70 30 Rule House Flipping: Formula, Examples & Limits
The 70 30 rule house flipping investors use is a quick way to find the most you can pay for a property and still make money. In one sentence: pay no more than 70% of what the house will be worth after repairs, minus the cost of those repairs. The other 30% pays for buying, holding and selling costs, and for your profit.
This guide works through the formula on a real deal and shows how changing the percentage changes your profit. It also covers when the rule misleads you and what “70/30” means when people use it for partnership splits.
Quick answer: The 70 30 rule in house flipping says your maximum offer = (After Repair Value × 70%) − repair costs. The remaining 30% of ARV covers closing, holding, financing and selling costs plus your profit. It’s a fast screening tool. Before you make an offer, check it against a full line-by-line deal analysis.
What is the 70 30 rule in house flipping?
It’s a rule of thumb for the highest price a flipper should pay. You take 70% of the After Repair Value (ARV), then subtract the estimated repair budget. The result is your Maximum Allowable Offer (MAO).
Most people call it the “70% rule.” The “70/30” name points to the part beginners forget: the 30% isn’t profit. That 30% of the finished value has to cover every cost apart from the purchase price and the rehab, and whatever is left over is your profit.
The formula
- MAO = (ARV × 0.70) − Repair costs
- ARV = the realistic sale price once the renovation is done, based on recent sold comps (not list prices)
- Repair costs = your full rehab budget, including a contingency
How to apply the 70 30 rule house flipping formula to a real deal
Here’s a complete example from start to finish. A three-bed house needs a new kitchen, flooring, paint and a roof patch.
- Set the ARV from comps. Three renovated homes within half a mile sold for $295k, $302k and $305k in the last 90 days. Use $300,000.
- Build the repair budget. Kitchen $18k, flooring $9k, paint $6k, roof $5k, permits and misc $3k, plus about 10% contingency. Total: $45,000.
- Apply 70%. $300,000 × 0.70 = $210,000.
- Subtract repairs. $210,000 − $45,000 = $165,000 maximum offer.
Where the 30% actually goes
Next, check that the 30% ($90,000 here) really covers everything. These are typical figures for a six-month flip with hard-money financing:
- Buying costs (title, escrow, lender points): about 2% of the price, so $3,300
- Holding costs (loan interest, taxes, insurance, utilities for 6 months): about $12,000
- Selling costs (agent commission plus seller closing costs): about 8% of ARV, so $24,000
Total project cost: $165,000 + $45,000 + $3,300 + $12,000 + $24,000 = $249,300. Selling at $300,000 leaves about $50,700 profit before tax, around 17% of ARV.
That margin is healthy. Notice, though, that only about half of the “30%” was profit. If the rehab runs two months long or the house sells 5% under ARV, that profit shrinks fast.
To avoid doing this by hand on every lead, the Fix and Flip Calculator spreadsheet lays out all of these lines for you. Enter the ARV, the rehab budget and your loan terms, and it shows the maximum offer, total costs, profit and ROI side by side in Google Sheets or Excel.
Should you use 65%, 70%, 75% or 80%?
Seventy percent is a starting point, not a rule of law. Experienced flippers adjust the percentage to fit the price point and how competitive the market is. The table uses the same deal as above, with $45,000 in repairs and about $39,300 in buying, holding and selling costs.
| Rule used | Typical situation | Max offer (ARV $300k) | Est. profit before tax | Profit as % of ARV |
|---|---|---|---|---|
| 65% | Low-priced homes, heavy rehabs, first flip | $150,000 | $65,700 | 21.9% |
| 70% | Standard mid-priced flip, cosmetic to medium rehab | $165,000 | $50,700 | 16.9% |
| 75% | Competitive metros, light cosmetic work, cheap money | $180,000 | $35,700 | 11.9% |
| 80% | High-ARV markets, very fast turnarounds | $195,000 | $20,700 | 6.9% |
The takeaway: moving from 70% to 80% looks small, but on this deal it cuts your profit by 59%. Only go higher when your costs are truly lower, not because you’re losing bids.
When the 70 30 rule house flipping shortcut fails
The rule assumes costs scale with the home’s value. In practice many of them don’t, and that’s where flippers get burned.
1. Cheap houses
Take a house with a $100,000 ARV. Its 30% is only $30,000. Fixed costs like title fees, insurance, utilities and minimum lender fees hardly shrink, so the rule can leave you with almost no profit. Many investors use 60–65% below about $150k ARV.
