The 70% Rule for Fix and Flip: What I Wish Someone Told Me on Day One

You make your money when you buy. Not when you sell. That's the first thing you need to understand about flipping houses, and it's why the 70% rule matters so much. I've used this formula on every deal I've analyzed since my first flip, and it's saved me from walking into disasters more times than I can count.

The 70% rule is simple. It tells you the max you should pay for a property. It's not the only thing you need to look at, but if a deal doesn't pass this test, I don't waste time on it.

The 5-Minute Framework: How to Use the 70% Rule Right Now

Here's what you do. Takes five minutes once you have the numbers:

Step 1: Find the after-repair value (ARV). Look at 3-5 recently sold comps in the same area. Similar size, similar condition to what yours will be after you fix it up. Average those sale prices. That's your ARV.

Step 2: Get a solid repair estimate. Walk the property with a contractor if you can. If not, use your best guess and add 20% on top. Seriously. Add the buffer.

Step 3: Multiply ARV by 0.70. That's 70% of the after-repair value.

Step 4: Subtract your repair costs from that number. What's left is your maximum purchase price.

Step 5: Compare that number to the asking price. If the seller wants more, you either negotiate hard or walk away.

The formula looks like this:

Maximum Purchase Price = (ARV x 0.70) - Repair Costs

That's it. If the deal doesn't hit that number, it's not a deal.

A Real Example (Because Formulas Mean Nothing Without One)

I looked at a house last month. Needed work but the neighborhood was solid. Here's how I ran the numbers:

• Comps showed the ARV at $300,000 after renovations
• My contractor estimated $40,000 in repairs
• 70% of $300,000 = $210,000
• $210,000 - $40,000 = $170,000 max offer

The seller wanted $180,000. I offered $165,000. We didn't make a deal. That's fine. I would rather miss a deal than burn money trying to force bad math to work.

If I'd paid $180,000, I'd have $10,000 less cushion for everything that goes wrong. And things always go wrong.

Why 70%? What's That Other 30% Covering?

New investors always ask why 70%. Here's what that missing 30% pays for:

• Holding costs while you own it (taxes, insurance, utilities, loan interest)
• Closing costs on both ends (buying and selling)
• Financing fees if you're using hard money or private money
• Real estate commissions when you sell (usually 5-6%)
• Your profit (you're not doing this for free)
• The stuff you didn't see coming (there's always something)

That 30% disappears faster than you think. If you don't protect it on the buy, you won't have it at the end.

If holding costs are high in your market, I'd use 65% instead of 70%. Better safe than stuck.

When the 70% Rule Doesn't Apply (And When It Still Does)

Some markets are so hot that nobody can buy at 70%. I get it. In those markets, experienced flippers might go to 75% or even 80%. But here's the thing: they're not beginners, and they've got systems that keep costs low.

If you're going above 70%, you need:

• Rock-solid ARV data (not wishful thinking)
• Contractors who show up and stay on budget
• Fast timelines (the longer you hold, the more you bleed)
• Cheap money (hard money at 12% kills tight deals)
• Cash reserves for when things go sideways

When I started, I used 70% on everything. No exceptions. Now I'll occasionally go to 72% if I know the neighborhood inside and out and my repair estimate is dialed in. But that took years.

If comps are messy, I pass. If the property needs more work than I've done before, I pass. The 70% rule keeps me honest.

Where People Screw This Up

I've seen the same mistakes over and over. Here's what kills deals:

Bad ARV Estimates

You want the property to be worth $350,000, so you find one comp at $340,000 and call it close enough. That's not how this works. Use real comps from the last 3-6 months. Same neighborhood. Same size. Same condition as what yours will be after repairs.

If you can't find good comps, you don't have a good ARV. If you don't have a good ARV, you can't use the 70% rule. Walk away.

Repair Costs That Live in Fantasy Land

New flippers underestimate repairs by 30-50%. Every time. Get three contractor bids. Take the highest one. Add 15% for contingency. That's your repair number.

I pad repair estimates because I've been burned. If the roof looks old, I assume it needs replacement and keep moving.

