70 Percent Rule Formula
The 70 percent rule formula multiplies ARV by 70% and subtracts repair costs. It is a quick screening shortcut for flips, not a complete analysis or instruction to make an offer.
Estimates are based on your inputs and assumptions. DealSharp does not provide financial, investment, legal, tax, or lending advice.
Run the number, then pressure-test the assumptions.
The 70 percent rule formula multiplies ARV by 70% and subtracts repair costs. It is a quick screening shortcut for flips, not a complete analysis or instruction to make an offer.
Use this page to understand the metric directionally, then compare it against financing, reserves, repair risk, cash flow, and your own constraints.
Rule-based max purchase price = ARV x 70% - repair costs
If ARV is $300,000 and repairs are $45,000, the 70 percent rule estimate is $165,000.
Use the formula inside a full deal model
DealSharp helps compare assumptions, debt service, cash flow, and risk flags so this metric is not reviewed in isolation.
Open DealSharpHow to read this number
The useful move is not treating one number as a final answer. Use it to decide which assumptions deserve more review, then compare the result against cash flow, financing, reserves, repair risk, and your own constraints.
Inputs required
- After repair value.
- Repair cost estimate.
- Rule percentage used for the shortcut.
Outputs explained
- Rule-based purchase threshold.
- Screening context before full flip analysis.
- Reminder to add financing, holding, selling, and contingency review.
Assumptions to review
- ARV and repair costs are user estimates.
- The percentage is a shortcut and may not fit every market.
- The output is not an offer recommendation.
What this tells you
- The formula gives a quick threshold for deeper review.
- It can help avoid spending time on scenarios that need much tighter numbers.
- It should be checked against full flip ROI.
What this does not tell you
- The rule ignores many deal-specific costs.
- It can mislead when ARV, repairs, financing, or timeline assumptions are wrong.
Common mistakes
- Treating the rule as full underwriting.
- Using optimistic ARV.
- Forgetting selling costs, holding costs, and financing.
FAQ
Why 70 percent?
It is a common shortcut some investors use to leave room for repairs, costs, and margin, but it is not universal.
Should I rely only on the 70 percent rule?
No. Use it as a first screen, then run a full model with costs, timeline, financing, and comps.
Run the full deal before deciding
This page helps with one metric or workflow. DealSharp is built for full real estate deal analysis: assumptions, financing, cash flow, repair scenarios, DSCR, cap rate, and risk flags based on your inputs.
Open DealSharpDisclaimer
DealSharp provides calculation and scenario-modeling tools for informational purposes only. Outputs are estimates based on your inputs and assumptions. DealSharp does not provide financial, investment, legal, lending, tax, or accounting advice. Verify important decisions with qualified professionals.