House flippers cap their offer at 70% of the after-repair value minus repair costs — the margin that leaves room for holding costs, selling costs, and profit. One subtraction gives the maximum allowable offer.
The example
$300k ARV, $40k repairs.
| A | B | |
|---|---|---|
| 1 | Item | Value |
| 2 | ARV | 300000 |
| 3 | Repairs | 40000 → $170,000 |
The formula
The formula:
How it works
How it works:
- ARV (after-repair value) is the expected resale price once the work is done.
- Take 70% of ARV — the 30% haircut covers holding costs, selling costs, and profit.
- Subtract the repair budget to get the maximum allowable offer (MAO).
- Adjust the percentage by market — competitive areas use 75–80%, riskier ones 65%.
The 30% is not all profit. It absorbs financing/holding costs, agent commissions and closing on the sale, and the investor’s margin — typically a few percent each. In thin markets, tightening to 65% builds a bigger cushion; in hot ones, 75% keeps offers competitive.
Try it: interactive demo
ARV, repairs, and rule percentage.
Variations
Custom percentage
Tune the rule:
Projected profit
If bought at MAO:
Offer as % of ARV
Sanity check:
Pitfalls & errors
ARV is an estimate. Base it on solid comps — an inflated ARV ruins the whole calculation.
Budget repairs honestly. Underestimating the rehab eats the margin fast.
Adjust the percent. 70% is a default, not a law — tighten or loosen by market and risk.
Practice workbook
Frequently asked questions
How do I calculate a max offer with the 70% rule in Excel?
What does the 30% in the 70% rule cover?
Can I change the 70%?
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