What is the 70% rule in house flipping?

The 70% rule states that a flipper should pay no more than 70% of the After Repair Value (ARV) minus repair costs. For ARV of $250,000 and $40,000 in repairs: maximum offer = ($250,000 × 0.70) − $40,000 = $135,000. The 30% spread covers holding costs, selling costs, cost overruns, and profit. The rule is conservative — experienced investors sometimes accept thinner margins, but first-time flippers should follow it as a hard limit.

How do I determine the ARV?

Use 3-5 recently sold comparable properties (comps) in the same neighborhood that are similar in size, layout, condition (post-renovation quality you're planning), age, and features. Look at comps sold within the last 6 months within a half-mile radius. Average their per-square-foot prices and multiply by your subject property's square footage. Be conservative — pick the average of comps, not the highest. Many failed flips overestimated ARV by 5-15% based on cherry-picked comps.

What profit margin should I target?

Most experienced flippers target minimum 10-15% profit margin on ARV, or at least $25,000-$30,000 per flip. Below 10% margin, the deal is too thin to survive normal cost overruns and market shifts. Above 20% margin, you've found an excellent deal. Beginner flippers should target 15%+ margins; gain experience before accepting thinner deals.

How accurate is the 70% rule?

It's a guideline, not a precise formula. It works well in stable markets with typical 4-8 month renovation timelines and standard selling costs. In fast-moving seller's markets, some flippers operate at 75-80% of ARV (accepting thinner margins for more deal flow). In slow markets or with high holding costs, 65% of ARV may be the right discipline. Adjust based on your specific market and risk tolerance.

How long does a typical flip take?

Plan for 4-8 months total: 4-6 weeks for permits and pre-construction planning, 2-4 months of active renovation, 2-4 months on market to sell. First-time flips often run longer (6-12 months) due to inexperience with contractors, permits, and timeline management. Each additional month adds holding costs, so faster execution improves profitability — but rushing increases the risk of quality issues that hurt sale price.

ARV Calculator

Estimate the After Repair Value (ARV) of a property to determine if a flip or rehab project is profitable. Enter the purchase price, estimated repair costs, and comparable sales to calculate potential profit using the 70% rule.

After Repair Value (ARV) is the foundation of fix-and-flip real estate investing. It's the estimated value of a property after all planned repairs and renovations are complete, based on comparable sales of similar (post-renovation-quality) properties in the same area. ARV drives the maximum-purchase-price decision and ultimately determines whether a flip is profitable or not. Get ARV wrong by 10%, and a profitable flip becomes a money-losing project.

The industry-standard framework is the "70% rule": pay no more than 70% of ARV, minus repair costs. The 30% spread between purchase + repairs and final ARV is meant to cover: holding costs (insurance, taxes, utilities, loan interest during renovation, typically 3-6% of ARV over 4-8 months), selling costs (agent commission and closing costs, typically 8-10% of ARV), buffer for cost overruns (every flipper experiences these), and the flipper's actual profit (the remaining 10-15%).

This calculator computes the maximum purchase price under the 70% rule, projected profit, and ROI on cash invested. Use it to evaluate potential flip projects, identify whether a deal pencils out before making an offer, and avoid the common amateur mistake of overpaying for properties because "the renovation will fix it." Real estate flipping has substantial profit potential but also substantial risk — the calculator helps separate genuinely profitable opportunities from optimistic mirages.

Inputs

Purchase Price ($)

Estimated Repair Costs ($)

After Repair Value ($)

Estimated value after all repairs are complete (from comps)

Holding Costs ($)

Insurance, taxes, utilities, loan payments during renovation

Selling Costs (%)

Agent commission + closing costs (typically 8-10%)

Results

Est. Profit

$35,000

ROI

17.9%

Profit Margin

14.0%

Max Offer (70%)

$135,000

Flip Analysis

Detail	Value
Purchase Price	$150,000
Repair Costs	$40,000
Holding Costs	$5,000
Total Investment	$195,000
After Repair Value (ARV)	$250,000
Selling Costs (8%)	$20,000
Net Proceeds	$230,000
Estimated Profit	$35,000
Profit Margin (% of ARV)	14.0%
ROI	17.9%
Max Offer (70% Rule)	$135,000

Last updated: May 26, 2026Reviewed by the CalcMountain editorial team

Formula

Maximum offer under 70% rule: Max Offer = (ARV × 0.70) − Repair Costs This leaves 30% of ARV to cover holding costs, selling costs, and profit. Total cost of project: Total Cost = Purchase Price + Repair Costs + Holding Costs + Selling Costs Where Selling Costs = ARV × selling cost %. Net profit: Profit = ARV − Total Cost Return on investment (cash-on-cash): If financing the deal with debt, use only cash invested (down payment + repair costs + holding costs): Cash ROI = Profit / Cash Invested If paying cash for everything: ROI = Profit / Total Cash Invested Example: $150K purchase, $40K repairs, $250K ARV, $5K holding, 8% selling costs. Selling costs: $250,000 × 8% = $20,000 Total cost: $150K + $40K + $5K + $20K = $215,000 Profit: $250,000 − $215,000 = $35,000 Profit margin: $35,000 / $250,000 = 14% 70% rule check: Max offer should be: ($250K × 0.70) − $40K = $135K Actual purchase: $150K — paid $15K above 70% rule. This deal is profitable but tighter than the 70% rule recommends. Any cost overruns (very common) or a softer market could turn it into a money-loser. A stronger deal: same ARV/repairs but purchase at $135K instead of $150K. Profit becomes $50,000 instead of $35,000.

