What is the 70% rule?
The 70% rule is the standard quick screen for house flips and BRRRR deals. It caps what you pay for a property that needs work:
The 30% you hold back is not all profit. It has to cover buying costs, holding costs (financing, insurance, utilities, taxes while you own it), and selling costs first — the margin is what survives all three. That framing is the single most important thing to understand about the rule, and it's why the full worked flip P&L in our 70% rule deep-dive is worth ten minutes before your first offer.
The rule leans entirely on ARV — get that number right
Repairs you can estimate line by line. The multiplier is a convention. ARV — what the property sells for after the rehab — is the input the whole rule leans on, and the one people fudge. It comes from comparable sales of renovated homes near the subject: ideally sold in the last 3–6 months, within about half a mile, matching on beds, baths, and square footage. ARV is set by the market, not by how much you spend on the rehab.
If you don't have an ARV yet, build one from your comps with the ARV calculator — it computes the price-per-square-foot average, sanity-checks the result against the comps' actual sale range, and runs this same max-offer math on the way out. And price the rehab input honestly with the rehab cost estimator — a guessed repair number turns the rule's output into a guess with a decimal point.
When 70% is the wrong number
The single biggest mistake with the 70% rule is treating the 70 as a law of physics. It stands 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. The calculator's multiplier ladder shows the max offer at 60, 65, 70, and 75% side by side so you can see exactly what each assumption is worth in dollars.
The 70% rule for BRRRR
A BRRRR plan uses a future refinance rather than a sale. Maximum LTV, eligible value, seasoning, appraisal treatment, costs, and approval vary by lender, program, borrower, and property. A 75% refinance case is an editable scenario—not a ceiling, quote, or promise that capital returns.
But a BRRRR has a second gate a flip doesn't: the finished property has to work as a rental. If it won't cash-flow at the refinanced payment, it isn't a BRRRR — it's a flip you accidentally kept. Model the full cycle with the BRRRR calculator, and check the rental math with the cap rate and DSCR calculators before you commit.
What the rule can't tell you
The 70% rule is a screen, not underwriting. It approximates a rigorous backward solve — start from the resale price, subtract the actual buying, holding, and selling costs and your required profit, and whatever is left is the real Offer Ceiling. The rule compresses all of those costs into one multiplier, which is exactly why the multiplier has to move when your costs do. Three things it cannot see:
- Your financing. Hard money at roughly 9.5–13% plus points makes every extra month of holding expensive; cash changes the math entirely.
- Your timeline. A six-week cosmetic rehab and a nine-month gut job can have the same repair budget and wildly different holding costs.
- Your exit. Sell vs. refinance-and-hold produce different cost stacks from the same purchase.
When a deal passes the screen, back into the offer from the real costs. TrueCap's full analyzer does the rigorous version — a max-allowable-offer solve from your actual return target, plus rehab, refinance, cash flow, and a selected-rule fit and secondary Screening Index — free, from the same numbers you typed here.
Frequently asked questions
What is the 70% rule in real estate?+
It's a rule of thumb that calculates a screening boundary at 70% of a property's projected after-repair value (ARV) minus repairs. On a property modeled at $300,000 renovated with $45,000 of work, the 70%-rule Offer Ceiling is (0.70 × $300,000) − $45,000 = $165,000. The 30% held back is not all profit; buying, holding, and selling costs come first. This boundary is not a recommended offer or appraisal.
Is the 70% rule the same as an Offer Ceiling?+
The 70% rule produces a quick Offer Ceiling: 70% of ARV minus repairs. A target-dependent Offer Ceiling can instead model financing, holding months, commissions, and a selected return target. Both are screening boundaries—not recommended offers. Verify the inputs and review the full underwrite before recording a decision.
Where does the ARV number come from?+
Comparable sales of renovated homes near the subject — ideally sold within the last 3–6 months, within about half a mile, matching on beds, baths, and square footage. The common method takes the price per finished square foot of those comps times the subject's square footage. ARV is set by the market, not by how much you spend on the rehab. Our ARV calculator builds the number from your comps.
Does the 70% rule work for BRRRR?+
It can be an initial screen, not a refinance rule. Cash-out LTV, eligible value, seasoning, appraisal treatment, costs, and approval vary by lender, program, borrower, and property. A 75% case is only a planning scenario and does not promise that most or all cash returns; verify the completed rental's income, expenses, coverage, appraisal downside, and written loan terms.
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.
Why is the Offer Ceiling rounded down to $500?+
Rounding down keeps the displayed amount at or below the rule's own modeled boundary. The same convention is used for TrueCap's target-dependent Offer Ceiling. It does not make the result a recommended offer.