The 70% Rule for House Flipping: Where It Breaks

The formula

The 70% rule says an investor should pay no more than 70 percent of a house's after-repair value (ARV), minus the cost of repairs:

Maximum offer = (ARV x 0.70) − estimated repairs

The remaining 30 percent is meant to cover everything else: purchase and sale closing costs, financing or holding costs, agent commissions, and the investor's profit.

A worked example

Suppose a house in a neighborhood should sell for $200,000 once it is renovated, and the rehab is estimated at $35,000.

ARV x 0.70 = $140,000
$140,000 − $35,000 = $105,000 maximum offer

The numbers here are for illustration only. They are not a statement about any Oklahoma market or any Rose Rock deal.

Why investors use it

It is fast. Before spending hours on a house, an investor can check in a minute whether a seller's asking price is even in range. It also builds in a cushion: if repairs run over or the sale price comes in low, the 30 percent absorbs some of the miss.

Where the rule breaks

Low-priced houses. Fixed costs like closing, insurance, and utilities do not shrink with the price. On a small house, 30 percent may not cover them, so the rule can overstate what you can safely pay.
High-priced houses. On an expensive property the same 30 percent can be far more than you need, and a rigid 70 percent may make you lose deals you could have done profitably.
Long timelines. A rehab that drags on for months costs more in interest, taxes, and insurance than the rule assumes.
Bad inputs. The rule is only as good as the ARV and the repair estimate. An optimistic ARV or an unscoped rehab makes the answer meaningless. See how to calculate ARV.
Hidden problems. Foundation, sewer, and electrical issues, common in older Oklahoma houses, can overwhelm a standard repair estimate. See hidden costs in older Oklahoma houses.

Use it as a filter, then do the real math

The better approach is to treat the 70% rule as a first screen. If a seller's price clears it with room to spare, spend the time on a proper budget: scope the repairs line by line, add realistic holding and selling costs, and decide how much margin the specific project needs. If the price fails the rule by a wide margin, move on.

General information only. Rules of thumb are not guarantees, and real estate investing involves risk of loss.

Frequently asked questions

What is the 70% rule in real estate?

It is a rule of thumb for flippers: pay no more than 70 percent of the after-repair value, minus the cost of repairs. The remaining 30 percent covers costs and profit.

Is the 70% rule always accurate?

No. It is a quick filter. It tends to be too generous on very low-priced houses and too strict on high-priced ones, and it depends entirely on accurate ARV and repair estimates.

Does Rose Rock Capital Partners use the 70% rule?

We use many inputs when we evaluate a property, and a rule of thumb is only a first screen. We describe the rule here for education, not as a statement of our pricing.

Published 2026-10-08 by Rose Rock Capital Partners.

The 70% Rule for House Flipping: How It Works and Where It Breaks