The 70% rule for house flipping (and BRRRR): how to calculate your max offer (2026)
Jul 5, 2026 · 11 min read
Every flip and every BRRRR deal is won or lost at the offer. Pay too much and no amount of hustle on the rehab earns it back — the spread you needed was gone before you got the keys. The 70% rule is the back-of-the-napkin screen investors use to keep that from happening: it caps what you offer at 70% of the finished value, minus what the repairs will cost. It fits on an index card, it works often enough to be worth memorizing, and — like every rule of thumb — it quietly lies in exactly the situations where the money is biggest. Here is the formula, a full worked flip, how to pin down the two inputs that actually drive it, the version BRRRR investors use, and when 70% is the wrong number.
What the 70% rule actually says
The rule sets your Maximum Allowable Offer — the MAO, the most you can pay and still leave room to profit:
Maximum offer = (ARV × 0.70) − Repair costsARVis the after-repair value: what the property will sell for once it's fixed up, not what it's worth today in its current condition. Repair costsare your all-in rehab budget. Everything hinges on those two numbers, and we'll spend most of this post on getting them right. Take a house you expect to be worth $300,000 renovated that needs $45,000 of work:
Maximum offer = (0.70 × $300,000) − $45,000 = $165,000So you offer no more than $165,000 — not because that's what the seller wants or what the property is worth in its current condition, but because it leaves 30% of the finished value to cover everything between the contract and the closing on the resale, plus your profit.
Where the other 30% goes
The 30% you held back isn't profit — it's profit plus every cost the formula doesn't name. On a $300,000 ARV, that spread is $90,000 (ARV × 0.30), and it has to stretch over four things:
- Buying costs — closing costs, lender points, and inspections on the purchase.
- Holding costs— the interest, property tax, insurance, and utilities you pay every month you own it, whether it's rented or gutted.
- Selling costs — agent commission and closing costs when you sell the finished house, which land on the higher ARV, not on your low purchase price.
- Profit— what's left, and the entire reason you took the risk.
Skip any of these when you're eyeballing a deal and you'll systematically overpay. The 70% is calibrated so that, on a normal deal, the first three eat roughly 12–14% of ARV and your profit is the remaining 16–17%. Change any of those assumptions — a longer hold, a pricier market, a thinner margin — and the right multiplier moves off 70%.
A full worked flip
Numbers make the 30% concrete. Buy the house at the $165,000 max offer, put $45,000 into it, and sell it six months later at the $300,000 ARV. Here is the whole ledger:
| Line | Amount |
|---|---|
| Buy at MAO | $165,000 |
| Acquisition closing costs (~2%) | $3,300 |
| Rehab | $45,000 |
| Holding, 6 mo (interest + 2 points + tax/ins/utilities) | ~$15,000 |
| Selling costs (5% commission + ~1.5% closing on $300K) | $19,500 |
| Total all-in | $247,800 |
| Resale | $300,000 |
| Net profit | ~$52,200 |
That $52,200 is about 17% of ARV — a healthy flip. Watch how the $90,000 spread split: roughly $37,800 went to buying, holding, and selling, and $52,200 was profit. The rehab wasn't in the spread at all — the formula subtracts it separately, which is exactly why you can't quietly fold rehab into "costs" and double-count it. And notice the biggest line after the house and the rehab: $19,500 of selling costs, paid on the finished value. Hard money in 2026 runs roughly 9.5–13% plus 1.5–3 points, so on a $165,000 loan held six months you're paying about $9,000 in interest and $3,300 in points before you replace a single fixture. Investors who forget that commissions and holding costs scale with the deal — not with the bargain price they paid — are the ones whose "guaranteed" $70,000 profit shows up at closing as $50,000.
ARV: the input that matters most
Of the two inputs, ARV is the one people fudge — usually upward, because a higher ARV justifies a higher offer and makes the deal you already want to do look fine. Discipline here is most of the edge. ARV comes from sold comparables, not from your rehab budget and not from active listings. The market decides what a renovated house is worth; your job is to read the market, not argue with it. The tightest comps are homes that sold — closed, not just listed — in the last 3–6 months, sit within about half a mile, match the subject on beds, baths, and square footage within ~20%, and, critically, were themselves renovated, so you're comparing finished-to-finished.
