The 70% rule for house flipping and wholesaling

The rule

Maximum purchase price = after-repair value × 70% − repair costs

The after-repair value (ARV) is what the house should sell for once it's fixed, based on recent sales of similar renovated homes nearby. The repair costs are the full rehab budget. The remaining 30% of the ARV is meant to cover everything else (buying and selling costs, loan interest, holding costs) and still leave a profit.

A worked example

Renovated three-bedroom houses on the street have sold for around $300,000. The house you're looking at needs $45,000 of work.

Where does the other $90,000 (30% of the ARV) go? Say the flipper borrows 90% of the price and all of the rehab from a hard-money lender at 10% plus 2 points, and the project takes six months.

So the 30% splits roughly in half: about 15% of the ARV goes to costs and about 15% is profit. That's the cushion the rule is designed to protect. Run the full version, with your own loan terms and timeline, in the fix-and-flip calculator.

The wholesaling version

A wholesaler puts a house under contract and assigns the contract to a flipper for a fee. The flipper still needs the deal to work at their own maximum, so the wholesaler works backwards:

Maximum offer to seller = ARV × 70% − repairs − assignment fee

In the example, with a $10,000 assignment fee, the wholesaler can offer the seller at most $155,000. Offer more and the end buyer is paying above their own 70% number, which experienced buyers usually won't do. The wholesale MAO calculator does this math and lets you change the percentage.

When to adjust the percentage

• Lower-priced houses. Some costs, like closing fees, permits and utilities, don't shrink with the price, so they eat a bigger share of a small ARV. On a $120,000 ARV the 30% is only $36,000. Many flippers use 65% or less on cheaper houses.
• Higher-priced houses. On a $600,000 ARV, 30% is $180,000, often more cushion than needed, so investors in expensive markets sometimes go to 75% or 80%.
• Long or uncertain projects. Permits, structural work or a slow market mean more months of interest and holding costs. Use a lower percentage.
• Cash buyers. No loan interest or points leaves more room, but the cash still has a cost: it could be earning something elsewhere.

Common mistakes

• An optimistic ARV. Every dollar of ARV error flows straight into profit. Use recent sales of truly comparable renovated homes, not list prices or the best sale on the street.
• A thin repair budget. Add a contingency (often 10–20%) for what you find behind the walls.
• Treating 70% as a target rather than a ceiling. It's the most you should pay, not what you should offer.
• Forgetting taxes on the profit. Flip profits are usually taxed as ordinary income, which can take a meaningful share of that 15%.

Planning to keep the house as a rental instead of selling? The buy-and-rehab math is the same, but the exit is a refinance: see the BRRRR method.