Before you flip a property, know the most you should pay for it. The 70% rule turns after-repair value and rehab cost into a maximum offer.
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This answers a different question than a flip ROI calculator. Instead of telling you what you'll net on a deal you've already priced, it tells you the most you should offer going in, so the deal still has room for your profit margin and a cushion for cost overruns.
The target percentage defaults to 70%, the standard rule of thumb among flippers, though some investors adjust it up or down based on their market and risk tolerance.
| After-repair value (ARV) | $230,000 |
| Target percentage | 70% |
| Rehab cost | $30,000 |
| Maximum allowable offer | $131,000 |
Offering at or below $131,000 leaves room for profit and unexpected costs once the after-repair value and rehab budget are accounted for.
The maximum allowable offer (MAO) is the most you should pay for a flip and still hit your profit target. The common 70% rule says your offer should be no more than 70% of the after-repair value (ARV) minus the rehab cost, leaving room for holding costs, selling costs, and profit.
The 70% figure is a starting convention, not a rule of physics. In hot markets investors sometimes stretch to 75%, while thin-margin or high-risk projects call for a lower percentage. Adjust it to your real costs and required return before making an offer.