Every profitable flip is won at the purchase, not the sale. You can run a flawless renovation and sell into a hot market, but if you overpaid on the way in, the margin was gone before you ever picked up a hammer. That's the problem the 70% rule exists to solve.
The 70% rule is a fast screening formula that tells you the most you can pay for a property and still leave room for renovation costs, financing, holding, and profit. It's not a law of physics — experienced investors bend it constantly — but as a first filter it separates deals worth analyzing from deals worth walking away from. In a market where properties move in days, being able to run this number in your head is a real edge.
This guide breaks down exactly how the 70% rule works, walks through worked examples, shows you when it's safe to deviate, and explains how the rule connects to the leverage you'll actually get from a lender. At Funded Capital, we finance fix and flip deals up to 90% of cost — and understanding your maximum offer is the first step to structuring a deal that funds fast.
What the 70% Rule Actually Says
The 70% rule states that an investor should pay no more than 70% of a property's after-repair value, minus the cost of repairs. The logic is simple: the remaining 30% is a buffer that has to absorb your financing costs, holding costs, closing costs, selling costs, and — critically — your profit.
Here's the formula:
Maximum Allowable Offer (MAO) = (ARV × 0.70) − Repair Costs
Two inputs drive everything. The first is after-repair value (ARV) — what the property will realistically sell for once the renovation is complete, based on comparable sales. The second is your repair estimate — a realistic, line-item budget for the work. Get either of these wrong and the rule produces a number that looks safe but isn't. Running an honest ARV calculation before you make an offer is the single most important discipline in flipping.
Why 70% and Not 80%?
The 30% haircut isn't arbitrary. On a typical flip, financing and holding costs might eat 6–10% of ARV, closing and selling costs another 8–10%, and that leaves the rest as profit margin. Push your offer to 80% of ARV and you're borrowing that cushion from your own paycheck — the first surprise on the project comes straight out of profit. The buffer is what keeps a deal profitable when the rehab runs long or the market softens.
Worked Examples
The formula is easiest to understand with real numbers. Say you're looking at a property with an ARV of $400,000 that needs $60,000 in work.
MAO = ($400,000 × 0.70) − $60,000 = $280,000 − $60,000 = $220,000
That $220,000 is the ceiling. Pay it, and the numbers work at standard margins. Pay $250,000, and you've quietly handed $30,000 of your profit to the seller.
The table below shows how the maximum offer shifts across different deals. Notice how heavily repair costs weigh on the final number.
| ARV | Repair Costs | 70% of ARV | Maximum Allowable Offer |
|---|---|---|---|
| $300,000 | $40,000 | $210,000 | $170,000 |
| $400,000 | $60,000 | $280,000 | $220,000 |
| $500,000 | $80,000 | $350,000 | $270,000 |
| $650,000 | $100,000 | $455,000 | $355,000 |
Run this calculation on every deal that crosses your desk. It takes fifteen seconds and it's the fastest way to know whether a property is worth a deeper underwrite or a polite pass.
When to Deviate From the 70% Rule
The 70% rule is a starting point, not a verdict. Seasoned investors adjust the percentage up or down based on the specific deal, and knowing when to flex it is what separates a rule-follower from a strategist.
When You Can Go Higher (75–80%)
In expensive, fast-moving markets, a strict 70% rule can price you out of nearly every deal. On a high-ARV property, the dollar profit at 75% can still be substantial even though the percentage buffer is thinner. Investors also stretch the percentage when the ARV is exceptionally well-supported by recent, nearly identical comps, when the rehab is light and predictable, or when they can turn the property quickly and cut holding costs. Lower-priced financing helps here too — every point you shave off your rate widens the margin you're working with.
When You Should Go Lower (60–65%)
Tighten the rule when risk is higher. First-time flippers should build in extra cushion because their repair estimates are usually optimistic and their timelines longer. Heavy or structural renovations, thin or dated comparable sales, and softening or unpredictable markets all argue for a more conservative offer. When in doubt, a lower percentage protects you from the mistakes you can't yet see. Our fix and flip loan requirements guide covers how underwriters view deal risk — and their view often mirrors yours.
How the 70% Rule Connects to Your Financing
Here's what most beginner guides miss: the 70% rule and your loan leverage are two sides of the same coin. The rule protects your profit; your lender's leverage ratios protect their position. When you buy right, both line up — and the deal funds easily.
Fix and flip loans are underwritten against loan-to-cost and loan-to-ARV. At Funded Capital, we lend up to 90% of total cost and cap the loan at a safe percentage of after-repair value. A property purchased at or below your 70%-rule maximum almost always fits comfortably inside those caps, which means more of your cost is financed and less comes out of your pocket at closing. A deal bought at retail, by contrast, bumps against the ARV ceiling and forces a larger down payment.
In other words, disciplined buying doesn't just protect your margin — it directly increases your leverage. The same conservative offer that keeps your profit intact is the one that lets the loan do more of the work. That's why the investors who honor the 70% rule tend to recycle their capital faster, often pairing it with the BRRRR strategy to pull their cash back out and redeploy it into the next deal.
Fund Your Next Flip With Real Leverage and Real Speed
Once your numbers work, the next question is how fast you can move — and in a competitive market, speed closes deals. Funded Capital is a Miami-based private lender built for investors who need leverage that matches their underwriting.
We finance fix and flip loans from 8.75% with up to 90% loan-to-cost, DSCR loans from 6.0% up to 80% LTV, and new construction from 8.75% up to 85% of cost. We underwrite the deal — the purchase price, the rehab, and the after-repair value — not your tax returns. That's why a property bought at the right price funds with less cash down and fewer hurdles.
Term sheets in two hours. Closings in as little as five days. No income verification on most programs. We lend across 44 states.
Or call us directly: (305) 857-5620 | processing@fundedcapital.com
If you place loans for investor clients, our broker program makes high-leverage flip deals fast and predictable. And when you're ready to run the numbers on a specific property, our deal calculator does the math in seconds.
Frequently Asked Questions
What is the 70% rule in house flipping?
The 70% rule says an investor should pay no more than 70% of a property's after-repair value (ARV), minus repair costs. The formula is: Maximum Allowable Offer = (ARV × 0.70) − Repair Costs. The 30% buffer covers financing, holding, closing, and selling costs, plus your profit. It's a fast screening tool for deciding whether a deal is worth pursuing.
How do you calculate the maximum offer on a flip?
Multiply the after-repair value by 0.70, then subtract your total repair estimate. For a property with a $400,000 ARV and $60,000 in repairs, the math is ($400,000 × 0.70) − $60,000 = $220,000. That's the most you should pay to protect your margin. Accuracy depends entirely on realistic ARV and repair numbers.
Is the 70% rule always accurate?
No — it's a starting point, not a guarantee. In expensive, fast-moving markets, investors often stretch to 75–80% when comps are strong and the rehab is light. On riskier deals — first flips, heavy renovations, or soft markets — a more conservative 60–65% protects you better. Always confirm the numbers with a full underwrite before committing.
Does the 70% rule include closing and holding costs?
Yes, indirectly. The 30% gap between your offer and 70% of ARV is designed to absorb financing, holding, closing, and selling costs along with your profit. It doesn't break those costs out line by line, which is why the rule is a screen rather than a full profit analysis. Run a detailed cost breakdown before you close.
How does the 70% rule affect my loan?
Buying at or below your 70%-rule maximum keeps the deal inside a lender's loan-to-cost and loan-to-ARV caps, which means more of your cost gets financed and you put less down. At Funded Capital, disciplined buying often lets a fix and flip loan cover up to 90% of total cost — so the same offer that protects your profit also maximizes your leverage.