Underwriting rule
The 70% Rule Calculator
Short answer
The 70% rule caps your fix & flip offer at 70% of after-repair value minus the rehab budget: MAO = (ARV × 0.70) − rehab. On a $285,000 ARV with a $35,000 rehab, the maximum offer is $164,500. The 30% gap pays agent commissions, both closings, financing, taxes, insurance, and your profit.
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 does the 30% buffer actually cover?
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 does the 70% rule lie 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.
Is passing the 70% rule enough to buy?
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 — price the loan itself in the hard money loan calculator.
Run the full analyzer →