The 70% rule says an investor should pay no more than 70 percent of a property's after-repair value (ARV) minus estimated repairs. On a $300,000 ARV with $50,000 in repairs, the maximum allowable offer is $160,000. The 30 percent spread protects margin for holding costs, financing, and profit, which is why flippers and wholesalers use it as a first-pass screen before any deeper underwriting.
Key Takeaways
- Maximum allowable offer equals (ARV x 0.70) minus estimated repairs.
- On a $300,000 ARV with $50,000 in repairs, the MAO is $160,000.
- Wholesalers also subtract an assignment fee, usually $5,000 to $15,000.
- The 30 percent spread covers holding, financing, closing costs, and profit.
- Higher 2026 insurance and Texas property taxes push buyers toward 65 percent.
- The rule is a fast screen, not a full property valuation.
- Light-rehab and turnkey deals can justify paying 75 to 80 percent.
What is the 70% rule in real estate?
The 70% rule is a rule of thumb that caps an investor's purchase price at 70 percent of a property's after-repair value minus the cost of repairs. After-repair value, or ARV, is what the home will sell for once it is fully renovated, established from recent comparable sales rather than the current as-is condition. The rule exists because a flip or wholesale deal has to survive far more than the purchase price and rehab budget. It has to absorb hard money interest, insurance, property taxes during the hold, utilities, agent commissions on the resale, title and closing costs on both ends, and still leave a profit. Packing all of that into a single 30 percent buffer is what makes the rule fast enough to run in your head on a first phone call.
Popularized by educators at BiggerPockets and referenced in Investopedia's coverage of after-repair value, the 70% rule became the industry default for screening deals because it is directional and conservative. It is not a valuation and it is not a substitute for a real underwriting model. What it does is answer one question quickly: is this property even worth a deeper look at the seller's asking price? If the seller wants far more than the MAO the rule produces, most experienced investors move on rather than burning hours on a deal that cannot pencil. For a full breakdown of estimating the input that drives everything, see our guide on how to calculate ARV for investment properties.
How do you calculate maximum allowable offer (MAO)?
Maximum allowable offer equals ARV multiplied by 0.70, then minus estimated repairs. The formula is MAO = (ARV x 0.70) minus repair costs. That single line is the entire mechanic, and its accuracy depends completely on two inputs: a defensible ARV pulled from comparable sales, and a realistic repair estimate that does not lowball the scope.
Walk through a live example. A San Antonio three-bedroom will appraise at $250,000 once renovated, and a contractor prices the rehab at $40,000. Multiply $250,000 by 0.70 to get $175,000, then subtract the $40,000 in repairs for a maximum allowable offer of $135,000. Everything above that $135,000 line, all the way up to the $250,000 resale, is the 30 percent buffer doing its job across financing, holding, closing, and profit. The table below shows the same math across three ARV tiers so you can see how the numbers scale, and how a wholesaler's offer sits below a flipper's on every row.
| ARV | Estimated repairs | ARV x 0.70 | Flipper MAO | Wholesaler MAO (after $10K fee) |
|---|---|---|---|---|
| $200,000 | $30,000 | $140,000 | $110,000 | $100,000 |
| $300,000 | $50,000 | $210,000 | $160,000 | $150,000 |
| $450,000 | $75,000 | $315,000 | $240,000 | $230,000 |
Notice how the dollar buffer grows with ARV. On the $200,000 deal the spread above the flipper MAO is $90,000; on the $450,000 deal it is $210,000. That is why higher-priced flips can feel safer on paper, though they also tie up more capital and carry larger absolute repair overruns when a rehab goes sideways. Running the same property through a complete model, rather than trusting the shortcut, is covered step by step in our real estate deal underwriting framework.
Does the 70% rule still work in 2026 with high rates?
The 70% rule still works in 2026, but elevated financing, insurance, and property-tax costs push disciplined investors toward 65 percent on many deals. The rule's 30 percent buffer was calibrated in a cheaper-money era, and when hard money runs 10 to 12 percent and holding periods stretch, that cushion compresses fast.
Three cost pressures explain the shift. First, financing: hard money and bridge lenders price well above conventional debt, and a six-month hold at 11 percent on a $150,000 loan is roughly $8,250 in interest alone. Second, insurance: premiums on vacant and under-renovation properties have climbed sharply, and a builder's-risk policy adds real monthly cost. Third, property taxes: in high-tax states the drag is significant, and in HUD-tracked metros like San Antonio, Bexar County effective property-tax rates above 2 percent of assessed value mean a $250,000 project can carry more than $5,000 a year in taxes during the hold. According to the Federal Reserve Economic Data series, 30-year mortgage rates stayed elevated through mid-2026, keeping investor borrowing costs high. When those three line items eat into the buffer, dropping the multiplier to 0.65 restores the margin the rule was meant to protect. The disciplined move is to compare the shortcut against your true cost stack, the same logic in our comparison of hard money and bridge loans.
