70% Rule Calculator
Determine the Maximum Allowable Offer (MAO) for fix-and-flip properties to secure your target profit margin and buffer against unexpected construction overruns.
Property & Renovation Parameters
$
Projected fair market sales price after all renovations are finished.
$
Total budget for materials, labor, permits, and contractor fees.
%
$
Fee paid to a wholesaler or assignment finder (leave blank if direct seller).
$
Compare a seller's listing price against your calculated MAO to assess deal feasibility.
Ready to calculate your maximum offer?
Enter the property's estimated ARV and repair costs above, or click "Try an example" to view a fully worked fix-and-flip analysis.
Maximum Allowable Offer (MAO)
$0
Passes 70% Rule
Target Flip Profit (15% ARV)
$0
Total Project Budget Ceiling
$0
Total Safety Buffer
$0
Capital & Profit Anatomy (Based on ARV)
ARV: $0
Purchase Offer
Repairs Budget
Holding & Closing (~15%)
Target Net Profit (~15%)
| Financial Component | Formula / Rule Basis | Projected Amount |
|---|---|---|
| After-Repair Value (ARV) | Projected Exit Sales Price | $0 |
| Allowable Project Ceiling | ARV × 70% | $0 |
| Less: Renovation Costs | Materials, Labor & Contractor | -$0 |
| Maximum Allowable Offer (MAO) | Strict Purchase Price Limit | $0 |
How to Use This Calculator
The 70% rule helps real estate investors avoid overpaying for distressed residential properties. Follow these 4 straightforward steps to determine your maximum purchase offer:
- Establish the After-Repair Value (ARV): Review recent sales comps (properties sold within the last 3 to 6 months within a 0.5-mile radius) that reflect the exact renovated condition, square footage, and layout of your target flip.
- Formulate an Itemized Repair Budget: Walk through the home with a licensed general contractor or structural inspector to total the cost of roof, HVAC, electrical, cosmetic finishes, and a 10% contingency for unexpected plumbing or framing surprises.
- Choose Your Rule Multiplier: Keep the default 70% for standard single-family flips. If you are operating in a low-inventory, ultra-competitive luxury market, toggle to 75% or 80%. For rural or slow-moving tertiary markets, consider dialing back to 65%.
- Review the Calculated MAO: Submit your purchase offer at or below the Maximum Allowable Offer. If the seller’s asking price exceeds this ceiling, either negotiate down or walk away to protect your downside capital.
The Formula
The standard 70% rule equation subtracts repair and transaction fees from 70% of the property's projected renovated value:
Maximum Allowable Offer (MAO) = (ARV × Rule %) − Estimated Repair Costs − Wholesale Fee
Variable Definitions
- After-Repair Value (ARV): The estimated gross sales price of the home once all renovations, staging, and landscaping are finalized.
- Rule %: The target percentage threshold (conventionally 0.70). The remaining 30% acts as a financial buffer covering closing costs, holding expenses, debt service, and investor profit.
- Estimated Repair Costs: Every dollar needed to bring the property from its distressed condition up to top-tier market comps.
- Wholesale Fee: The assignment fee negotiated by an off-market finder or wholesaler who located the contract.
Understanding the 30% Buffer
New investors frequently mistake the 30% gap for pure profit. In reality, that 30% spread is divided into three distinct buckets:
- Transaction Costs (~8%–10% of ARV): Buyer and seller agent commissions (typically 5%–6%), title insurance, transfer taxes, recording fees, and closing attorney costs.
- Holding & Financing Costs (~5%–7% of ARV): Hard money loan origination points (1%–3%), monthly debt service (10%–12% annualized interest), property taxes, builder's risk hazard insurance, and utility bills incurred during construction and listing periods.
- Net Investor Profit (~13%–15% of ARV): The actual net profit pocketed by the flipper to justify the time, risk, and capital outlay.
Example: A Standard Suburban Fix-and-Flip
Consider an investor evaluating a dated 3-bedroom ranch in an established neighborhood where remodeled homes consistently sell for $350,000:
- ARV: $350,000
- Contractor Repair Estimate: $60,000 (kitchen remodel, new bathrooms, roof patch, interior paint, HVAC service)
- Wholesale Fee: $0 (sourced directly from an estate sale)
- Seller Listing / Asking Price: $175,000
Applying the 70% rule:
- Calculate 70% of the ARV:
$350,000 × 0.70 = $245,000 - Subtract the renovation budget:
$245,000 − $60,000 = $185,000 - Maximum Allowable Offer (MAO): $185,000
Because the seller is asking $175,000, the deal comes in $10,000 below MAO. The investor has a built-in $10,000 margin of safety in addition to the standard 30% cushion, providing ample room to absorb unforeseen drywall or foundation adjustments during construction.
Frequently Asked Questions
What is the 70% rule in house flipping?
The 70% rule is an industry benchmark stating that an investor should pay no more than 70% of a property's estimated After-Repair Value (ARV), minus the anticipated renovation and repair expenses. It protects your capital by reserving a 30% financial cushion to cover acquisition closing fees, holding costs, selling commissions, and investor profit.
Does the 70% rule include investor profit?
Yes, your projected flip profit is directly housed inside the 30% margin. In a standard deal, approximately 8% to 10% goes toward agent commissions and closing fees, 5% to 7% covers debt service and holding costs, leaving the remaining 13% to 15% of the total ARV as net investor profit.
What if a housing market is too competitive for the 70% rule?
In competitive or high-priced metropolitan markets with rapid inventory turnover, strict 70% offers are rarely accepted. Experienced investors frequently adjust their target threshold to 75% or 80% because lower holding periods and higher gross dollar amounts can still deliver an attractive overall return.
What costs does the 70% rule fail to consider?
The rule is a rapid screening shortcut that omits property-specific nuances such as extended permit delays, high hard money loan origination points, transfer taxes, and contractor budget overruns. For deep diligence, always supplement the 70% rule with an itemized construction budget and detailed cash flow analysis.
What is the difference between the 70% rule and Maximum Allowable Offer (MAO)?
The 70% rule is the mathematical guideline, while the Maximum Allowable Offer (MAO) is the specific dollar figure produced by applying that rule to a deal. MAO represents the strict ceiling price you can submit to the seller while preserving your target investment margin and contractor cushion.