What This Calculator Does
When evaluating a flip, the first question is often: What is the most I can pay and still make money? The 70% rule is a quick, rough filter. It helps you decide whether a deal is worth a closer look before spending time on detailed numbers or calling agents.
This calculator takes two inputs—After‑Repair Value (ARV) and estimated repair cost—and applies the standard formula:
> Maximum Allowable Offer (MAO) = ARV × 0.70 – Repairs
The result is the highest price you should consider offering, assuming the 70% rule applies to your market and situation. It is not a guarantee of profit, but a starting point for underwriting.
How to Use the Calculator
1. After‑Repair Value (ARV) – Enter the estimated market value after all repairs and renovations are complete. This is typically based on recent sales of comparable homes in the same neighborhood. Do not guess; use actual comps from the MLS or a licensed appraiser’s preliminary opinion.
2. Repair Cost – Enter your estimate of all money needed to bring the property to the ARV condition. Include structural repairs, roof, HVAC, kitchen and bath updates, permits, and a contingency (usually 10–15%) for surprises. Be realistic. Underestimating repairs is the most common way flippers lose money.
After entering both numbers, the calculator displays the Maximum Allowable Offer. If the seller’s asking price is at or below this number, the deal passes the first filter. If it is higher, you either walk away or renegotiate.
Breaking Down the Inputs
After‑Repair Value (ARV)
ARV is the cornerstone of the calculation. If you overestimate the finished value, the MAO will be too high, and you risk paying too much. If you underestimate it, you may pass on a profitable deal.
How to estimate ARV:
- Find three to five recently sold properties similar in size, bedroom/bathroom count, and condition.
- These sales should have closed within the last three to six months.
- Adjust for differences (e.g., if your subject property has a renovated kitchen and the comp does not, add the typical kitchen remodel cost in your area).
- The result is a price range; use the midpoint as your ARV input, or be conservative and use the lower end.
Repair Cost
Repair estimates separate successful flippers from those who struggle. Be thorough.
Common repair categories to include:
- Roof replacement or repair
- HVAC system (heating and cooling)
- Electrical updates to meet current code
- Plumbing repairs or replacements
- Foundation issues
- Kitchen remodel (cabinets, countertops, appliances)
- Bathroom updates
- Flooring (remove and replace, or refinish)
- Paint (interior and exterior)
- Windows and doors
- Permit fees and impact fees
- Carrying costs during rehab (utility hookups, temporary fencing, dump fees)
Pro tip: Get at least two contractor bids for major scope items. Use the higher bid if they differ significantly, or calculate an average and add a 10–15% contingency line item for hidden issues (mold, outdated wiring, termite damage).
Reading the Result
The calculator outputs a single dollar amount: Maximum Allowable Offer (MAO).
- If the asking price ≤ MAO: The deal clears the 70% threshold. You can proceed to deeper analysis—title review, financing feasibility, exit strategy, and detailed profit projection.
- If the asking price > MAO: The deal does not meet the 70% rule. You can either make a lower counteroffer, walk away, or investigate whether an exception applies.
Remember: The MAO is a ceiling, not a target. If you offer exactly the MAO, your projected profit margin will be thin. Many investors aim to buy at 60% or 65% of ARV to build in a safety buffer.
Worked Example
Consider a property in a target market.
- After‑Repair Value (ARV): $250,000
This estimate is based on three recent comps in the same subdivision that sold between $240,000 and $260,000 after renovation.
- Repair Cost: $35,000
This includes a new roof ($8,000), HVAC replacement ($6,000), kitchen refresh ($12,000), bath updates ($5,000), flooring ($3,000), and permits/paint ($1,000). A 10% contingency ($3,500) is also included.
Applying the formula:
> MAO = $250,000 × 0.70 – $35,000
> MAO = $175,000 – $35,000
> MAO = $140,000
Interpretation: Based on these inputs, the most you should offer is $140,000. If the seller asks $155,000, the deal fails the 70% rule. If they accept $135,000, you have a $5,000 buffer before hitting the MAO.
Note: These numbers are hypothetical. Actual ARV and repair costs vary by location, market conditions, and property condition.
Common Mistakes
1. Overoptimistic ARV. Using a “best‑case” sale price or including future appreciation that has not occurred. Stick to actual closed comps.
2. Underestimating repairs. Basing repair costs on a quick walk‑through without contractor input. Always get written estimates for major items.
3. Forgetting holding and closing costs. The 70% rule does not include loan interest, insurance, property taxes during rehab, real‑agent commissions, or title fees. These costs come off the top of your profit. Subtract them from your projected gross profit to see the net.
4. Ignoring local market nuances. In some hot markets, investors use a 75% or 80% rule. In slower markets, 65% may be more realistic. The 70% rule is a general guideline; adjust based on your area.
5. Not running the numbers twice. Once with conservative estimates, once with optimistic ones. If the deal only works under optimistic conditions, treat it as risky.
When to Talk to a Lender
The 70% rule helps screen deals, but financing terms determine whether a deal is actually doable.
- Hard money lenders often lend based on the as‑is value or a percentage of the ARV. If your MAO is $140,000 and the lender will finance 70% of the ARV ($175,000), you have room to bring less cash to the table. Confirm the lender’s loan‑to‑value (LTV) or after‑repair‑value (ARV) ratios before committing.
- Private money or equity partners may have different criteria. Understand their expected return, fee structure, and exit timeline.
- Your own capital. Calculate how much of your own money will be required for the down payment (if any), repairs, and carrying costs. Ensure you have reserves for unexpected overruns.
If the numbers look tight after talking to a lender, revisit the repair estimate or look for another property. Never stretch your capital based on a calculator alone.
Frequently Asked Questions
Q: Is the 70% rule a law or a requirement?
A: No. It is a traditional guideline used by many flippers to quickly screen properties. Some markets and investors use 65%, others use 75%. Use it as a starting point, not a rule you must follow.
Q: Can I use the 70% rule for rental properties?
A: The rule is designed for fix‑and‑flip transactions. Rental analysis uses different metrics, such as the 1% rule, cap rate, or cash‑on‑cash return. Do not apply the 70% rule to buy‑and‑hold calculations.
Q: What if my repair estimate is too low and I go over budget?
A: This is the most common reason flippers lose money. Always include a 10–15% contingency in your repair budget. If you discover major issues during rehab (foundation, mold, outdated electrical), pause and get a revised contractor bid before proceeding.
Q: Do I need to pay cash to use the 70% rule?
A: No. The calculator shows the maximum price based on value and cost, not payment method. However, your financing type will affect how much of that MAO you can actually close. Talk to a lender early to confirm your borrowing capacity.
Q: How do I find accurate ARV comps?
A: Work with a local real‑estate agent who has access to the MLS, or use public property records. Look for sales of similar homes (same square footage, bedroom/bath count, neighborhood) that closed in the last six months. Adjust for differences like a renovated kitchen or extra garage.
Q: What closing costs should I expect?
A: Typical closing costs for a flip range from 2% to 5% of the purchase price, depending on the state and loan type. This includes title insurance, recording fees, transfer taxes, and lender fees. Factor this into your overall profit calculation.
This calculator is for educational and screening purposes only. It is not financial, legal, or tax advice. Results are hypothetical and based on the inputs you provide. Always conduct due diligence and consult qualified professionals before making any real‑estate investment.