The 70 percent rule calculator gives house flippers a fast, disciplined answer to the single most important question in the business: what is the most I can pay for this property and still make money? Rather than negotiating from gut feel or falling in love with a listing, the 70% rule anchors your offer to the after-repair value and the true cost of getting the property there.
Arb Digital built this calculator because flipping math punishes guesswork faster than almost any other real estate strategy β a rushed offer can turn a profitable rehab into a break-even project or a loss. This tool takes the guesswork out of the first, most important number: your maximum offer.
What This 70 Percent Rule Calculator Does
You provide three inputs: the after-repair value (ARV), your estimated repair costs, and the rule percentage (70% by default, adjustable). The calculator multiplies ARV by your chosen percentage, then subtracts repair costs to produce your maximum allowable offer, or MAO. It also shows you exactly how much of the ARV that percentage represents in dollars, and how much cushion β the gap between ARV and your total cost basis β the rule builds in for you.
This isn't a full profit-and-loss projection; it's a guardrail. It tells you the ceiling on your offer before you start negotiating, so you walk into every deal with a hard number instead of an emotional one.
How to Use It
- Estimate the ARV conservatively. Pull recent, truly comparable sold listings β similar size, condition, and finish level, sold within the last three to six months in the same immediate area. Resist the temptation to use the best comp in the neighborhood.
- Build a real repair budget. Walk the property with a contractor if at all possible, and add a 10β15% contingency on top of the line-item bid. Underestimating repairs is the single most common way flippers blow through their margin.
- Set your percentage. 70% is the traditional default, but see the section below on when to adjust it up or down.
- Read your maximum offer. That's the ceiling β the most you should offer, not necessarily what you should open with. Leave room to negotiate down from there.
- Sanity-check the cushion. The built-in cushion shown in the results has to cover financing costs, holding costs, closing costs on both ends, real estate commissions, and your profit. If that number looks thin once you account for all of those, either the ARV is optimistic, the repair budget is light, or the price is too high.
The Formula / How It's Calculated
The math is a single line: Maximum Offer = (ARV Γ Rule Percentage) β Repair Costs. At the standard 70%, that means: take 70% of what the house will be worth after renovation, then subtract what it will cost to get it there. Whatever's left is the most you can pay for the property today.
The remaining 30% of ARV isn't profit β it's a bucket that has to absorb several real costs before anything is left over for you. Investopedia has a solid plain-language breakdown of house-flipping economics and the risks that eat into that margin; see investopedia.com for background on typical flip costs and timelines.
What the 30% Cushion Actually Covers
New flippers often see "30% margin" and assume that's their take-home profit. It isn't β and treating it that way is how first-time flippers lose money on paper-profitable deals. The cushion has to absorb, at minimum: financing costs (points, interest, and origination fees on a hard money or private loan, which can easily run 8β14% annualized); holding costs for however many months the project takes (property taxes, insurance, utilities, and loan payments accruing every month the property sits unsold); closing costs on both the purchase and the eventual sale, which commonly total 2β5% of price on each side; real estate agent commissions on the sale, typically 5β6% of the sale price; and unplanned overages on the renovation budget, which show up on almost every project regardless of how carefully it was scoped.
Once you stack those against the 30% cushion, actual net profit margin on a flip using the standard rule is often closer to 10β15% of ARV, not 30%. That's exactly why the rule is calibrated where it is β the extra buffer exists because flips reliably run over budget and over schedule, and the rule is built to survive that reality rather than assume a perfect execution.
When to Flex the Percentage
The 70% figure isn't a law of physics β it's a starting convention that different markets and risk profiles reasonably adjust. In hot, fast-moving markets with low competition for renovated inventory and short expected holding periods, some experienced flippers push toward 75% or even 80%, betting that a quick resale minimizes holding-cost exposure. In slower markets, markets with high property taxes or insurance costs, or on larger, more complex renovation projects with more that can go wrong, dropping to 65% or even 60% gives you a wider safety margin against the unexpected.
New flippers, in particular, should lean conservative rather than aggressive on this dial. Every flip carries execution risk β permitting delays, contractor issues, hidden structural problems discovered after demolition β and a tighter percentage rule gives you room to absorb a rough project without turning it into a loss. Use this calculator's adjustable percentage field to model both a conservative and an aggressive scenario on the same property before you commit to an offer.
