70 Percent Rule
The 70 percent rule is an investor heuristic that caps the price of a fix-and-flip or BRRRR deal at 70 percent of after-repair value minus rehab costs. The margin left covers holding costs, selling costs, surprises, and profit.
The formula is maximum offer = (ARV x 0.70) minus estimated rehab costs. On a 250,000 dollar ARV with 40,000 dollars of rehab, the rule caps the offer at 135,000 dollars. The 30 percent haircut is not profit; it has to absorb financing costs, holding costs, transaction costs, and every estimate that comes in worse than planned, and profit is what survives.
It is a screening heuristic, not a law. Experienced investors flex the percentage by market, price band, and exit (a BRRRR refinance exit can tolerate different math than a flip sale), and a deal that passes the rule can still fail on a bad ARV estimate, since the whole formula leans on that one projected number.
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Related terms: After Repair Value (ARV) , The 1% Rule
Last updated . Part of the FinExplained finance glossary .