70% Rule Calculator United States

What the 70 percent rule calculator does

The calculator estimates the most you should offer for a distressed property you plan to renovate and resell. It uses a well-known real-estate shortcut: pay no more than 70% of the after-repair value, minus the cost of repairs. The result is your maximum allowable offer, often shortened to MAO.

Flippers and wholesalers look at many properties, and most are not worth pursuing. Running the after-repair value and a rough repair estimate through the rule shows quickly whether a deal is close enough to deserve a full analysis.

The formula

• Start with the after-repair value, the price the finished property should sell for.
• Multiply it by the rule percentage, classically 70%.
• Subtract your estimated repair costs.
• Subtract any wholesale assignment fee, if you are wholesaling the deal.

What remains is the maximum you should pay. The share the rule holds back, 30% in the classic version, is not all profit. It has to cover your target profit, holding costs while you own the property, financing costs, and closing costs on both the purchase and the sale.

After-repair value

If the after-repair value is wrong, every figure after it is wrong too. ARV is what the property will be worth once the renovation is finished, not its value today. Estimate it from recent sales of comparable, fully renovated homes in the same area, matched as closely as possible on size, layout, condition and location.

The rule multiplies ARV directly, so an optimistic value inflates your maximum offer and eats into the cushion meant to protect you. Experienced investors tend to be conservative with ARV for that reason.

Estimating repair costs

A walkthrough shows cosmetic work, but the expensive problems, such as a failing roof, outdated electrical, foundation movement or plumbing, are often hidden. Underestimating repairs pushes your maximum offer too high, just as an inflated ARV does.

A rough estimate is enough to decide whether to keep looking. Before making an offer, get contractor estimates or a detailed scope of work, because the gap between a guess and a real quote can turn a good deal into a loss.

Adjusting the percentage

The right percentage depends on the market and the deal, so you can change it. In a competitive market where finished homes sell quickly and prices are rising, some investors go to 75% or higher to win bids and accept a thinner cushion. In a slower, riskier or high-cost market, 65% or lower rebuilds the margin. Higher-priced properties sometimes justify a higher percentage because fixed costs are a smaller share of the total, while lower-priced properties often need a tighter one.

What the cushion has to cover

In a typical flip the cushion pays the buying closing costs, holding costs (taxes, insurance and utilities while you own the property), interest on a hard-money or private loan, selling costs including agent commissions, and only then your profit. On a fast, low-cost project 30% can be generous; on a long rehab in a high-tax area with expensive financing it can be used up before any profit appears. Estimate these items yourself and compare them with the cushion the calculator shows.

Wholesaling and the assignment fee

If you are wholesaling, enter the assignment fee you intend to earn for putting the deal under contract and assigning it to an end buyer. Subtracting it up front means the maximum offer leaves room for your fee and still gives the flipper enough margin. Set the fee too high and the offer becomes uncompetitive.

Reading your result

The output shows your maximum allowable offer, the rule value before repairs, the total deductions, the reserved investor cushion, and your offer as a percentage of the after-repair value. If the cushion looks thin once you account for your real holding and financing costs, the deal is tighter than the offer figure suggests. Compare different repair estimates and percentages to see how the maximum offer moves.

The rule is a first screen, not full underwriting. Check the deals that pass with accurate comparable sales, a real repair scope and a complete accounting of your costs.

This is general information only and not financial or investment advice.

About This 70 Percent Rule Calculator

Use this 70 percent rule calculator to get an instant estimate based on the figures you enter. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.