Maximum Allowable Offer Calculator
The 70% rule and the offer your own costs actually support, side by side — and the gap between them.
The deal
What the rule hides
The 70% rule folds these four into one percentage. Enter them and the tool computes the offer your own numbers actually support.
Financing cost is entered rather than derived, because it depends on the loan, which depends on the price this tool is solving for. Compute it precisely with the fix & flip cost of capital calculator.
Assumptions
The 70% rule says
$215,000
ARV × rule − repairs
Your numbers say
$209,900
ARV less every cost and your profit
The rule lets you overpay by $5,100. On these costs the rule that actually protects your margin is 68.72%, not 70.00%.
| After repair value | $400,000 |
|---|---|
| Repairs | − $65,000 |
| Selling costs | − $32,000 |
| Holding costs | − $5,100 |
| Financing | − $28,000 |
| Break-even purchase price | $269,900 |
| Your profit target | − $60,000 |
| Maximum allowable offer | $209,900 |
| Profit if you pay the 70% price | $54,90013.72% of ARV |
| Rule your costs actually imply | 68.72% |
Estimates only, based on the figures you entered. A maximum offer is only as good as the ARV and repair estimate behind it, and both are usually wrong early on. Not an appraisal, a loan commitment, or investment advice.
The 70% rule is one number doing four jobs
Pay 70 percent of after-repair value, minus repairs. It is the most repeated piece of advice in house flipping, it fits in a sentence, and you can run it in your head standing in a driveway. Those are real virtues and they are why it survives.
The problem is what the other 30 percent is quietly covering. It is not profit. It is selling costs — agent commission and seller-side closing, commonly 7 to 9 percent of ARV. Holding costs — taxes, insurance, utilities, lawn, security, every month you own it. Financing — points and interest on short-term money. And then, whatever is left over, your profit.
Four independent variables compressed into one constant. That works only while all four stay near the values the constant was calibrated against — and one of them did not. Short-term money that cost 8 or 9 percent now routinely costs 11 or 12 with points on top. The rule returns the exact same $215,000 whether your financing costs $12,000 or $40,000, whether you sell in three months or twelve.
Run the default scenario above and the two numbers land close: the rule says $215,000, the itemized calculation says $209,900. The rule lets you pay about $5,100 more than your own costs support — a gap that looks small until you notice it is roughly 8 percent of the profit you were expecting to make.
Then drag the financing cost from $28,000 to $40,000. The rule does not move. Your number drops by the full $12,000. That is the failure mode in one gesture: the rule cannot respond to the thing that actually changed, so the error lands entirely in your margin without ever appearing in the calculation.
The tool also reports the percentage your costs actually imply. On the default inputs it is about 68.7 percent rather than 70. That number is worth more than the offer itself, because it is portable — it is the rule you should be screening with in your market, at your rates, with your hold period, instead of one inherited from a different decade.
None of which rescues you from the real risk. A maximum offer is only as good as the two estimates feeding it, and both are usually wrong early on. Repair budgets overrun. ARV is a guess about a future sale — build it properly with the ARV calculator, and get your financing cost right with the fix & flip cost of capital calculator. Precision in the offer formula cannot compensate for error in the inputs.
Methodology
- The rule:
ARV × rule% − repairs − assignment fee. - Itemized:
ARV − repairs − selling − holding − financing − assignment fee − profit target. - Selling costs = ARV × selling percentage. Holding costs = monthly cost × months. Profit target = ARV × profit percentage.
- Break-even purchase price = ARV less every cost, with no profit. The price at which you work for free.
- Profit at the rule’s price = ARV − the rule’s offer − every cost. What the heuristic actually leaves you.
- Implied rule = (itemized offer + repairs + fee) ÷ ARV. The percentage your own costs support.
Financing cost is entered rather than derived, because deriving it is circular — it depends on the loan, which depends on the price being solved for. Both offers are floored at zero, and the tool flags when costs exceed ARV so completely that no purchase price works.
Not modelled: income tax, entity costs, insurance deductibles, permit delays, the cost of a rehab overrun, or the possibility that the property does not sell at ARV. Currency is computed in exact integer cents.
Frequently asked questions
- What is the 70% rule in house flipping?
- Pay no more than 70 percent of after-repair value, minus repair costs. On a $400,000 ARV with $65,000 of repairs that is $215,000. The remaining 30 percent is meant to absorb selling costs, holding costs, financing, and your profit, all at once. It is a screening heuristic — quick enough to run in your head on a listing — and it was never intended as underwriting.
- Is the 70% rule still accurate?
- It depends entirely on the four costs it bundles, and one of them moved a great deal. The rule was calibrated when short-term money was cheap; hard money at 11 or 12 percent with points costs several times what it did, and the rule returns the identical number either way. It cannot know your rate, your hold period, or your market's commission structure. Use it to decide which listings to look at, then itemize before you make an offer.
- What should my profit target be on a flip?
- There is no correct answer, but the useful way to frame it is as payment for risk and work rather than as a percentage convention. A 15 percent margin on ARV disappears entirely if the rehab runs 20 percent over and the hold runs three months long, both of which are ordinary. The thinner the margin, the more precisely everything else has to go right — and the estimate that most often goes wrong is repairs.
- Why do I have to enter financing cost instead of it being calculated?
- Because it is circular. Financing cost depends on the loan amount, the loan amount depends on the purchase price, and the purchase price is exactly what this tool is solving for. Rather than fake a resolution, the cost is an input — and the fix and flip cost of capital calculator will give you the real figure, including whether your quote is Dutch or non-Dutch, which alone can move it by thousands.
- Does the 70% rule work for a BRRRR or a rental?
- No. It is built for a resale exit, so it prices in agent commissions and seller closing costs that a refinance-and-hold strategy never pays. On a BRRRR the constraint is the appraised value and the lender's loan-to-value, not what a buyer will pay net of commission. Different exit, different arithmetic.
- What if the rule and my own numbers disagree?
- Trust your numbers, assuming they are honest. That is the entire reason to itemize. If your costs support paying more than the rule allows, the rule is costing you deals you could profitably win. If they support less, the rule is walking you into thin margins. This tool shows you both numbers and tells you what percentage your actual costs imply.
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