70% Rule (Max Purchase Price)
It is a back-of-napkin check: if you pay more than this number, you probably will not have enough spread after rehab and holding costs.
Formal definition
The 70% rule sets maximum purchase price at 70% of after-repair value minus estimated rehab costs — a quick filter for flip deals.
Why it matters
Investors use it to avoid overpaying before running a full profit-and-loss — hard-money lenders also think in terms of total project cost, not just ARV.
Where you see it
- Fix-and-flip investor education
- BiggerPockets and real estate podcasts
- Wholesale deal analysis spreadsheets
- Hard-money lender conversations
- Real estate investing bootcamps
Worked example
- After-repair value (ARV): $300,000.
- Rehab budget: $50,000.
- 70% rule max price = ($300,000 × 0.70) − $50,000 =
- Interpretation: Paying above
How Business metrics calculates it
70% of ARV − Rehab budget. A screen, not a law.
Where people fool themselves
The 70% rule assumes a market that still has spread. In a hot ZIP code the rule says “do not buy” more often than it says “bid this.” That can be the correct answer.
Run it on your own numbers: the Fix & Flip calculator.