The 70% Rule for House Flipping, Explained
If you flip houses, the 70% rule is the first piece of math you should run on every deal — before you fall in love with the kitchen, before you picture the after photos. It's a guardrail that stops you from overpaying, and it takes about fifteen seconds.
The rule in one line
Never pay more than 70% of the after-repair value, minus your repair costs.
ARV is the after-repair value — what the house will sell for once it's fixed up, based on comparable sales. That's the number everything hinges on. Plug your numbers into the fix & flip calculator and it does this instantly.
A worked example
Say the ARV is $425,000 and the place needs $100,000 in repairs:
- 70% of $425,000 = $297,500
- Subtract $100,000 in repairs = $197,500
So $197,500 is the most you'd offer before repairs (r/FirstTimeHomeBuyer). Anything above that and you're eating into your margin.
Where does the other 30% go?
That 30% isn't pure profit — it's your buffer for everything the ARV math ignores: closing costs on both ends, holding costs (loan interest, taxes, insurance, utilities while you renovate), agent commissions when you sell, and finally your actual profit (Amerisave). The rule bakes in a cushion so a surprise doesn't wipe you out.
When flippers bend the rule
In a hot market with fast sales and reliable comps, experienced flippers sometimes stretch to 75% or even 80% of ARV. That can work — but understand you're shrinking your safety net every time you do. A single bad appraisal, a permit delay, or a $15,000 surprise behind the drywall hits a lot harder at 80% than at 70%.
The two numbers that make or break it
The 70% rule is only as good as your inputs. Get these two wrong and the whole thing falls apart:
- ARV: Pull real, recent comparable sales — not Zillow's estimate, not what the seller "thinks." Sold, similar, nearby, recent.
- Repair costs: Walk the property with a contractor and pad your estimate. Rehabs almost always run over, not under.
The rule doesn't guarantee a profit — it just keeps you from starting underwater. Run every potential flip through the fix & flip calculator, be honest about ARV and repairs, and walk away from the deals that don't pencil. The best flip is often the one you didn't buy.
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