Forgetting the Small Stuff That Adds Up

Permits. Inspections. Dumpsters. Landscaping. Staging. These aren't in your contractor's bid, but they're real costs. I keep a checklist of every expense category and estimate each one. It's boring but it works.

Ignoring Time

A flip that takes three months costs half what a six-month flip costs in holding expenses. If you're slow, your profit disappears. Factor in realistic timelines based on your actual speed, not what you hope will happen.

What I Do After a Deal Passes the 70% Rule

The 70% rule is a filter. It tells me whether to spend more time on a property. If a deal passes, then I dig deeper:

• Walk the property with my contractor for a detailed estimate
• Check permit history and zoning issues
• Talk to neighbors about the area
• Look at days on market for recent sales
• Run the numbers again with worst-case scenarios

Some deals pass the 70% rule but still don't make sense once I know more. That's fine. The rule gets me to the right starting point.

Building Your System Around This Formula

Here's what I'd do if I were starting over in 2026:

First, learn your market. Spend a month looking at sold properties. Understand what sells fast and what sits. Know your price ranges. You can't estimate ARV if you don't know the market.

Second, find contractors you trust. Get three who will walk properties with you and give you honest estimates. This takes time but it's everything. Bad contractor estimates wreck the whole formula.

Third, build a simple spreadsheet. ARV at the top. Repair costs below that. The 70% calculation in the middle. Your max offer at the bottom. Run this on every property you see.

Fourth, be conservative while you're learning. Knock 5% off your ARV estimate. Add 20% to repair costs. You'll learn faster if you don't lose money on your first deal.

Fifth, look at volume. I analyze 20 properties for every one I make an offer on. Most deals don't work. That's normal. The 70% rule helps you sort through the junk quickly to find the good ones.

The Bigger Picture Beyond the Math

The 70% rule is just math. It doesn't manage your contractor. It doesn't pull permits. It doesn't stage the house or negotiate with buyers. You still have to execute.

But the math keeps you out of bad deals. And avoiding bad deals is more important than finding good ones when you're building a flipping business.

I know investors who do 30 flips a year at 70%. I know others who do five flips a year at 75% because they have unique advantages. Both approaches work if you're honest about your costs and capabilities.

The rule is your first filter. Use it on everything. Then do the deeper work on the deals that pass.

Start Here

Pick three properties in your area that are for sale right now. Find comps and estimate ARV. Get repair estimates (or make educated guesses with big buffers). Run the 70% rule calculation. See what your max offer would be.

Most of them won't work. That's the point. You're learning to spot the difference between a property that looks like a deal and a property that actually is a deal.

Track every property you analyze. Build a spreadsheet. Over time, you'll see patterns. You'll get faster. Your estimates will get sharper. The 70% rule becomes automatic.

Every investor started exactly where you are. Learning the basics. Running the numbers. Making mistakes on paper before making them with real money. The 70% rule gives you a proven framework to evaluate deals without gambling.

Start analyzing. Start building your database. Start learning your market. The deals are out there. The 70% rule helps you find them.

FAQ

Is the 70% rule legal to use in all states?
Yes, the 70% rule is just a calculation method, not a regulated practice. It's a personal investment guideline you use to evaluate properties. There are no legal restrictions on using this formula in any state.

Can you use the 70% rule for rental properties?
The 70% rule is designed specifically for fix-and-flip projects where you plan to sell quickly. For rental properties, you'd use different calculations like the 1% rule or cap rate analysis since you're evaluating cash flow, not resale profit.

What if I can't find properties that meet the 70% rule in my market?
If nothing in your market hits 70%, you have three options: look in different neighborhoods, wait for market conditions to change, or accept higher risk by using 75-80% (not recommended for beginners). Sometimes the right move is to not force deals in overheated markets.

How do I calculate ARV if there aren't many comparable sales?
If you can't find at least three solid comps from the past six months, you don't have enough data for an accurate ARV. Either expand your search radius slightly or skip that property. Guessing at ARV is how investors lose money.

Should I include my own labor in repair costs?
If you're doing the work yourself, you should still assign a dollar value to your time in the repair estimate. Your time has value, and including it keeps your calculations honest. Plus, if something comes up and you need to hire it out, your numbers will still work.