The workhorse method is price per finished square foot. Say three renovated comps nearby sold like this:
| Comp | Sold price | Size | $/sqft |
|---|---|---|---|
| A | $312,000 | 1,480 sqft | $211 |
| B | $298,000 | 1,420 sqft | $210 |
| C | $305,000 | 1,460 sqft | $209 |
They cluster around $210/sqft. Your subject is 1,450 finished square feet, so 1,450 × $210 ≈ $304,500 — round down to $300,000 to stay honest. Then sanity-check against the neighborhood ceiling: if the nicest renovated homes on the street top out around $310,000, no kitchen you install makes yours worth $340,000. You cannot renovate a house above what the block supports, and nearly every over-ambitious ARV traces back to ignoring that ceiling.
The rehab number: the other half of the equation
ARV sets the top of the deal; the repair estimate sets how much of it you keep. Get the rehab wrong and the 70% rule faithfully hands you a max offer that's also wrong. A rough 2026 scope-to-cost ladder, per finished square foot:
- Cosmetic (paint, flooring, fixtures, minor kitchen): ~$15–25/sqft
- Moderate (full kitchen and baths, some systems, curb appeal): ~$30–50/sqft
- Full gut or major systems (roof, HVAC, electrical, plumbing, layout): ~$60–90/sqft
On the 1,450-sqft subject, a moderate rehab at about $31/sqft is the $45,000 in the example. Whatever number you build bottom-up from a contractor walk-through, add a contingency of 10–25% — the older the house, the higher — because the expensive surprises (knob-and-tube wiring, a failed sewer lateral, rot behind the tub) are the ones you find after demolition, not before. The rehab cost estimator and the full framework for pricing a scope are worth using before you ever plug a number into the rule.
Why 70% isn't always the right number
The single biggest mistake with the 70% rule is treating the 70 as a law of physics. It's a stand-in for a specific bundle of cost-and-profit assumptions, and when those assumptions don't hold, the multiplier should move. Fixed costs are the reason. Commissions scale with ARV, but a title search, a dumpster, six months of insurance, and a permit cost about the same on a $130,000 house as on a $400,000 one — so on cheap houses those fixed costs eat a much bigger share of a much smaller spread.
| Situation | What's different | Offer as % of ARV |
|---|---|---|
| Low ARV (< ~$150K), cheaper market | Fixed costs are a big share of a small spread | 60–65% |
| Typical ($200K–$400K), moderate rehab | The rule's home turf | 70% |
| High ARV (> ~$600K), light rehab | Fat spread; costs are a small share | 72–75% |
| Long or heavy rehab (9+ months) | Holding costs balloon | drop 3–5 pts |
| Red-hot seller's market | Competition; win rate falls at 70% | 72–75%* |
*Higher isn't permission to overpay — it's a warning that a thinner margin needs a tighter rehab number and a faster exit. None of these adjustments break the rule; they remind you that 70% encodes a set of numbers, and your numbers might differ. When they do, back into the multiplier from the real costs rather than defending the 70 out of habit.
The BRRRR version: the 75% refinance tie-in
Buy-and-hold investors use the same skeleton with a different destination. In a BRRRR deal you're not selling — you refinance the finished rental and pull your cash back out to do it again. The binding constraint is the refinance: a cash-out refinance on a single-family investment property tops out around 75% of appraised value in 2026. That ceiling is why BRRRR investors aim to keep everything they put into the property — purchase plus rehab — at or under 75% of ARV.
Run our house as a BRRRR. ARV $300,000, so a 75% cash-out refinance funds a new loan of $225,000. Buy at the 70%-rule price of $165,000 and add $45,000 of rehab, and your all-in on the property is $210,000. The $225,000 refinance pays that off and returns about $15,000 toward the closing and holding costs you racked up along the way — so you walk away owning a rental with little or none of your own cash still trapped in it. That is the whole appeal of BRRRR, and it's why the 70% purchase cap fits so naturally: the roughly five-point gap between the 70% you paid and the 75% you can refinance is about the room the transaction costs need. Miss high on the rehab or drag the timeline and you leave more cash in — the BRRRR calculator shows exactly how much. And if the refinanced rental won't cash-flow after all that, the deal was never a BRRRR — it was a flip you forgot to sell. Pressure-test it as a hold on cap rate and DSCR before you commit.
