70% Rule

The 70% rule says an investor should pay no more than 70% of a property's after repair value minus rehab costs.

The 70% rule is a screening formula for distressed property: pay no more than 70% of the after repair value, minus rehab costs. Written out: maximum allowable offer = (ARV × 0.70) − rehab. The 30% that comes off the top is not all profit — it has to cover the buyer's holding costs, closing costs, selling costs, and margin.

Example: a house has an ARV of $200,000 and needs $30,000 of work. The rule says the maximum offer is $200,000 × 0.70 − $30,000 = $110,000. A wholesaler who wants a fee on that deal needs to contract the property below $110,000, so the end buyer's math still works after the fee is added on top.

What beginners get wrong is treating 70% as a law of nature. It is a rule of thumb, and real buyers flex it — some adjust the percentage up or down based on their own costs and strategy, and buy-and-hold or Section 8 buyers often price off rent and yield instead of the flip formula entirely. The rule is a fast filter for whether a deal is worth underwriting; it is not the underwriting itself. Use it to screen a stack of leads quickly, then build the real numbers on the survivors before you sign anything.