Free 70 Percent Rule Calculator (2026)
House flipping purchase bid estimator. Calculate instantly — no signup required. Updated for 2026.
What Is a 70 Percent Rule Calculator?
A 70 Percent Rule calculator is a vital house-flipping and real estate investment tool designed to calculate the Maximum Allowable Offer (MAO) for a distressed property. The 70% rule is one of the most widely used screening guidelines in residential real estate. It states that an investor should pay no more than 70% of the property’s After Repair Value (ARV), minus the estimated cost of renovations and repairs.
Paying too much for a distressed house is the single most common mistake in house flipping. Because renovation projects frequently face unexpected repairs, material inflation, and holding costs, buying with a solid equity buffer is essential to protect your profit margin. Our 70% rule calculator automates this calculation, helping you set a highly disciplined bid price and negotiate from a position of numbers-based confidence.
How to Use This 70 Percent Rule Calculator
To calculate your Maximum Allowable Offer (MAO), enter these three variables:
- After Repair Value (ARV): The estimated market value of the home *after* all renovations are completed, based on comparable neighborhood home sales.
- Estimated Repair Costs: The total budget required to complete all cosmetic and structural renovations (materials, labor, permits).
The calculator instantly processes the variables, displaying your MAO bid price and calculating your projected gross profit margin.
The 70 Percent Rule Formula
The mathematical calculation of the Maximum Allowable Offer (MAO) is:
Maximum Allowable Offer (MAO) = (After Repair Value (ARV) × 0.70) − Estimated Repair Costs
The **Projected Gross Profit Margin** is calculated as:
Projected Profit = ARV − MAO − Repair Costs = ARV × 0.30 (which covers investor profit, transactional fees, and holding costs).
Step-by-Step Practical Example
Let’s analyze a distressed home purchase opportunity:
- Estimated After Repair Value (ARV): $300,000
- Estimated Renovation & Repair Costs: $45,000
Applying the 70% rule formula:
MAO = ($300,000 × 0.70) − $45,000
MAO = $210,000 − $45,000 = $165,000
Step 2: Analyze the deal margins
The calculator shows that your **Maximum Allowable Offer is $165,000**. If you purchase the home at this bid price, your projected gross margin is $300,000 (ARV) − $165,000 (Purchase) − $45,000 (Repairs) = $90,000. This $90,000 buffer is designed to cover your financing costs, agent commissions when selling, and your target investor profit, making this a highly secure flip opportunity.
Key Takeaways
- The 70% rule calculates the maximum bid price for a distressed property to protect your profit margin.
- After Repair Value (ARV) represents the home’s future value after complete renovation.
- The remaining 30% buffer covers holding costs, transactional fees, and investor profit.
Frequently Asked Questions
What is After Repair Value (ARV) in house flipping?
After Repair Value (ARV) is the estimated market value of a distressed property after all necessary renovations, repairs, and updates are completed. Investors estimate ARV by analyzing recent sale prices of comparable renovated homes ("comps") in the immediate neighborhood, which sets the baseline for the entire flip budget.
Why does the 70% rule allocate a 30% margin?
The remaining 30% margin is not pure profit. It is designed to cover: 1) Buying closing costs. 2) Monthly holding costs during the rehab (mortgage interest, taxes, insurance, utilities). 3) Selling transaction costs (realtor commissions, escrow fees). 4) A safety buffer for unexpected repair overruns. The remaining portion represents the investor’s actual profit.
Is the 70% rule applicable in highly expensive markets?
In highly expensive, high-demand metropolitan markets (like California or Seattle), the 70% rule is often too conservative, making it difficult to win bids. In these markets, flippers often adjust the rule to a 75% or 80% rule because higher absolute purchase prices allow for healthy dollar-amount profits even with tighter percentage margins.
How can I accurately estimate repair costs before buying?
To estimate repair costs: 1) Walk through the property with a trusted, licensed general contractor. 2) Create a detailed Scope of Work (SOW) breaking down materials and labor. 3) Use standard square-foot cost estimates (e.g., $15-$25/sqft for cosmetic updates, $50+/sqft for gut renovations) based on local market averages.
What happens if a property is purchased above the MAO?
Purchasing a property above the Maximum Allowable Offer (MAO) directly reduces your profit margin and eliminates your safety buffer. If you encounter unexpected renovation surprises (like structural foundation damage or bad plumbing) or if the housing market cools, you face a significant risk of losing money on the flip.