The honest version: solve the offer backward
The 70% rule is triage, not underwriting. The rigorous way to set a max offer is to start from the ARV and subtract every real cost plus the profit you require, leaving the price as the remainder:
Max offer = ARV − selling − holding − buying − rehab − required profitPlug in the flip's actual figures — $19,500 selling, $15,000 holding, $3,300 buying, $45,000 rehab, and a $50,000 target profit:
Max offer = $300,000 − $19,500 − $15,000 − $3,300 − $45,000 − $50,000 = $167,200That lands within about $2,000 of the 70% rule's $165,000 — which is the point. On a textbook deal the rule and the real math agree, so the shortcut is a fine screen. The gap only opens when your costs or your target profit stray from the averages the 70 assumes — and then the backward solve is right and the rule is wrong. Use the rule to decide which listings are worth an hour; use the full solve before you sign.
FAQ
What is the 70% rule in house flipping?
It's a rule of thumb that caps your purchase offer at 70% of a property's after-repair value (ARV) minus the cost of repairs. On a house that will be worth $300,000 renovated and needs $45,000 of work, the maximum offer is (0.70 × $300,000) − $45,000 = $165,000. The 30% you hold back is not all profit — it covers buying costs, holding costs, and selling costs first, and whatever is left is your margin.
How do you calculate ARV (after-repair value)?
ARV is based on comparable sales of renovated homes near the subject — ideally ones that sold within the last 3–6 months, sit within about half a mile, and match on beds, baths, and square footage. The common method is to take the price per finished square foot of those comps and multiply by the subject's square footage, then cap the result at the neighborhood ceiling (the most a renovated home on that street realistically sells for). ARV is set by the market, not by how much you spend on the rehab.
Does the 70% rule work for BRRRR?
Yes, with a twist. BRRRR investors refinance instead of selling, and a cash-out refinance on a single-family investment property typically maxes out at 75% of ARV in 2026. Keeping purchase-plus-rehab at or under 70% of ARV leaves roughly a five-point cushion for closing and holding costs, so a 75% refinance can return most or all of your invested cash. If the finished property won't cash-flow as a rental, though, it isn't a BRRRR — check cap rate and DSCR first.
Is the 70% rule outdated in 2026?
It still works as a screen, but 70 was never a universal number. Higher financing costs — hard money runs roughly 9.5–13% plus points in 2026 — make holding costs a bigger drag on long rehabs, which argues for a lower multiplier on heavy projects. On cheap houses, fixed costs push you toward 60–65%; on expensive houses with light work, 72–75% can be justified. Treat 70% as the center of a range, not a law.
What if there aren't good comparable sales?
Thin comps are a real risk, because ARV is the input the whole rule leans on. Widen the search carefully — a little further out or a little older — and adjust for the differences the way an appraiser does. If you still can't triangulate a credible ARV, that uncertainty is itself information: either build in a wider margin (a lower multiplier) or pass. A max offer built on a guessed ARV is just a guess with a decimal point.
The bottom line
The 70% rule earns its place because it compresses a real underwriting model into one line you can run in your head on a listing: offer 70% of the finished value, minus the repairs, and you've usually left enough room for the costs and the profit. Respect what it's actually doing, though. The 70 is an average of assumptions about holding, selling, and margin — honest on a typical deal in a typical market, and quietly wrong on a cheap house, a long rehab, or a bidding war. Get the two inputs right first: an ARV disciplined by real sold comps and a neighborhood ceiling, and a rehab number built bottom-up with a contingency. Then use the rule to screen and the backward solve to commit. The TrueCap analyzer runs a property's max offer, cash flow, cap rate, and DSCR off the same inputs — so whether you're flipping it or holding it, you can see the number that protects your spread before you write the offer. None of this is investment or lending advice; confirm your own costs, comps, and financing terms before you make an offer.