70% Rule Calculator (Maximum Allowable Offer)
Flipper / wholesaler quick filter. MAO = ARV × 70% − rehab.
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Sam's Take
The 70% rule is a fast filter, not a deal analyzer. If a property doesn't pass the 70% rule, walk — don't try to make it work. If it does pass, run the full deal: hard money rates in 2026 are 10-12% with 2-4 points; financing alone can eat 5-8% of ARV in holding costs. The rule was calibrated for 4% mortgage rates and 0% holding cost. In 2026 conditions, 65% of ARV is a safer threshold.
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What the 70% rule is, in one sentence
The 70% rule is a quick rule of thumb used by house flippers and wholesalers to figure out the maximum they should pay for a distressed property: take the after-repair value (ARV — what the property will be worth once it's fixed up), multiply by 70%, then subtract the rehab cost. What's left is your maximum allowable offer (MAO).
That 30% spread between ARV and your offer (after rehab) is what's supposed to cover everything else in the deal: hard money interest while you hold, closing costs going in and going out, agent commissions when you sell, holding costs (taxes, insurance, utilities) — and a profit margin big enough to be worth doing the deal at all.
When the 70% rule breaks down
The 70% rule was made famous in a different rate environment than the one we're in. It was designed around 4-6% mortgage rates and 8-10% hard money. It still holds as a starting point, but in a few specific situations it doesn't work:
- Hot markets. When 5 wholesalers are bidding on every distressed property, the 70% rule doesn't win deals. Operators in competitive markets often run at 75-80% just to get under contract — and accept thinner margins as the price of doing volume.
- High interest rates. At 10%+ hard money rates (which is where we are in 2026), 70% leaves too thin a margin. The interest cost during the rehab and hold period eats more of the spread than the rule was originally designed to cover. Most experienced operators drop to 65% in this environment.
- Heavy rehabs. When the rehab is gut-renovation level (full mechanicals, structural, kitchen and baths), surprise costs are bigger. The rule of thumb pads down further — 65% or even 60% on heavy projects, because what you don't see when you're walking through is what gets you in year 2 of the rehab.
- Slow markets. If properties are sitting on market 90-120 days instead of selling in 30, your holding costs are 3x what the rule assumed. The longer the hold, the more the margin gets eaten by money-of-time costs.
Bottom line for 2026: with 7%+ mortgage rates and 10%+ hard money, most experienced flippers I know are running at 65% as a working threshold, not 70%. The textbook number is a starting point, not a fixed rule. Adjust for the actual conditions you're operating in.