The 70% rule
The 70% rule is a quick screen for flips:
Max offer = (After-repair value × 70%) − Repair costs
On a house worth $300,000 after repairs that needs $60,000 of work, that's $300,000 × 0.70 − $60,000 = $150,000. The 30% gap is meant to cover your costs and leave a profit.
It's a screen, not an answer. Whether 30% is enough depends on your financing, how long you hold the house and what it costs to sell in your market.
The costs the rule hides
- Financing: hard-money interest, points, draw fees and inspection fees.
- Holding: taxes, insurance, utilities and lawn care for every month you own it.
- Buying: closing costs on the purchase.
- Selling: agent commissions, seller closing costs and concessions.
- Contingency: the part of the rehab you haven't found yet.
Add those up and compare them to the gap. That's your real profit.
Max offer, real profit after financing, and a what-if grid. Excel and Google Sheets. No cost.
Set your own target
Instead of a fixed 70%, work backward from the profit you need. Decide on a minimum profit in dollars or as a share of the sale price, add your expected costs, and see what purchase price gets you there. Then bid the lower of that number and the 70% number.
Run the what-ifs before you bid
Two things go wrong on most flips: the house appraises or sells for less than you thought, and the rehab runs over. Before you make an offer, check what happens if:
- The after-repair value comes in 5% to 15% low
- The rehab runs 10% to 20% over
- Both happen
If the deal only works when everything goes right, it isn't a deal. Lower the offer or walk.
After you buy it
Once you close, the job shifts to the rehab budget, the lender's draws and, if you hold it, the rent roll. Each needs its own tracker.
Deal analyzer, rehab budget, lender draw tracker and rental portfolio tracker, plus a monthly lender update. $97, instant download.
This is general information, not financial or lending advice. Check your numbers with your lender and CPA.