keeps the ceiling honest when bidding gets competitive.
Should the repair estimate in the formula include a contingency?
Yes. The repair number you subtract should be the full expected cost of the renovation, including the contingency you carry for surprises. Feeding the formula a best-case repair figure quietly converts your MAO into a best-case ceiling, which defeats the buffer the rule exists to create.
What happens if I pay more than MAO?
Every dollar above MAO comes out of the same 30% slice that funds your transaction costs, holding costs, and profit. Pay $15,000 over and, with costs fixed, your projected profit drops by roughly that amount. Small overages on strong deals can be a deliberate choice; habitual ones are how flippers end up working six months for a break-even.
Should I offer exactly MAO on every deal?
No. MAO is the ceiling, and most winning offers start well under it, leaving room for the counteroffer dance. Where you open depends on the market's temperature and the seller's motivation, but where you stop should not move: crossing your own ceiling mid-negotiation converts a calculated buffer into a hope. If a deal cannot be won at or under MAO, the discipline is to let it go and let the next lead compete for your capital.