The 70% rule in house flipping, worked through
The 70% rule says the most you should pay for a flip is 70% of its after-repair value (ARV), minus the cost of the repairs. A house that will sell for $340,000 after $55,000 of work: 0.70 x $340,000 = $238,000, minus $55,000 = a maximum offer of $183,000.
It’s a rule of thumb investors use to screen deals fast. Anchor Loans, a hard-money lender, describes it on its education page as “a quick and easy way to determine a ballpark purchase amount.” No lender or regulator requires it.
What the 30% is supposed to pay for
The gap between your all-in cost and 70% of ARV is meant to cover everything that isn’t the house or the rehab: buying and selling costs, loan points and interest, holding costs, and your profit. On the $340,000 example, 30% is $102,000.
Here is where that money goes on the calculator’s example, which buys at $210,000 instead of the 70% maximum:
| Cost | Amount |
|---|---|
| Closing costs to buy | $4,000 |
| Points, interest and lender fees on a hard-money loan | $18,241 |
| Taxes, insurance and utilities for 6 months | $5,400 |
| Commissions and seller closing costs (6.5% of $340,000) | $22,100 |
| Costs before profit | $49,741 |
At the 70% price of $183,000, the same deal would leave about $102,000 minus those costs (a little less, since the loan and its interest shrink with the price), or roughly $54,000 of profit. At $210,000, it leaves about $25,000.
Where the rule breaks
The cushion scales with price, but many costs don’t. On a $700,000 house the 30% is $210,000, far more than the costs, so the rule turns down deals that would make good money. The opposite problem shows up at the cheap end: on a $120,000 house the 30% is $36,000, and commissions, two points and six months of interest can eat most of it. ATTOM’s report for the second quarter of 2026 found that homes bought for $50,000 or less produced a typical loss of $15,000.
The rule is also only as good as the repair estimate. A $55,000 budget that turns into $80,000 takes $25,000 straight off the profit, rule or no rule. And time costs money: every extra month adds interest and holding costs, and ATTOM’s typical flip took 161 days from purchase to resale in Q2 2026.
What to do instead
Use the 70% rule to decide which listings deserve an hour. Then run the real numbers: your rehab bid, your loan terms, your market’s commission and transfer tax, and a realistic timeline. The fix-and-flip calculator stamps every deal with the 70% check, but the profit line is the one that pays you.
Sources
- Anchor Loans, “The 70% Rule of House Flipping” (lender education page, read October 24, 2026).
- ATTOM, “Home Flipping Profits Continue Gradual Two-Year Decline,” Q2 2026 report, released October 1, 2026.
Questions people ask
What is the 70% rule in house flipping?
A rule of thumb that caps your purchase price at 70% of the after-repair value minus the repair cost. On a house worth $340,000 fixed up that needs $55,000 of work, the maximum is $238,000 minus $55,000, or $183,000.
Is the 70% rule required by lenders?
No. It's an investor convention, not a lending rule or a regulation. Lenders set their own limits, usually a maximum loan as a percent of cost and as a percent of after-repair value. Those caps run from about 60% to 80% of ARV among the lenders we compare.
Does the 70% rule still work in expensive markets?
It gets tight. On a $700,000 house, the 30% cushion is $210,000, far more than the selling and financing costs, so investors in high-price markets often accept a higher percentage. On a $150,000 house, the same cushion may barely cover costs. Run the actual numbers instead of relying on the percentage.