The 70 percent rule in house flipping caps what you can pay for a deal. It says: pay no more than 70% of the after-repair value, minus your repair estimate. Anything above that number, and the deal is unlikely to leave room for costs and profit.
The formula is: Maximum allowable offer = (ARV × 0.70) − estimated repairs. This guide walks the math, explains what that missing 30% is actually for, and covers what a good return looks like on a flip in 2026.
Key Takeaways
- The 70% rule caps your offer at 70% of ARV minus repairs. It is a filter, not a profit guarantee.
- The 30% you hold back covers purchase, holding, financing, and selling costs, and whatever profit is left after those.
- Roughly half of that 30% is eaten by transaction and carrying costs, leaving a target net margin near 10% to 15% of ARV.
- Competitive and higher-priced markets often run the rule at 75% to 80%, mostly because sellers there will not accept a 70% offer.
- Paying above 70% buys a thinner margin and a smaller error buffer, so treat the extra points as risk, not headroom.
How the 70 percent rule works
Start with the after-repair value: the price the finished house should sell for, based on recent sales of comparable renovated homes nearby. Multiply it by 0.70. Then subtract your repair estimate. The result is the most you can pay and still expect the deal to work.
Worked on a $300,000 ARV with $50,000 in planned repairs:
- ARV × 0.70 = $210,000
- Minus repairs ($50,000)
- Maximum allowable offer = $160,000
If the seller wants $185,000, the deal fails the screen. You either negotiate down, find savings in the rehab scope, or pass. For how to build the ARV number itself, see how to calculate ARV and pull comps that hold up.
What the missing 30% is for
The 30% you hold back is not profit. It is the budget for every cost the purchase-plus-repairs number leaves out, with profit as whatever remains. A common way to describe it is roughly 15% for fixed and transaction costs and 15% for profit, though the split shifts with your market and financing (BiggerPockets).
On the $300,000 ARV deal, that 30% is $90,000. A realistic split of where it goes:
- Purchase costs (closing, title, inspection): about $4,000
- Holding costs over a five-month rehab: about $12,000
- Financing (points plus interest): about $10,000
- Selling costs (commission, seller-paid closing, concessions): about $22,000
- Costs subtotal: about $48,000
- Profit left: about $42,000
Two things stand out. Costs consume more than half the cushion, and the profit that remains, about $42,000, is 14% of ARV. That is in the range the rule is built to protect, but only because holding and selling costs stayed controlled. Let one of them run over and the profit half of the cushion shrinks fast. For the full cost breakdown, see how to calculate house flip profit and house flip holding costs.
Why some markets use 75% or 80%
The 70% figure is a national rule of thumb, not a constant. In competitive or higher-priced markets, many experienced flippers run the rule at 75% to 80%. The honest reason is not that the math improves. It is that at 70%, sellers in those markets will not take your offer, so you win no deals.
Paying more is a real concession, because most flip costs scale with price. Agent commission is a percentage. Loan interest and points rise with a bigger loan. Only a few items, like inspection fees, stay fixed. So a higher purchase percentage mostly buys you a thinner margin.
Work it on a $600,000 ARV with $80,000 repairs. At 75%, the maximum offer is $370,000, and the held-back cushion is 25% of ARV, or $150,000. After a realistic $85,000 in purchase, holding, financing, and selling costs, about $65,000 in profit remains. That is roughly 11% of ARV, noticeably thinner than the 14% the 70% rule protected on the smaller deal.
The catch compounds. A higher percentage means a smaller buffer for anything that goes wrong. At 70%, a $10,000 rehab overrun is uncomfortable. At 80%, the same overrun can wipe out the profit. Treat every point above 70% as risk you are accepting, not free room.
What counts as a good flip return in 2026
There is no single benchmark, but a few reference points help.
ATTOM’s Q1 2026 U.S. Home Flipping Report put the typical gross return at 25.4%, on a median gross profit of $66,000 (ATTOM, June 2026). That figure is gross: purchase price to resale price, before rehab and holding costs. For 2025 as a whole, ATTOM reported gross flipping profits at their lowest level since 2008 (ATTOM, March 2026).
Net of every cost, most flippers underwrite to one of two floors. The first is a minimum net profit per deal, often $25,000 to $50,000. The second is a net margin near 10% to 15% of ARV. Which one you use depends on your market and your capital. A $40,000 net profit is a strong result on a $250,000 flip and a thin one on a $600,000 flip.
Cash-on-cash return matters too. If a $40,000 profit came off $80,000 of your own money, the return on invested cash is 50% over the hold, before tax. The same profit on a deal with $160,000 of cash tied up returns exactly half that. Track the money in, not just the profit out. See house flip profit tracking, stage by stage.
Judge a finished deal on net profit and on return on the cash you actually invested, not on the gross spread. The full method is in the flip profit calculation.
Frequently asked questions
Does the 70% rule guarantee a 30% profit?
No. The 30% you hold back is a budget for costs the formula ignores, such as closing, holding, financing, and selling, with profit as whatever is left. On a typical deal, roughly half of the 30% goes to those costs.
Is the 70% rule outdated in 2026?
It still works as a first-pass screen. In competitive or high-priced markets it is often run at 75% or higher, mainly because sellers there will not accept a 70% offer. Paying more buys a thinner margin, so the rule flags deals to skip but never replaces a full cost analysis.
What is a good ROI on a house flip?
Compare net profit and return on invested cash, not the gross spread. Many flippers target a net profit of $25,000 to $50,000 per deal or a net margin around 10% to 15% of ARV. The right floor depends on your market, capital, and risk tolerance.
How do I use the 70% rule with a wholesale fee?
Subtract the fee as another cost: maximum offer = (ARV × 0.70) − repairs − wholesale fee. The buyer still needs the remaining cushion to cover their own transaction and holding costs plus profit.
Use the rule as a filter, then do the math
The 70% rule is a fast way to reject deals that cannot work. It is not a promise of profit, and the 30% it holds back is mostly earmarked for costs. Run the screen to decide what to even analyze, then build the full profit calculation on the deals that pass.
Next, work through the complete number with the worked flip profit example.
This article is for education, not financial or investment advice. Portions were drafted with AI assistance and reviewed by the author.
About the author — Albert Chui. Albert Chui is a real estate investor in the San Gabriel Valley, California, who has flipped roughly 80 houses in the area since 2021. He ran those projects on spreadsheets at first, and learned firsthand how contractor changes, delays, and mid-rehab overruns quietly turn a profitable deal into a thin one. He founded FlipMargin so flippers can see current costs and projected profit throughout a rehab, not just at closing.
