The 70% Rule In House Flipping: The Ultimate Guide (2026)

You make your money when you buy, not when you sell.

This is the oldest adage in real estate investing, but it is also the most accurate. If you overpay for a property, no amount of renovation magic or market appreciation can save you. You need a margin of safety.

Enter the 70% rule. This simple formula has been the "North Star" for house flippers for decades because it forces discipline. It prevents you from making emotional decisions and ensures that even if things go wrong—and in construction, they always do—you still walk away with a profit.

However, the real estate market has shifted. In 2026, interest rates are high, labor is more expensive, and inventory is tighter. Does the 70% rule still work? Or is it an outdated relic?

This guide will break down exactly how the rule works, where the numbers come from, and how professional investors adjust it for today's market.

Here is what we will cover:

• What Is The 70% Rule? (The Formula)
• The "Missing 30%": Where Does It Go?
• How To Use The 70% Rule In 3 Steps
• The Fast Track: Finding Deals That Fit
• Is The 70% Rule Accurate In 2026?
• Using The 70% Rule With The BRRRR Method
• Frequently Asked Questions

What Is The 70% Rule? (The Formula)

The 70% Rule is a quick-analysis formula used to calculate the Maximum Allowable Offer (MAO) for a fix-and-flip investment.

It states that an investor should pay no more than 70% of the After Repair Value (ARV) of a property, minus the cost of necessary repairs.

The goal is to bake in a 30% margin right from the start. This margin isn't just profit; it has to cover all the "soft costs" that beginners often forget: closing costs, lender fees, holding costs (insurance, taxes, utilities), and selling commissions.

The "Missing 30%": Where Does It Go?

The biggest misconception beginners have is thinking, "Wow, if I buy at 70%, I make a 30% profit!"

This is false; the 70% rule does not promise a 30% net profit. That 30% "equity cushion" gets eaten up by the friction costs of buying, holding, and selling real estate. If you don't account for these, you will lose money.

Here is the breakdown of where that 30% actually goes in a typical flip:

How To Use The 70% Rule In 3 Steps

Using the rule is simple math, but getting the inputs right is where the skill lies. If your ARV is wrong, the rule is useless. If your repair estimate is low, the rule will fail you.

Step 1: Determine the After Repair Value (ARV)

The ARV is what the house will be worth after you have completely renovated it. Do not look at what the house is worth now.

Look for "comparables" (comps) in the immediate neighborhood—houses that have sold in the last 3-6 months that are fully renovated. If a 3-bedroom, 2-bath house down the street with a new kitchen and roof sold for $300,000, that is your baseline ARV.

Step 2: Estimate Repair Costs

This is where most new investors fail. You must be realistic. Walk the property with a contractor if you are unsure.

• Cosmetic Rehab: Paint, flooring, fixtures ($15 - $25 per sq ft).
• Medium Rehab: Kitchens, baths, some deferred maintenance ($30 - $50 per sq ft).
• Full Gut: New roof, HVAC, electrical, plumbing, walls moved ($60+ per sq ft).

Step 3: Run the Calculation

Let's assume the ARV is $300,000 and the repairs are estimated at $50,000.

• ARV: $300,000
• The 70% Multiplier: $300,000 x 0.70 = $210,000
• Minus Repairs: $210,000 - $50,000 = $160,000
• MAO: $160,000

This means your absolute maximum offer to the seller is $160,000. If they want $180,000, you walk away.

The Fast Track: Finding Deals That Fit

Is The 70% Rule Accurate In 2026?

The 70% rule is a rule of thumb, not a law of physics. In 2026, market conditions vary wildly by zip code. Sticking rigidly to 70% in a hyper-competitive market might mean you never buy a house.

Using The 70% Rule With The BRRRR Method

While often associated with flipping, the 70% rule in house flipping is actually the secret weapon for the BRRRR strategy (Buy, Rehab, Rent, Refinance, Repeat).

When you go to a bank to refinance your rental property, they will typically only lend you 70% to 75% of the appraised value (ARV). This is called the Loan-to-Value (LTV) ratio.

If you buy and renovate the property correctly using the 70% rule, your "all-in" costs will be exactly 70% of the value. When the bank gives you a loan for 70% of the value, you can pay off your original purchase and rehab costs entirely. This allows you to pull all your cash back out of the deal and own a cash-flowing rental property for $0 out of pocket.

*For in-depth training on real estate investing, Real Estate Skills offers extensive courses to get you ready to make your first investment! Attend our FREE Webinar Training and gain insider knowledge, expert strategies, and essential skills to make the most of every real estate opportunity that comes your way!

Frequently Asked Questions

Here are the answers to the most common questions investors ask about the 70% rule and calculating offers.

Final Thoughts: Discipline Over Emotion

The 70% Rule in house flipping is more than just math; it is a discipline. It prevents you from falling in love with a property and overpaying. In real estate, you make your money when you buy.

If you stick to this rule, you build a moat around your capital. If the market dips, you have a cushion. If repairs go over budget, you have a buffer.

However, the hardest part isn't the math—it's finding the deals that fit the math. You won't find these on the MLS. You need a system to generate off-market leads.

*Disclosure: Real Estate Skills is not a law firm, and the information contained here does not constitute legal advice. You should consult with an attorney before making any legal conclusions. The information presented here is educational in nature. All investments involve risks, and the past performance of an investment, industry, sector, and/or market does not guarantee future returns or results. Investors are responsible for any investment decision they make. Such decisions should be based on an evaluation of their financial situation, investment objectives, risk tolerance, and liquidity needs.