The 70% rule says the most you should pay for a house you plan to flip is 70% of its after-repair value, minus the repairs: ARV × 0.70 − repair costs. On a house that will be worth $400,000 after $80,000 of work, that's $200,000.
It's a screen, not underwriting. It tells you in a minute whether a deal is worth a closer look. The other 30% of the ARV has to pay for buying, financing, holding and selling the house before any of it is profit, and the rule has no idea how long you'll own it.
The formula, worked
Two numbers go in. The after-repair value is what the house should be worth once the work is done. NerdWallet describes it as an appraiser's estimate of the value after the renovation is finished. It isn't what the house is worth today, and it isn't what you paid plus what you'll spend. The repair costs are the whole rehab: every trade's labor and materials, plus permits, haul-off and whatever else it takes to finish the house. The rule doesn't say whether your contingency goes in. Decide, and count it once.
Multiply first, then subtract:
| After-repair value | $400,000 |
| × 0.70 | $280,000 |
| − repairs | −$80,000 |
| The most you should pay | $200,000 |
Don't subtract first: ($400,000 − $80,000) × 0.70 = $224,000. That's $24,000 too high. Done that way, only 70% of the repairs come off the price; the other 30% of the repair bill, $24,000, comes out of the cushion the rule was meant to leave you. The rule takes the whole repair bill off, after the 70%.
What the other 30% has to pay for
On the $400,000 house, the 30% is $120,000. It's tempting to read that as profit. Anchor Loans, a flip lender, warns that new investors often make exactly that mistake. The 30% has to cover everything that isn't the purchase or the repairs: closing on the way in, the loan's points and fees, every day you own the house, and selling it. Profit is whatever is left, before income tax.
Say you borrow $250,000 toward the $280,000 of purchase and repairs, at 11%, interest only and all of it out from day one, with two points. You pay $5,000 to close besides the points, and pay 8% of the price to sell, commission and closing together. The house holds at $100 a day with the interest in it; that rate is worked out line by line in what holding costs are. Hold it 161 days, which is how long ATTOM found the typical flip took in the second quarter of 2026, and the $120,000 goes like this:
| Line | Amount |
|---|---|
| Buying: closing costs besides the points | $5,000 |
| Financing: two points on $250,000 | $5,000 |
| Holding: 161 days × $100 | $16,100 |
| Selling: 8% of $400,000 | $32,000 |
| Left: profit before tax, if the ARV, the repairs and the 161 days hold | $61,900 |
| The 30% | $120,000 |
$61,900 is a good flip. But one of those lines grows with time, and the rule doesn't have a line for time at all.
The rule has no clock
Keep the same house, the same $200,000 offer and the same costs, and change only how long you own it:
| Days you own it | Holding at $100 a day | Left of the $120,000 |
|---|---|---|
| 161 | $16,100 | $61,900 |
| 240 | $24,000 | $54,000 |
| 365 | $36,500 | $41,500 |
Every row passes the 70% rule. The offer is identical. But owning it a year leaves you $20,400 less than selling at 161 days, and more if it outruns the loan's term: an extension, if the lender will give you one, costs extra. The rule never hears about it.
That's its real blind spot. The 30% is a fixed share of the ARV. Holding costs are what you pay to own the house — interest, taxes, insurance, utilities, upkeep — and they run by the day, so the total is your daily rate times the days you own it. Those days run from the day you buy to the day your buyer closes: the wait for the permit, the crew, the inspections, then the listing and the buyer's closing. ATTOM's 161 days only counts houses resold within a year. Yours is the wait before work starts, plus whatever your schedule says, plus the time it takes to sell.
So when a deal passes the rule, price the hold on its own: your daily rate × the days you'll own the house. How to calculate holding costs on a flip walks through it, and how to cut holding costs covers buying days back.
Cheap houses, expensive houses and hot markets
A flat 30% treats every house the same, and the costs don't behave that way. The commission grows with the price. Some costs barely track it: a summer of mowing or the county's recording fee usually doesn't cost four times as much on a $600,000 house as on a $150,000 one.
