The 70% Rule in House Flipping: Screen First, Then Price

The 70% rule in house flipping can give you an offer number before you know what the roof needs. That's convenient when you're sorting leads. It's a problem when you start negotiating as if the number is settled.

I want a quick way to decide which properties deserve more work. But before an offer, I want to know what the shortcut left out. A calculator won't tap you on the shoulder when you forget six months of insurance.

What the 70% Rule in House Flipping Actually Tells You

The basic fix and flip formula is:

Screening price = after-repair value (ARV) × 70% - estimated repairs.

ARV is the estimated resale value after the planned work is complete. The remaining 30% is supposed to leave room for costs beyond repairs, profit, and uncertainty. It is not a promised profit margin.

That makes the rule a sorting tool. It helps you decide whether to investigate, ask better questions, or move on. It doesn't know your loan terms, permit requirements, buyer pool, or ability to finish the work.

My advice: keep the shortcut for screening. Build the actual offer from the actual project. My free FIRE AI Deal Analyzer kit helps with that first screen: sold comps, an ARV range, a repair ballpark, and a 70% screening price. It doesn't replace the cost-by-cost review below.

Start With an ARV You Can Defend

If you're learning how to calculate ARV for a flip, start with recent closed sales that resemble what you plan to sell. Not the highest asking price nearby. Not an automated estimate you happen to like.

Ask these questions about the comps:

• Are they in the same neighborhood, with similar location advantages and drawbacks?
• Are the size, bedroom count, bathroom count, and layout comparable?
• Does their finished condition match the work you're budgeting?
• Are the sales recent enough to reflect the market you're entering?

I use Property Radar for property records and comps. The data gives you something to investigate; it doesn't make every nearby sale a good comparison.

Check photos and sale details. Look at competing listings and how long comparable homes take to sell. If your resale estimate needs the nicest house on the nicest street to justify it, revisit the number.

Estimate Repairs Before You Trust the Fix and Flip Formula

A rough repair allowance can help screen a lead. A scoped budget answers a harder question: what will it take to deliver the condition behind your ARV?

Walk through the systems, roof, exterior, interior, and site. Identify permit needs, contractor availability, material choices, and the finish level buyers expect. Paint and flooring don't fix an electrical problem.

Get the important work priced, identify what's excluded, and make room for unknown conditions. My guide to estimating rehab costs before you buy goes deeper into building that scope.

Don't quietly use a basic rehab budget with a premium resale comp. Those two assumptions have to describe the same finished house.

Build a Maximum Allowable Offer From the Actual Deal

For a maximum allowable offer, real estate investors need more than ARV and a repair estimate. Here's the structure I'd use for a resale project:

Maximum allowable offer (MAO) = ARV - repairs - acquisition costs - selling costs - financing and holding costs - required profit - risk buffer.

Include title and escrow charges, applicable transfer costs, selling compensation, and expected concessions. For financing, include interest, points, fees, and any extension costs the plan could require. Holding costs include taxes, insurance, utilities, and property upkeep.

Separate these buckets so nothing disappears or gets counted twice. A repair contingency already in the rehab budget shouldn't reappear as the same expense under another label.

One hypothetical example, not one of my deals: Assume a $520,000 resale, $65,000 repair scope, and the following estimated costs. These are teaching assumptions, not local quotes, lender terms, or expected results.

• ARV: $520,000
• Repairs: $65,000
• Acquisition costs: $8,000
• Selling costs: $32,000
• Financing and holding costs: $47,000
• Required project profit before income taxes: $60,000
• Separate allowance for remaining project uncertainty: $18,000

The quick screen gives you $520,000 × 70% - $65,000 = $299,000.

The detailed calculation gives you $520,000 - $65,000 - $8,000 - $32,000 - $47,000 - $60,000 - $18,000 = $290,000.

Same house. Same ARV and repairs. But the shortcut puts the purchase ceiling $9,000 above what these assumptions support.

The $60,000 is a target deducted to set the ceiling, not money earned. Actual results depend on the purchase, execution, costs, and market. Losses are possible.

Also, some fees change with the purchase price or loan amount. Recalculate them at the proposed offer. A MAO is a decision based on assumptions, not a number you calculate once and defend forever.

When 70% Is Too High, Too Low, or Just a Starting Point

A complicated rehab with slow permits, expensive financing, and thin comps may need more room than the shortcut leaves. A simpler project with well-supported costs may support a different purchase ceiling.

That doesn't mean changing the percentage until the seller's price works.

It means testing what happens if the resale comes in lower, construction takes longer, or repairs grow. Change those inputs and see whether the deal still meets your requirements.

Experience matters, too. If you haven't managed that kind of project, don't borrow an experienced operator's best-case schedule. Price the help and time you'll need. A house flipping offer formula can't supply either one.

Use FIRE AI to Work Through the Numbers

I built FIRE AI to help you think a deal through, not hand you a number to follow blindly. This is where the Deal Analyzer fits: working through the property and your assumptions before you decide what to offer.

The free FIRE AI Deal Analyzer kit works with a free ChatGPT account; instructions for Gemini and Claude are included. For the membership option, see FIRE AI Deal Analyzer and what's included. Already a member? Sign in to the FIRE App for the Deal Analyzer and setup steps.

Bring the same questions you used above. What supports the ARV? What's missing from the repair scope? What happens if the project takes longer? AI can't see the house, and a rehab estimate is still a range until you provide property details or contractor pricing. Use the analysis to guide your homework. You still make the call.

Make the Offer Only After the Risk Is Visible

Before committing, I'd want a clear answer to each of these:

• Comps: What supports the resale price?
• Scope: What's included, excluded, and still unpriced?
• Timeline: Does it cover acquisition through resale closing?
• All-in cost: Are financing, holding, and selling expenses included?
• Exit and risk: What changes if the plan runs late or the market softens?
• Walk-away number: Where does the purchase stop making sense?

For the broader review, read How to Analyze a Real Estate Deal Before You Make an Offer. Then check the schedule against How Long Does It Take to Flip a House? Build the Timeline Before You Buy. Time belongs in the budget, not just on the calendar.

If you'd like to practice questioning those assumptions with other investors, bring your numbers and come check out the FIRE Center. I'd rather talk through the uncertain parts than admire a tidy spreadsheet. Your first visit is free.

Rich

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