2. Expensive houses
On a $900,000 ARV, 30% is $270,000, which is far more cushion than most flips need. Sticking to 70% there means you’ll rarely win a deal. That’s why 75–80% is common in high-priced metros.
3. Expensive financing or a long timeline
Hard money at 12% plus 2–3 points over nine months can eat $25k–$40k by itself. The rule doesn’t know your loan terms or schedule, so the spreadsheet has to account for them.
4. An optimistic ARV
Every number downstream depends on the ARV. If you use list prices, or comps from a better street, you’ve inflated the 70% before you even begin. Use sold comps only, keep them as close and recent as you can, and match square footage within about 15%.
What does 70/30 mean in a flipping partnership?
Sometimes “70/30” has nothing to do with the offer price. It describes how two partners split the profit, usually between the person putting up the money and the person running the project.
No split is standard. In practice:
- 50/50 is the most common starting point when one partner brings the money and the other brings the deal and does the work.
- 70/30 in favour of the operator shows up when the operator finds the deal, manages the rehab and carries the risk, and the money partner wants a passive return.
- 70/30 in favour of the money partner is typical when the operator is new and has no track record.
On the $50,700 example, a 70/30 split is $35,490 and $15,210. Run that against the cash the money partner put in. If they funded $210,000 for six months, $15,210 is about a 7.2% return over half a year (roughly 14.5% annualised). That’s easy to defend. Put every split in a written agreement, and spell out what happens if the project loses money.
A 10-minute workflow for screening flips
Here’s how to use the rule so it saves time without leading you into bad deals:
- Screen fast: run the 70% formula on every lead. If the asking price is more than 15% above your MAO, move on.
- Walk the property: turn your rehab guess into a line-item budget. A renovation budget calculator helps you avoid forgetting permits, dumpsters and contingency.
- Run the full numbers: enter actual loan terms, holding months and selling costs. Your profit should clear your floor, which for most flippers is at least $25k or 10% of ARV.
- Stress test: drop ARV by 5% and add two months of holding. If the deal still makes money, make the offer.
- Offer below MAO: MAO is your ceiling, not where you open. Start lower so you have room to negotiate.
If the house could become a rental instead, look at both exits. Our guide on how to analyze a rental property shows the hold side, and the free rental property calculator gives you a cash-flow figure in a minute. To compare returns between deals, the free ROI calculator keeps it simple.
Don’t forget taxes on flip profits
The 70 30 rule house flipping math above stops at pre-tax profit, and that’s where many first-time flippers come up short. Houses you hold for less than a year are taxed at short-term rates. The IRS explains the difference in Topic 409, Capital Gains and Losses.
If you flip often, the IRS may treat you as a dealer. In that case your profit can count as ordinary business income and be subject to self-employment tax on top of income tax. Set aside 25–35% of each profit until a CPA confirms your actual rate.
The done-for-you shortcut
The rule takes ten seconds. The full analysis is what protects your money. Growtoria has two tools built for that second step:
- Fix and Flip Calculator: a deal analyzer with built-in formulas. It calculates MAO, financing, holding and selling costs, profit and ROI. Change one number and everything else updates.
- Real Estate Investor Toolkit: flip, BRRRR/rental and short-term rental calculators bundled together, so you can compare every exit on the same house.
Both work in Google Sheets and Excel. If you’d rather shop on a marketplace, you can also grab them on our Etsy shop.
Frequently asked questions
Is the 70% rule the same as the 70 30 rule in house flipping?
Yes, when people are talking about offer price. Both mean paying no more than 70% of ARV minus repairs. The “30” refers to the share of ARV left for costs and profit. The only exception is partnership talk, where 70/30 describes a profit split.
Does the 70% rule include closing costs?
No, not directly. Buying, holding, financing and selling costs all have to come out of the remaining 30% of ARV. That’s why a 70% offer often turns into a profit of only 12–18% of ARV once every cost is counted.
Is the 70% rule still realistic in 2026?
In many competitive markets, deals at 70% are hard to find, so investors go up to 75% on light cosmetic flips. Paying more is fine if your actual costs are lower. Run the full numbers instead of just raising the percentage.
What is a good profit on a house flip?
Many flippers aim for at least 10–20% of ARV, or a fixed minimum of $25,000–$30,000 per deal, whichever is higher. Below that, a single surprise like a foundation crack or a slow sale can wipe out the profit.
How do I calculate ARV accurately?
Use 3–5 renovated homes that actually sold within about half a mile in the last 3–6 months, with similar beds, baths and square footage. Adjust for differences, and lean toward the lower comps. Don’t base ARV on list prices or Zestimates.