Say two houses each need repairs worth 20% of their ARV. On both, everything that grows with the price comes to 15% of ARV, and each carries $6,000 of costs that don't:
| Cheaper house | Pricier house | |
|---|---|---|
| After-repair value | $150,000 | $600,000 |
| Repairs (20% of ARV) | $30,000 | $120,000 |
| The most you should pay | $75,000 | $300,000 |
| The other 30% | $45,000 | $180,000 |
| Costs that grow with the price (15%) | $22,500 | $90,000 |
| Costs that don't | $6,000 | $6,000 |
| Left | $16,500 | $84,000 |
| Left, as a share of ARV | 11% | 14% |
Same rule, same assumptions, and the cheaper house keeps three percentage points less of its value: the same $6,000 is 4% of one ARV and 1% of the other. It's one reason not to treat 70% as fixed, and some guides do move it. Anchor Loans suggests dropping it to 65% in a lower-end market, and raising it to 80% or even 85% in a higher-end one.
Where houses get bid up, an offer that keeps to the rule may not win the house. Bob Vila's guide warns that sticking to it may be impossible in some hot markets, where flippers may be pushed as high as 85%. Read that as 85% in the formula, still less the repairs: on this house, 85% of the ARV itself plus the $80,000 of work would cost more than the house sells for. Changing the percentage doesn't change the arithmetic; it changes how much you leave yourself. Whatever share you use, run the costs underneath it.
It isn't a lender's rule
Some fix-and-flip lenders cap the loan at a share of ARV, and NerdWallet's example uses 70%, which makes the two easy to mix up: a lender at 70% of ARV lends at most $140,000 on a house that will be worth $200,000 after repairs. Others cap it against the property's value, which NerdWallet says usually tops out at 90%, or against the project's whole cost, purchase plus rehab, where some go to 90% or higher. Which caps apply is up to the lender. The example's $250,000 is 62.5% of the ARV and 89% of the $280,000 cost.
Those caps decide what the lender will lend. The 70% rule is your ceiling on price. A lender saying yes doesn't mean the deal passes the rule, and a deal that passes the rule still has to fit the lender's caps, with your cash covering the gap.
Only as good as its two guesses
The rule takes two estimates and hands back a number that looks exact. Miss either one and what's left pays for it. On the $400,000 house, held 161 days:
- Sell for 5% less, $380,000, and what's left drops from $61,900 to $43,500. You lose $20,000 of price and save only $1,600 of selling costs.
- Run the repairs 25% over, $100,000 instead of $80,000, and it drops to $41,900.
Either miss takes close to a third of the profit. So build the ARV the way an appraiser does, from recent closed sales of similar finished houses nearby, not from the price you're hoping for. And give the repair number real work: how to estimate rehab costs walks the house room by room.
Run the rule beside the clock
Firmabuilt's deal page has a card for the rule. It reads Pay at most and a dollar figure, with how far your price is under or over it. It takes off the rehab with its contingency, 10% unless you change it, so it's stricter than the plain rule. On the $400,000 house that's $280,000 − $88,000 = $192,000, and the $200,000 that passes the plain rule shows $8,000 over. If your repair number already carries a cushion, set the contingency to zero or you'll count it twice.
Once the work is described, the months held come from the job's schedule, from your start date to its last task, and the page prices them at your monthly holding cost: change a task's days and both follow. Those are the build's months. Allow for the sale on top, unless the listing is on the schedule too.
Questions
Does the 70% rule include closing costs?
No. The formula only takes off the repairs. Closing on the purchase, the loan's points and the cost of selling all come out of the other 30%. On a $400,000 ARV, that 30% is $120,000; with $5,000 to buy, $5,000 in points and 8% to sell, $42,000 of it goes to buying, financing and selling, before a day of holding or a dollar of profit.
Does the 70% rule include holding costs?
Not as a line. They come out of the same 30% as everything else, and they grow with every day you own the house. On a flip bought at $200,000 with a $400,000 ARV, $80,000 of repairs and $42,000 to buy, finance and sell, holding at $100 a day leaves $61,900 after 161 days and $41,500 after a year. Work out your own daily rate and the days your schedule needs: how to calculate holding costs on a flip shows how.
Does the 70% rule work in a hot market?
Sometimes not at all. Bob Vila's guide warns that sticking to it may be impossible in some hot markets, where flippers may be pushed as high as 85%. Use that as 85% in the formula, in place of 70%, still less the repairs. On a $400,000 ARV with $80,000 of repairs, that's $340,000 − $80,000 = $260,000, and the rest is $60,000. Take out $5,000 to close, $5,000 in points, 161 days at $100 and 8% to sell, and $1,900 is left, less in practice, since a pricier purchase costs more to close. Run every cost before you raise the percentage.