The 70% Rule Explained (and When to Break It)

If you're a real estate wholesaler, you've probably heard the 70% rule thrown around as a golden number for making offers. But here's the truth: it's a shortcut, not a law. Used right, it keeps you from overpaying. Used blindly, it can cost you good deals.

Key takeaways

• The 70% rule says your maximum offer should be 70% of the after-repair value (ARV) minus repair costs.
• It's a quick filter to avoid bad deals, not a substitute for a full deal analysis.
• The rule works best for standard flips in stable markets with predictable repairs.
• You can (and should) break the rule for high-demand areas, low-repair properties, or when you have a buyer lined up.
• Always adjust the percentage based on your actual holding costs, profit margin, and market conditions.

What is the 70% rule in real estate?

The 70% rule is a simple formula real estate investors use to estimate the maximum price they should pay for a fix-and-flip property. The rule states: your offer price should be no more than 70% of the property's after-repair value (ARV) minus the estimated repair costs.

In other words: Maximum Offer = (ARV × 0.70) – Repair Costs.

This built-in 30% buffer covers your holding costs (taxes, insurance, utilities), closing costs, realtor commissions, and your desired profit. It's a rule of thumb that helps you avoid overpaying before you run a full analysis.

How do you calculate the 70% rule?

Calculating the 70% rule is straightforward. Follow these steps:

1. Determine the after-repair value (ARV). This is what the property will be worth after all renovations are complete. Use comparable sold properties (comps) in the same area that are similar in size, condition, and features.

2. Estimate total repair costs. Get quotes from contractors or use your own experience. Be thorough — include everything from materials and labor to permits and dumpster fees.

3. Apply the formula. Multiply the ARV by 0.70, then subtract the repair costs. The result is your maximum allowable offer.

Tip: Use a conservative ARV and a realistic repair estimate. Overestimating ARV or underestimating repairs is the fastest way to lose money.

Example calculation

Let's say you find a property with an ARV of $200,000 and estimated repairs of $40,000.

• 70% of ARV: $200,000 × 0.70 = $140,000
• Subtract repairs: $140,000 – $40,000 = $100,000

Your maximum offer under the 70% rule would be $100,000. If the seller wants more, you walk away — unless you have a reason to break the rule.

Why do wholesalers use the 70% rule?

Wholesalers use the 70% rule because it's fast and prevents emotional overpaying. When you're analyzing multiple deals a day, you don't have time to run a full pro forma on every property. The rule gives you a quick yes/no filter.

It also protects your profit margin. The 30% buffer accounts for all the costs that eat into your profit: financing, closing, holding, selling, and unexpected surprises. If you stick to the rule, you're unlikely to end up in the red.

Warning: The 70% rule does not include your wholesale fee. If you're wholesaling, your assignment fee comes out of that 30% buffer. Make sure you still have room for your profit after the flipper's costs.

When does the 70% rule work best?

The 70% rule is most reliable in these scenarios:

• Stable, predictable markets where ARV and repair costs are easy to estimate.
• Standard fix-and-flip properties with cosmetic updates (kitchen, baths, flooring, paint).
• Deals where you plan to sell quickly (under 6 months) to minimize holding costs.
• Markets with moderate competition where you don't need to stretch to win offers.

When should you break the 70% rule?

There are several situations where sticking to the 70% rule will cause you to miss great deals. Here's when to consider breaking it:

High-demand, low-inventory markets

In a hot seller's market, you may need to offer 75% or even 80% of ARV to compete. If the area has strong appreciation and quick resale, the extra risk may be worth it.

Properties with minimal repairs

If a property needs only light cosmetic work (paint, carpet, cleaning), you can often use a higher percentage because the risk is lower. The 30% buffer is designed for major renovations.

When you have a cash buyer lined up

If you already have a buyer who agrees to purchase the deal at a certain price, you can offer more than the 70% rule suggests. Your risk is nearly eliminated because you have a guaranteed exit.

Unique or high-end properties

Luxury homes or unique properties may have fewer comps, making ARV harder to pin down. In these cases, experienced investors may use a lower percentage (like 65%) to account for the extra risk.

