Underwriting rule
The 70% Rule Calculator
The single most-used shortcut in fix & flip underwriting. MAO = (ARV × 70%) − Rehab. Below is the live version.
65% rule
$150,250
Slow / low-ARV markets
70% rule
$164,500
Standard rule
75% rule
$178,750
Cheap capital + hot market
80% rule
$193,000
Retail with proven crew
What the 70% rule actually covers
The 30% "buffer" isn't margin — it's the sum of every real cost of a flip: agent commission and closing on the exit (6–9% of ARV), financing (3–5%), taxes and insurance during the hold (2–3%), and a reasonable net profit (12–18%). Add those and you get roughly 30%.
When it lies to you
- Low-ARV markets. On a $120k ARV, 30% is only $36k — not enough for rehab, closing, and any profit. Use 65%.
- High-tax states. Texas (2.2%) and New Jersey (2.5%) burn through the buffer on longer holds.
- Slow markets. Days on market above 45 means holding costs outrun what 30% can absorb.
- Retail markets with premium finishes. Nashville, Austin, Denver — the buyer expects designer, so the rehab estimate is usually low.
The 70% rule is a screen, not a decision
Passing the 70% rule means the deal is worth underwriting. It doesn't mean the deal works. Run every deal through the full analyzer with real financing terms, real holding period, and real closing costs before you make an offer.
Run the full analyzer →