How to use this calculator

Enter the purchase price (what you'd pay for the property).
Enter estimated total repair costs. Be realistic — include materials, labor, permits, contingency (typically 10-20% on top of contractor quotes). Most first-time flippers underestimate by 30-50%.
Enter the ARV from comparable sales. Use 3-5 comps of similar properties recently sold in the same neighborhood, after similar quality renovation. This is the most critical input — wrong ARV invalidates the entire analysis.
Enter holding costs (insurance, property taxes, utilities, loan interest during the 4-8 month renovation period).
Enter total selling costs (typically 8-10% of ARV for agent commission + closing costs).
Review the profit calculation and 70% rule check.
If purchase price exceeds the 70% rule maximum: tight deal, vulnerable to cost overruns. Consider whether you can negotiate purchase price down.
For first-time flippers: start with the 70% rule as a hard limit. Experienced investors sometimes accept thinner margins; beginners should not.

Worked examples

Solid flip — meets 70% rule

$120,000 purchase, $35,000 repairs, $230,000 ARV. $4,000 holding, 9% selling costs. 70% rule max offer: ($230,000 × 0.70) − $35,000 = $126,000 ✓ (purchased at $120K, $6K under max) Total cost: $120K + $35K + $4K + $20.7K = $179,700 Profit: $230K − $179.7K = $50,300 Margin: 22% Strong margin meeting the 70% rule. Comfortable buffer for cost overruns. Typical "good flip" profile for experienced investors.

Tight flip — exceeds 70% rule

$180,000 purchase, $50,000 repairs, $275,000 ARV. $6,000 holding, 9% selling costs. 70% rule max offer: ($275,000 × 0.70) − $50,000 = $142,500 Actual purchase: $180,000 — $37,500 ABOVE the 70% rule maximum. Total cost: $180K + $50K + $6K + $24.75K = $260,750 Profit: $275K − $260,750 = $14,250 Margin: 5% Marginal profit — vulnerable to any cost overruns. A $20K renovation surprise (very common) turns this into a loss. Stronger discipline would walk away from this deal. For investors who proceed despite tight margins: minimize timeline (faster project = lower holding costs), avoid scope creep, and have backup financing in case of cost overruns.

Loss scenario — common amateur mistake

$190,000 purchase, $45,000 repairs (initial estimate), $250,000 ARV (optimistic comp interpretation). Actual outcome: repairs go to $65,000 (30% overrun, common), holding stretches to 8 months at $7,000, ARV actually achieved at sale: $235,000 (initial comp was too optimistic). Total cost: $190K + $65K + $7K + ($235K × 9% = $21.15K) = $283,150 Sale proceeds: $235,000 Loss: $48,150 This is the typical first-time flip disaster. The combination of: overpaying for the property, underestimating repairs, optimistic ARV interpretation, and longer-than-planned renovation produces 20-40% of first flips losing money. The 70% rule existed because experienced investors learned from this pattern. Following it disciplines you to walk away from deals that look "almost good enough" but aren't.

When to use this calculator

Use this calculator before making offers on fix-and-flip properties, when evaluating wholesale deals from other investors, when planning your own potential project, or when analyzing whether a renovation-focused real estate strategy makes sense for your goals.

For first-time flippers especially: be conservative with assumptions. Repair estimates from contractors are typically 20-50% below final actual costs. ARV "stretches" by interpretation favor the seller; use conservative comps. Holding periods are typically longer than planned. Build all of this conservatism in before deciding a deal "works."

Pair with: rental-property calculator (for buy-and-hold alternatives), cap-rate calculator (for rental yield analysis), real-estate-commission calculator (for selling cost detail), renovation-roi calculator (for return analysis on specific repair categories), and home-equity calculator (for understanding equity dynamics).

Key risk factors that turn flips bad:

1. **Repair overruns.** First-time flippers commonly experience 30-50% cost overruns. Build 20%+ contingency from the start.

2. **Optimistic ARV.** Looking at the highest comps rather than the average. Picking properties that don't actually match yours in quality, size, or location.

3. **Longer hold periods.** Permits delay. Contractors run behind. Weather, materials shortages, design changes — all extend timelines and pile up holding costs.

4. **Market softening.** A few months of declining home values can erase the profit margin even on well-executed projects.

5. **Hidden issues.** Foundation problems, sewer line failures, mold, asbestos discovered mid-project can add $10K-$40K of unplanned costs.

6. **Overscoping.** Many first-time flippers over-renovate, adding personalized features or premium finishes that don't recoup full value at sale.

The 70% rule exists precisely because experienced flippers learned through losses that thinner margins don't survive normal project variance. Use the calculator with realistic inputs, not optimistic ones, and the discipline of the 70% rule protects you from the most common amateur mistakes.

Common mistakes to avoid

Using optimistic ARV. Looking only at the highest comps, or comps in better neighborhoods. Use representative comps with conservative interpretation.
Underestimating repair costs. Contractor quotes typically come in 20-50% above the initial walk-through estimate. Build in 20%+ contingency.
Skipping holding costs. Properties don't magically appreciate during renovation — they cost real money (taxes, insurance, utilities, loan payments) every month they're held.
Forgetting selling costs. 8-10% of sale price disappears at closing. A $250K ARV nets $225K-$230K cash.
Ignoring the 70% rule. Especially for first-time flippers, the rule exists to protect against the cumulative effect of small estimation errors. Following it produces fewer but more consistent profits.
Falling in love with the project. Emotional attachment leads to overscoping renovations, accepting marginal deals, and not walking away when problems emerge.

Frequently Asked Questions

Sources & further reading

Real Estate Investor Resources — U.S. Department of Housing and Urban Development
Real Estate Analysis Tools — U.S. Consumer Financial Protection Bureau
Cost vs. Value Report — annual renovation ROI data — Remodeling Magazine

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