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
BRRRR investors don't sell — they refinance. A cash-out refinance on a single-family investment property typically maxes out at 75% of ARV in 2026, so keeping purchase plus rehab at or under 70% of ARV leaves roughly a five-point cushion for closing and holding costs. Hit that, and the refinance can return most or all of the cash you put in.
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 maximum offer. 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 plain-English verdict — 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 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.
Is the 70% rule the same as MAO?+
MAO (maximum allowable offer) is the general concept — the most you can pay and still hit your numbers. The 70% rule is the quick approximation of it: 70% of ARV minus repairs. A rigorous MAO backs into the offer from actual costs — financing, holding months, commissions, and your required profit — which is what a full underwrite does. The rule is the screen; the underwrite is the 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?+
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.
Why is the max offer rounded down to $500?+
Never rounding up means the calculator never quotes a price above the rule's own ceiling. It's the same convention TrueCap's full max-allowable-offer solver uses. Rounding to the nearest $500 could nudge an offer a few hundred dollars past the limit the rule just computed — down-only rounding keeps the number honest.