When you can add value beyond repairs

If you have a creative strategy — like a condo conversion, rezoning potential, or seller financing — the 70% rule may not apply. The rule assumes a simple buy-rehab-sell model.

Tip: Whenever you break the rule, document your reasoning. Write down why you're deviating and what additional profit or risk mitigation justifies the higher offer.

Common mistakes wholesalers make with the 70% rule

Even experienced wholesalers slip up. Here are the most common errors:

Mistake 1: Using the wrong ARV

Your ARV must be based on sold comps, not active listings or your gut feeling. Overestimating ARV by even 5% can wipe out your profit.

Mistake 2: Underestimating repair costs

First-time wholesalers often forget to include carrying costs during rehab, permit fees, dumpster rentals, and contingency (10-20% of total repairs). Always add a cushion.

Mistake 3: Ignoring holding costs

Taxes, insurance, utilities, HOA fees, and loan interest add up fast. The 30% buffer is supposed to cover these, but if you hold the property longer than expected, those costs eat into profit.

Mistake 4: Applying the rule to every deal

The 70% rule is a guideline, not a formula. It doesn't account for market trends, your specific exit strategy, or the seller's motivation. Use it as a filter, not a final answer.

70% rule vs. other offer formulas

Here's how the 70% rule compares to other common methods:

Formula	Description	Best For
70% Rule	Offer = 70% ARV – Repairs	Quick filtering of flips
Maximum Allowable Offer (MAO)	Offer = ARV – Repairs – Holding Costs – Desired Profit	Detailed analysis
65% Rule	Offer = 65% ARV – Repairs	High-risk or slow markets
75% Rule	Offer = 75% ARV – Repairs	Hot markets or low-repair deals

As you can see, the 70% rule is just one point on a spectrum. The right percentage depends on your market, your costs, and your profit goals.

How to adjust the 70% rule for your market

No two markets are the same. Here's how to customize the rule:

• Calculate your actual costs. Track your average holding costs, closing costs, and realtor commissions. If your total costs are 25% of ARV, you can use a 75% rule. If they're 35%, use 65%.
• Consider your desired profit. If you want a $30,000 profit on a $200,000 ARV property, that's 15%. Add that to your costs to find your target percentage.
• Factor in market conditions. In a rising market, you might accept a lower profit because appreciation will cover it. In a falling market, increase your buffer.

Tip: Build a simple spreadsheet that calculates your maximum offer based on your actual costs. Use the 70% rule as a starting point, then adjust.

Step-by-step: How to use the 70% rule in a wholesale deal

1. Find a potential deal. Drive for dollars, use direct mail, or work with a bird dog.
2. Estimate ARV. Pull 3-5 comparable sold properties within a half-mile radius, sold in the last 6 months, similar size and condition.
3. Estimate repairs. Walk the property with a contractor or use a repair cost estimator based on square footage and scope.
4. Apply the 70% rule. Calculate your maximum offer.
5. Compare to seller's asking price. If the seller is below your max, you have a deal. If not, negotiate or walk.
6. Run a full analysis. Before making a final offer, factor in your actual holding costs, closing costs, and desired profit. Adjust your offer accordingly.
7. Make your offer. Present your number with confidence, backed by your analysis.

The bottom line: Trust the rule, but know when to bend it

The 70% rule is a powerful tool for wholesalers who need to move fast. It prevents you from overpaying and keeps your profit margins healthy. But it's not a substitute for thinking.

Use the rule as your first filter. Then, for deals that pass the sniff test, do the full math. And when a deal is too good to pass up — even if it doesn't fit the rule — have a clear reason why you're breaking it.

Recommended tools / next steps

To apply the 70% rule consistently, use a deal analysis calculator or a CRM that lets you track ARV, repairs, and offers. Many wholesalers pair the rule with property data tools to pull comps fast. Start by running the rule on your last five deals — see how often you would have used it and whether it would have helped or hurt. Then adjust your approach for the next deal.