The 70% Rule: How to Calculate Your Maximum Allowable Offer
The 70% rule is the quickest way to know what you can pay for a flip:
Maximum allowable offer (MAO) = ARV × 70% − repair costs
An example
A house will be worth $300,000 after repairs and needs $45,000 of work. $300,000 × 70% = $210,000. Subtract $45,000 and your maximum offer is $165,000.
What the other 30% pays for
- Buying costs: title, closing and lender fees (2–3%).
- Holding costs: taxes, insurance, utilities and loan interest for 4–6 months.
- Selling costs: commissions and closing costs (6–9%).
- Your profit, usually 10–15% of the ARV.
When to change the percentage
- 65% or lower: cheaper houses, where fixed costs eat more of the price, or a slowing market.
- 75–80%: higher-priced homes, where costs are a smaller share of the price and profit in dollars is still strong.
Why it's only a first filter
The rule doesn't know your loan terms, your hold time, or Texas property taxes. Use it to decide quickly which deals deserve a closer look, then run a full fix and flip analysis.