The 70% rule in real estate is a quick underwriting shortcut many fix-and-flip and wholesale investors use: take the after repair value (ARV), multiply by 70%, then subtract the estimated repair cost to get a ballpark maximum price envelope (often discussed as a max purchase or max offer) — not a law of nature. Thin markets, expensive carry, or heavy repairs often push serious buyers toward 65% or lower, not 70%.
Read the formula, then the section on when people use 65%, 70%, or 75%— that is the question new investors ask right after they learn the headline rule.
The formula, written clearly
70% rule (ballpark)
Max offer (ballpark) = (ARV × 0.70) − estimated repairs
Some teams build in a wholesale fee by using a lower percentage or a higher repair buffer instead of changing the headline 70 — the idea is the same: leave room for acquisition, rehab, soft costs, profit, and assignment if applicable.
When investors use 65%, 70%, or 75%
The “right” percentage is not universal — it is the one that matches your risk, financing, and exit. Think in bands:
- ~75% (looser). Sometimes used when your numbers are already conservative elsewhere: you have a very tight ARV range, cheap carry, or a clear buyer at a known price. Still not a license to ignore soft costs.
- ~70% (common default). A middle ground for back-of-napkin screening on ordinary SFR rehabs in liquid markets where the rule is well understood by other investors.
- ~65% (tighter). Common when rehab risk is high, timeline is uncertain, or you need more room for selling costs, margin, and mistakes. Many wholesalers effectively run a lower implied percentage when their end buyer needs real protection.
- Below 65%. Heavy structural risk, luxury or thin-liquidity exits, or long holds where interest eats the deal — the percentage is a mirror of stress, not a loyalty test.
If your only tool is “always 70%,” you will overpay in bad risk situations and over-reject in narrow but real wins. The rule is a screen, not a bid button.
When the rule of thumb is useful
- First-pass screening on the phone or on a list. Fast pass, fast “no” list.
- Conversations with a buyer. Shared vocabulary before you open a spreadsheet.
- Comparing one deal to another in the same comp band and strategy.
Where it breaks (read this before you wire money)
- Low ARV, high fix — percentage rules hide absolute dollar problems.
- Long rehabs where carry and interest dominate.
- Luxury and thin-liquidity pockets where a few comps set the world.
- Wholesale when the end buyer is razor-thin; read wholesaling for beginners for the middle-mile reality.
Worked example (one chain of round numbers)
ARV $300k, repairs $40k, rule at 70%: ($300k × 0.70) − $40k = $210k − $40k = $170k ballpark conversation ceiling. Change the same inputs to 65%: ($300k × 0.65) − $40k = $155k — a material shift that might match a riskier job or a market where your buyer needs more room. In both cases, you still add soft costs, selling, assignability, and what the buyer actually needs — the rule is not a wire instruction.
Where to practice this on real rows
Use fix & flip and wholesale on /deals, and ground-truth location with Florida, Texas, or Houston so you are not underwriting zip codes you cannot comp.
FAQ
Is 70% a rule or a goal?
A screening shortcut. The number that actually clears title and rehab is a full budget, not a tweet-length formula.
What about 75% or 65%?
Same framework — the right percentage matches your local costs and risk. See the section on 65%, 70%, and 75% above.