70% Rule Calculator

The 30% buffer between purchase + rehab and ARV isn't pure profit. Roughly 6% goes to the selling agent's commission when you resell. Another 2–3% covers buyer-side closing costs you cover when you bought (title, recording, lender fees), plus a similar amount when you sell. Holding costs — property taxes, utilities, insurance, HOA, and loan interest during the 4–6 month rehab — typically eat 3–5% of ARV. That leaves roughly 12–18% as the actual gross margin you take home.

After income/self-employment tax on that profit, the net cash to your pocket on a $300K ARV flip with a $30K profit looks more like $20K. That's the realistic outcome — and exactly why overpaying by even 5% of ARV often turns a flip into a break-even project.

Use 65% (tighter) in cooling markets, on lower-priced houses where fixed costs eat margin, when you're newer and likely to underestimate repairs by 20–30%, or when comps are stale and ARV confidence is low. The lower percentage gives you a safety cushion for the things you can't see until demo day.

Use 75–80% (looser) only in hot, fast-moving markets on higher-ARV homes ($500K+) where the dollar profit still works even on a thinner percentage, when you're a seasoned operator with reliable contractors and known per-square-foot rehab costs, or when you have a verified end-buyer (wholesale assignment) lined up. Investors who routinely use 75% have systems and capital to absorb a bad month — beginners don't.

ARV should come from 3–5 sold comparables within the last 90 days, within 0.5 mile, similar in square footage (±20%), bed/bath count, and finish level. Don't use active listings — those are aspirational prices, not market reality. Pick the conservative middle of the comp range, never the highest comp. If your renovated comps show $280K–$320K, use $290K, not $320K.

Repair estimates are where most beginners blow up. Walk the property with a contractor before you offer, not after. Build the line items: roof, HVAC, plumbing, electrical, kitchen, baths, flooring, paint, exterior. Add 10–15% contingency for the surprises behind the walls. If you can't physically tour or get a contractor in before bidding (common at auctions), pad the repair number 25% higher than your eyeball estimate. The 70% rule only protects you if the inputs are honest.