Where This Rule Breaks Down
The 70% rule is built around a resale exit and assumes a fairly typical single-family renovation timeline of a few months. It's a poor fit for very high-end luxury flips, where percentage-of-ARV math behaves differently because fixed costs (permits, high-end finish work, staging) don't scale linearly with price. It's also a poor fit for ground-up construction, major additions, or projects with entitlement or permitting risk, where costs and timelines are far less predictable than a standard cosmetic-to-moderate rehab. In those cases a full line-item proforma with sensitivity analysis will serve you far better than a single percentage rule.
Low-priced properties expose another weakness in the rule: at very small ARVs, a fixed percentage can leave an unrealistically thin dollar cushion once you account for fixed transaction costs that don't scale down with price. A $60,000 ARV property at 70% minus a $15,000 rehab leaves a $27,000 maximum offer and only an $18,000 dollar cushion β but closing costs, agent commissions, and a few months of taxes and insurance are largely fixed regardless of price, so that cushion can vanish fast on a small deal. Conversely, on very high ARVs the percentage rule can leave more cushion than the deal actually needs, which is one reason some experienced flippers scale their percentage by price tier rather than using one flat number across every project size.
Market timing risk is also worth naming directly, since the rule doesn't model it at all. The 70% rule assumes your ARV estimate holds steady from the day you make your offer to the day you close on the resale, typically several months later. In a market that's cooling or turning during your renovation window, the ARV you underwrote at the start can be meaningfully higher than what the market actually supports when you list. Building in a buffer for that risk β either by using a slightly more conservative ARV or a lower rule percentage in uncertain markets β is a reasonable hedge that the base formula doesn't provide on its own.
Before you lock in an offer, run the same property through the gross rent multiplier calculator in case a hold-and-rent exit outperforms a flip.
Try the GRM Calculator All Free ToolsCommon Mistakes to Avoid
- Using an optimistic ARV. Inflated comps push your maximum offer up artificially and erode your real margin before you even close.
- Underbudgeting repairs. A repair estimate without a contingency almost always gets blown through once demolition reveals hidden issues.
- Treating the 30% cushion as pure profit. It has to cover financing, holding, closing costs, and commissions first β actual net margin is typically much smaller.
- Opening negotiations at your maximum offer. The MAO is a ceiling, not a starting bid; leave room to negotiate down from there.
- Ignoring your holding-period assumption. A project that takes twice as long as planned eats twice the holding costs, which can turn a "passing" deal into a loser.
- Applying a rigid 70% to every project type. Larger, higher-risk, or luxury projects generally need a wider margin than the standard percentage provides.
Related Free Tools From Arb Digital
Compare a flip exit against a hold-and-rent strategy with the gross rent multiplier calculator or the cap rate calculator. If you're planning to refinance and hold instead of selling, the BRRRR calculator models that path directly. Rental buyers should also check the 1 percent rule calculator and the cash-on-cash return calculator for a fuller underwriting picture. See the complete free online tools hub for more.
Frequently Asked Questions
It's a guideline stating that an investor should pay no more than 70% of a property's after-repair value, minus repair costs, to leave enough margin to cover financing, holding costs, selling costs, and profit.
Multiply the after-repair value by the rule percentage (commonly 70%), then subtract your estimated repair costs. The result is the maximum price you should pay for the property.
No. That cushion has to cover financing costs, holding costs, closing costs on both the purchase and sale, and real estate commissions before any of it becomes actual profit, which is often closer to 10-15% of ARV.
Yes, some investors use 75-80% in fast-moving markets with short expected holding periods, though this leaves a thinner margin for error and is generally a more aggressive strategy.
It works best for standard single-family cosmetic-to-moderate renovations. It's a poor fit for ground-up construction, major additions, or high-end luxury flips, where a full line-item proforma is more reliable.
Either negotiate toward your number, look for ways to lower your repair estimate through phased work, or walk away. Paying above your maximum offer materially increases the risk the project loses money.
This tool provides general estimates for educational purposes only and is not financial, tax, legal, or medical advice. Figures are illustrative; consult a licensed professional for decisions.
