Maximum Allowable Offer = (ARV × 70%) − Rehab. The classic margin-of-safety rule for residential flips. Optionally project profit and ROI if you enter the offer you actually plan to make.
The 70% rule is a flipper's first-pass screen: MAO = (ARV × 70%) − Rehab. The 30% gap between ARV and (MAO + Rehab) is the margin that absorbs holding costs, financing carry, selling costs, and profit. It is not a substitute for a line-item budget — it's a guardrail that catches obvious losers.
Across the typical residential flip, total non-rehab costs run about 25–30% of ARV: 7–9% selling (agent + title + concessions), 6–10% holding + financing (hard-money carry, points, taxes, utilities, insurance during rehab), and 8–15% target profit. 70% lands in the middle of that band. Tighter rules (65%) suit soft markets and inexperienced flippers; looser rules (75%) suit strong markets with reliable comps and proven crews.
ARV miss — comps were too optimistic, the renovated property sells for 5–15% less than modeled, and the gap eats the profit. Mitigate with conservative comp selection: closed comps only (not pending or active), within 0.25 mi, last 90 days, matching beds/baths/sqft/finish level. If you have to reach for outliers to make ARV work, don't.
Rehab overrun — line-item budget said $40K, actual cost $55K, the extra $15K comes straight off profit. Mitigate with contingency reserves (10–15% first-timers, 7–10% experienced), and walk the property with the GC before locking the offer. The flips that lose money almost always do so on rehab overruns, not ARV miss.
The rule assumes a "typical" flip. It overstates margin (lets you offer too much) when the property has:
Conversely, the rule understates margin (lets you walk from deals you should take) when you have a cash buy with no carry cost, an LLM-tight ARV based on identical 3-month comp data, and a proven crew executing routine cosmetic work in a tight market.
The 70% rule answers "should I offer." A spreadsheet answers "what will I actually make." Use the projection fields above to model your actual offer against actual holding and selling costs — that's the projection we'll quote against when you send the scenario over.
Running a specific deal? Call (903) 402-5626 — we structure investor files weekly.
The 70% rule is a flipper's rule-of-thumb for Maximum Allowable Offer (MAO): MAO = (ARV × 70%) − Estimated Rehab. The 30% gap between ARV and (MAO + Rehab) is the margin that absorbs holding costs, financing carry, selling costs, and profit. It is a quick screen, not a substitute for a line-item budget, but flips that violate it consistently lose money.
Experienced flippers tighten the rule (65%) in soft markets, high-rehab projects, or first-time-flippers learning to scope rehab. They loosen it (75%) in strong markets with reliable ARV comps, light rehabs, and proven contractors. 70% is the median where total non-rehab cost (holding + financing + selling + profit) typically lands around 25–30% of ARV.
After-Repair Value — what the property will sell for fully renovated, based on closed comps within 0.25 miles and the last 90 days that match in beds, baths, square footage, and finish level. ARV miss is the #1 reason flips lose money. Pull at least 3 closed comps, ideally 5, and skew toward the conservative side. If your model only works at the optimistic ARV, the deal is too thin.
Add 10–15% contingency on top of your line-item rehab budget for first-time flippers, 7–10% once you have done 5+ flips with the same general contractor. The contingency line exists because something always comes up — a code-required electrical update, a soft subfloor under flooring, an HVAC that fails inspection. Flips that go negative usually do so on rehab overruns, not ARV miss.
Most flippers use a fix-and-flip bridge loan (also called hard money) — short-term financing typically 6–18 months, interest-only payments, secured by the property. Rates run 10–13% with 1–3 points up front. The advantage is speed (close in 7–14 days) and approval based on the deal, not personal income. The disadvantage is carry cost, which is why a clean 70% rule and a 6-month rehab schedule matter so much. See our /loans/fix-and-flip/ page for details.
One of our investor-loan specialists will reply within 1 business day with a pre-quote and a checklist.
Send the scenario over and we'll quote a Texas fix-and-flip bridge — rates, points, max LTC, max LTV after-repair, and timeline to close. 1 business day reply.