How the ARV and 70% Rule Work
Every successful flip starts with two estimates: what the property will be worth fully renovated (the ARV) and what the renovation will cost. The 70% rule combines them into a single disciplined offer ceiling. You take 70% of the ARV, then subtract your rehab costs, and the result is your Maximum Allowable Offer, or MAO. That built-in 30% cushion is what pays for holding costs, selling costs, financing, and your profit.
This calculator also shows your purchase as a percentage of ARV, which is the all-in basis (offer plus rehab) divided by the ARV. Keeping that figure at or below your rule percentage is the quick visual confirmation that the deal protects your margin.
Worked Example
You find a tired property that will be worth $300,000 once renovated, and you estimate $40,000 in rehab. Applying the 70% rule: $300,000 times 0.70 is $210,000, your budget for purchase plus profit. Subtract the $40,000 rehab and your maximum allowable offer is $170,000.
If the seller is asking $180,000, the deal is $10,000 over your MAO, so the calculator flags it as too high. You would either negotiate the price down to $170,000 or below, trim the rehab scope, or walk away. If you could buy at $165,000, your spread would be a positive $5,000 under the ceiling, and the deal pencils out.
Practical Tips
Get the ARV right above all else. An inflated ARV makes every other number look good and is the fastest way to lose money on a flip. Anchor it to real, recent, renovated comps.
Pad your rehab estimate. First-time flippers almost always underestimate repairs. Add a contingency so a surprise behind the walls does not erase your margin.
Adjust the rule to the market. Tighten to 65% in soft markets to stay safe, and only stretch above 70% on low-risk cosmetic projects in strong markets.