◆Hard money rates: 9.5%–12% · 1–3 pts origination◆Avg hard money close: 7–14 days · vs 45+ for banks◆70% Rule: Max Offer = ARV × 0.70 − rehab◆Hard money rates: 9.5%–12% · 1–3 pts origination◆Avg hard money close: 7–14 days · vs 45+ for banks◆70% Rule: Max Offer = ARV × 0.70 − rehab
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strategy

The 70% Rule: The Only Math That Matters on a Flip

4 min read

The 70% Rule: The Only Math That Matters on a Flip

The 70% Rule is the single fastest way to know if a flip is worth pursuing. It takes 10 seconds, a calculator, and three numbers. If a deal fails this test, don't bother running comps, driving the property, or calling the seller — walk away and find a better one.

The formula

Max Offer = (ARV × 70%) − Rehab Cost

That's it. ARV is the After-Repair Value (what the property sells for finished). Rehab is your total renovation budget. Multiply ARV by 0.70, subtract rehab, and you get the maximum you should pay.

Why 70%

The 30% cushion isn't profit — it covers all the invisible costs that eat flippers alive:

  • Hard money interest (~5–8% of loan over 6 months)
  • Points and closing costs (~3–5%)
  • Holding costs: taxes, insurance, utilities (~2–4%)
  • Selling costs: agent, title, transfer tax (~7–9%)
  • Your profit (~10–15%)

    • Add it up: the 30% gap is what makes you money after every third party gets paid.

    A worked example

    Say the ARV is $320,000 and rehab is $50,000.

  • $320,000 × 0.70 = $224,000
  • $224,000 − $50,000 = $174,000 max offer

    • If the seller wants $195,000, the deal doesn't work — period. Not because $195K is a bad price, but because the math no longer leaves room for the costs above.

    When to bend the rule

    The 70% Rule is a *floor*, not a ceiling. Adjust it based on:

  • Hot markets (LA, Miami, NYC): experienced flippers sometimes use 75% because appreciation is doing part of the work.
  • Slow markets or heavy rehabs: drop to 65% to protect against overruns and slower sales.
  • New investors: stay at 70% or tighter — you don't have the reps to absorb surprises yet.

    • The mistakes that kill flippers

  • Using Zillow's Zestimate as ARV instead of real comparable sales
  • Underestimating rehab by 20–40% because they haven't priced materials
  • Skipping the rule "just this once" because they love the property

    • The bottom line

    The 70% Rule keeps you honest. It doesn't guarantee profit — but it makes losses very hard. Every flipper who blows up eventually admits they broke it. Run the number before you fall in love with the house.

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