The 70% rule is probably the most quoted formula in real estate investing. Ask any flipper how they screen deals and you will hear it inside the first thirty seconds. It is genuinely useful, and it is also widely misunderstood. Here is the honest version: the 70% rule is a fast way to throw out bad deals, but it is not how you decide to buy one.

The Formula

Max Offer = (ARV x 0.70) - Rehab Costs

The idea is simple. You take 70 percent of the after repair value (what the home is worth once it is fully renovated), subtract what the rehab will cost, and that is the most you should offer. The other 30 percent is meant to be rough room for your financing, your holding costs, your selling costs, and your profit. Notice the word rough. That 30 percent is a cushion, not a precise budget, and that is exactly where people get it twisted.

What the 70% Rule Is For

The real job of the 70% rule is speed. When you are looking at a high volume of deals, you cannot build a full model on every one. The 70% rule lets you run a property in under a minute and decide whether it is even worth a deeper look. It anchors your offer to what the home will be worth fixed up, not what the seller thinks their tired house is worth today.

Used that way, it is a great tool. It keeps you from overpaying and it kills bad deals fast so you can spend your real time on the ones that might work. I think it holds up well as a screen across the board.

What It Leaves Out

Here is the catch. The 70% rule assumes your costs and your timeline behave. The second those shift, the rule quietly misleads you, because it never looked at them. The biggest things it ignores:

  • How long you hold the loan. The rule treats a fast flip and a project that drags for a year the same way. They are not the same. Every extra month is more interest and more carry, and that eats the 30 percent cushion alive.
  • Your real financing costs. Points, the rate, and the fees on your actual loan are not baked into a flat 70. Two deals can screen identically and cost very different amounts to finance.
  • Your monthly carry and cash to close. Taxes, insurance, utilities, and the cash you need up front never show up in the formula, but they absolutely show up in your bank account.
Two deals can both pass the 70% screen and end completely differently. One sells in five months and prints. The other drags to month fourteen and the carry quietly turns your profit into a break-even. The formula cannot see the difference. You have to.

Why I Don't Decide on the 70% Rule

I use the 70% rule the way it is meant to be used, as a screen. But it is not how I tell an investor to pull the trigger. The decision comes from running the full numbers and asking a better question: how long can you sit in this loan and still come out ahead?

That time cushion is the real test. If the deal is still break even or profitable at month twelve, that is a good deal. If it is still profitable at month eighteen, that is a phenomenal one, because it means you could get stuck in a high-interest hard money loan for a year and a half and still win. The 70% rule will never tell you that. The full math will, which is exactly why I built the deal analyzer below so you do not have to do it by hand.

When Going Over 70 Percent Still Makes Sense

Treat 70 percent as a baseline, not a hard ceiling. I will absolutely go over it when the numbers back it up. I have seen 80 percent deals that were incredible, because the rest of the math worked out. A few things that let you push past 70:

  • How fast the market moves. A neighborhood where homes sell in thirty to sixty days carries far less risk than one sitting at five or six months on market. Less time on market means less holding cost, so a faster market can support a higher number.
  • How much rehab it needs. An 80 percent deal on a property already in good shape can beat a 70 percent deal that needs a full gut. Less rehab means less time, fewer holding costs, and less that can go wrong before you list.
  • The size of the loan. On a larger loan amount, the dollars in your cushion are bigger even at the same percentage, which can leave plenty of room for profit.

The common thread is always the same test: with every holding cost factored in, are you still profitable at month twelve? If the answer is yes, the deal works, whether it screened at 68 percent or 80. It is a numbers game, not a number rule.

"The 70% rule gets you to the table. The real math tells you whether to sit down."

Where the Rule Fits in Your Process

Run the 70% rule first to kill the obvious losers. Then, on anything that clears it, build the real picture: actual comps for your ARV, a real rehab budget you would stand behind, your true financing costs, your monthly carry, and how long you realistically expect to hold. If the deal still works with a healthy time cushion, now you have something. The formula is the map. It is not the territory.

Run Your Deal Through the Analyzer

This is the tool I was talking about. The top half runs the 70% screen in a second. The bottom half does the part almost no other calculator online bothers with: it tells you how many months you could hold this exact deal before your profit hits zero. Edit any number to match your own deal.

Capital Kings Deal Analyzer
Run the 70% screen, then the part most calculators skip: how many months you could hold this deal and still walk away profitable.
70% Rule max offer (you are at or under the line) $160,000
Purchase + Rehab
$210,000
Profit @ 12 Months
$29,100
Carry + Interest / Mo
$2,725
How Long You Can Hold And Still Break Even
22.7 mo
At $2,725/mo in carry and interest, that is the month your profit hits zero.
Phenomenal. You could hold this loan about 23 months and still break even, so even a badly delayed flip likely still wins.
Estimates only, based on the numbers you enter. This is an educational screening tool, not a loan commitment, an appraisal, or an offer to lend. Always confirm ARV with real comps and your costs with your lender before you buy.

Frequently Asked Questions

What is the 70% rule in real estate?
The 70 percent rule is a quick screen for fix and flip deals. It says your maximum offer should be about 70 percent of the after repair value, minus your rehab costs. The leftover 30 percent is rough room for financing, holding costs, selling costs, and profit. It is a filter to kill bad deals fast, not a precise profit calculation.
How do you calculate the 70% rule?
Take the after repair value, multiply it by 0.70, then subtract your estimated rehab costs. The result is your maximum offer. For example, on a property with a 300,000 dollar ARV and 50,000 dollars of rehab, the math is 300,000 times 0.70, which is 210,000, minus 50,000, for a maximum offer of 160,000.
Is the 70% rule still accurate in 2026?
It is still a useful screen, but it was always a rule of thumb, not a guarantee. It assumes a fairly short hold and steady costs. When hold times stretch out or financing costs are high, the built-in margin gets thin, so you still need to run the full numbers before you commit.
What does the 70% rule leave out?
It does not account for how long you actually hold the loan, your real financing costs, your monthly carry, or your cash to close. Two deals can pass the 70 percent screen and have completely different outcomes once you factor in a six month hold versus a twelve month one.
Should you ever pay more than the 70% rule says?
Yes, when the numbers back it up. Seventy percent is a baseline, not a ceiling. A deal at 75 or even 80 percent can be excellent if the market sells fast, the property needs little rehab, and the loan amount leaves room. The real test is whether you are still profitable at month twelve with all holding costs factored in. Let the full math decide, not the shortcut.

Found a Deal That Pencils?

Run it through the analyzer above, then bring me the ones that clear. One application gets you real lender quotes and actual financing costs, so you can replace these estimates with the numbers you will really close on.

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