Is the 70% rule the same for wholesaling and flipping?
No. Both start from the same ARV times 0.70 minus repairs, but a wholesaler subtracts an assignment fee on top, so the contract price still leaves the end-buyer investor a genuine 70 percent deal. The wholesaler's maximum allowable offer is always lower than a flipper's on the same property.
The reason is structural. A flipper is the end buyer, so the MAO is the most they can pay and still hit their own margin. A wholesaler never intends to renovate; they put a property under contract and assign that contract to an investor for a fee. That fee has to fit inside the same 30 percent buffer, or the end buyer no longer has a 70 percent deal and will not close. So a wholesaler working the $300,000 ARV example, with $50,000 repairs and a target $10,000 assignment fee, offers the seller $150,000 rather than the flipper's $160,000. The $10,000 difference is the wholesaler's spread, carved out of the buffer without breaking the end buyer's math. This is why accurate ARV and repair numbers matter even more in wholesaling: a padded estimate that inflates the offer leaves no room for the fee. The mechanics of locking and assigning that contract are detailed in our guide to the wholesale real estate contract assignment, and the end-to-end process in how wholesale real estate works step by step.
What is a good profit margin on a flip?
A common target is a gross profit of 20 to 30 percent of ARV, or roughly $30,000 to $50,000 in net profit per deal after every cost. The 70% rule is engineered to protect that margin by reserving 30 percent of ARV for repairs, holding costs, financing, and profit combined, so hitting the target depends on how much of that buffer the non-profit line items consume.
Think of the 30 percent buffer as a budget that gets divided before any profit is left. On a $300,000 ARV flip, the $90,000 buffer above the $210,000 line has to cover the $50,000 rehab, then financing, insurance, taxes, utilities, staging, resale commissions, and closing costs on both transactions. If those non-rehab costs run $25,000, the investor is left with roughly $15,000 in profit, which is why many operators set a minimum dollar profit floor rather than trusting the percentage alone. On tighter deals, a $30,000 net profit minimum protects against the flip that technically passes the rule but leaves too little for the risk. Per Forbes Advisor's coverage of house-flipping economics, underestimating holding and transaction costs is the most common reason a deal that looked profitable on the 70% screen finishes near breakeven. Modeling the resale exit properly, including the cap rate a rental buyer would pay, connects to our guide on what a good cap rate looks like in 2026.
Should you ever pay more than 70% of ARV?
Yes, in specific situations. Investors pay up to 75 to 80 percent of ARV on light-rehab deals, on turnkey rentals held long term, or in fast-appreciating markets where the exit price outruns the buffer. The 70% rule is a screen, not a hard ceiling, so a precise model that confirms the real costs can justify paying more.
The key is replacing the rule of thumb with actual arithmetic. When repairs are cosmetic and reliable, say $10,000 of paint and flooring on a structurally sound home, the risk baked into the 30 percent buffer simply is not there, and an 80 percent offer can still clear a healthy profit. Buy-and-hold investors purchasing a rental they will keep for years also weigh long-term appreciation and cash flow, not a quick-flip spread, so they routinely pay above 70 percent when the rent supports the debt. And in a supply-constrained market with strong price growth, waiting for a 70 percent deal can mean buying nothing at all. The discipline is not the number itself; it is knowing your true holding and financing costs well enough to break the rule on purpose rather than by accident. Balint Holdings, LLC, the entity behind Home Pros, underwrites every acquisition to that standard, which is how a deal above 70 percent gets approved only when the full model proves it out. For rental-hold decisions specifically, pair this with our walkthrough on how to underwrite a rental property.
How is the 70% rule different from the 1% rule?
The 70% rule screens the purchase price on a flip or wholesale deal, while the 1% rule screens rental cash flow on a buy-and-hold. They answer different questions for different strategies and should never be used interchangeably.
The 70% rule asks how much you can pay to protect a flip margin: cap the offer at 70 percent of ARV minus repairs. The 1% rule asks whether a rental produces enough income: monthly rent should be at least 1 percent of the purchase price, so a $150,000 rental should rent for roughly $1,500 a month to pass. A flipper cares about the resale spread and largely ignores rent; a landlord cares about monthly cash flow and largely ignores ARV. Many investors run both because they operate both strategies, but applying the wrong screen to the wrong deal produces bad decisions, such as overpaying for a flip because the rent looked strong, or passing on a great flip because it would make a weak rental. The table below lines them up side by side.
| Dimension | 70% rule | 1% rule |
|---|---|---|
| Purpose | Screen flip or wholesale purchase price | Screen rental cash flow |
| Formula | (ARV x 0.70) minus repairs | Monthly rent at least 1% of price |
| Best for | Flippers and wholesalers | Buy-and-hold landlords |
| Key inputs | ARV, repair estimate | Purchase price, market rent |
| Output | Maximum allowable offer | Pass or fail rent screen |
Both are shortcuts, and both deserve confirmation from a full model. For the income-screening side and how it compares to yield measures, see our breakdown of the gross rent multiplier versus cap rate.
Frequently Asked Questions
What is the 70% rule in real estate?
The 70% rule says an investor should pay no more than 70 percent of a property's after-repair value (ARV) minus estimated repairs. On a $300,000 ARV with $50,000 in repairs, the maximum allowable offer is $160,000. The 30 percent spread absorbs holding costs, financing, closing costs, and profit, which is why the rule is used as a fast screen on flips and wholesale deals.
How do you calculate maximum allowable offer (MAO)?
Maximum allowable offer equals ARV multiplied by 0.70, then minus estimated repairs. For a $250,000 ARV home needing $40,000 in work, MAO is ($250,000 x 0.70) minus $40,000, or $135,000. Wholesalers subtract their assignment fee as well, so a $10,000 fee drops the MAO to $125,000 to leave room for the end buyer's margin.
Does the 70% rule still work in 2026 with high rates?
The 70% rule still works in 2026, but higher financing, insurance, and property-tax costs push disciplined investors toward 65 percent on many deals. With hard money near 10 to 12 percent and Texas property taxes above 2 percent of value, the standard 30 percent spread can be thin, so buyers in high-cost markets like Bexar County often build in a wider cushion.
Is the 70% rule the same for wholesaling and flipping?
No. A flipper's MAO is ARV times 0.70 minus repairs. A wholesaler uses the same starting point but also subtracts an assignment fee, usually $5,000 to $15,000, so the contract price still leaves the end-buyer investor a 70 percent deal. The wholesaler's MAO is therefore always lower than a flipper's on the same property.
What is a good profit margin on a flip?
A common target is a gross profit of 20 to 30 percent of ARV, or roughly $30,000 to $50,000 in net profit per deal after all costs. The 70% rule is designed to protect that margin by reserving 30 percent of ARV for repairs, holding costs, financing, and profit combined. On thin-margin deals many investors require a minimum dollar profit, not just a percentage.
Should you ever pay more than 70% of ARV?
Yes, in some cases. Investors pay up to 75 to 80 percent of ARV on light-rehab deals in fast-appreciating markets, on turnkey rentals held long term, or when repairs are minimal and reliable. The 70% rule is a screen, not a valuation, so a precise underwriting model that confirms holding costs, financing, and exit price can justify paying more on the right property.
How is the 70% rule different from the 1% rule?
The 70% rule screens the purchase price on a flip or wholesale deal by capping the offer at 70 percent of ARV minus repairs. The 1% rule screens rental cash flow by asking whether monthly rent is at least 1 percent of the purchase price. One protects flip margin, the other tests buy-and-hold income, so investors use them for different strategies.
The Bottom Line
The 70% rule endures because it compresses a dozen cost variables into one number you can run on a first call: pay no more than 70 percent of ARV minus repairs. Maximum allowable offer is where that number becomes an actual price, and the wholesale version simply carves an assignment fee out of the same buffer. What the rule cannot do is replace underwriting. In 2026, with financing, insurance, and Texas property taxes all heavier than the rule was calibrated for, the honest move is to treat 70 percent as a starting screen, drop to 65 percent when the cost stack demands it, and pay above 70 percent only when a full model proves the deal. Get the ARV right, be honest about repairs, and the formula will keep you out of far more bad deals than it costs you good ones. This is educational information, not investment, tax, or legal advice; confirm any deal with your own advisors and lender.
Want deals that already clear the 70% screen before they hit your inbox? Join the Home Pros Marketplace for off-market inventory across 48 markets with ARV comps and repair estimates ready to drop into your own MAO math. Questions on structuring an offer? Email contact@selltohomepros.com or call (830) 510-1597.
Founder of Home Pros, operator across 48 markets, with 300+ investor transactions closed since 2021. Trevor writes on institutional real estate underwriting, capital placement, and market analysis. More about Trevor →