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Calculate your Maximum Allowable Offer using the 70% rule. Input the ARV and repair costs to instantly see the most you should pay for any deal.

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Understanding the 70% Rule

The 70% rule is the most widely used quick-screening formula in fix-and-flip investing. It provides a ceiling purchase price that, in theory, leaves enough margin to cover all costs and deliver a reasonable profit. The formula is straightforward: MAO = ARV × 70% − Repair Costs.

The "70%" represents the maximum percentage of the ARV you should have invested in the deal (purchase price plus repairs). The remaining 30% is your buffer for closing costs, holding costs, financing expenses, and profit. In practice, those costs typically consume 15-20% of ARV, leaving 10-15% as actual profit.

The MAO Formula

MAO = ARV × Rule % − Repair Costs

For example, if a property has an ARV of $300,000 and needs $50,000 in repairs: MAO = $300,000 × 0.70 − $50,000 = $160,000. This means you should offer no more than $160,000 for the property.

When to Adjust the Percentage

The 70% rule isn't a law — it's a guideline. Smart investors adjust the percentage based on several factors:

  • Use 65% (conservative)— If you're a newer investor, the market is uncertain, the property has unknown issues, or you want a larger safety margin.
  • Use 70% (standard) — The default for most deals in most markets. Provides a reasonable balance of competitiveness and profitability.
  • Use 75%+ (aggressive) — In hot, competitive markets where properties sell fast and holding costs are low. Only recommended for experienced investors with reliable contractor relationships and accurate cost estimates.

Limitations of the 70% Rule

While the 70% rule is an excellent screening tool, it has limitations. It doesn't account for your specific financing terms, actual closing costs in your market, or how long the project will take. A property that passes the 70% rule might still lose money if holding costs are high or the renovation takes longer than expected.

That's why smart investors use the 70% rule as a first pass, then run a detailed profit analysis. Use our Flip Profit Calculator for a complete deal analysis, or explore Vortonic's platform for automated deal screening that goes far beyond the 70% rule.

Frequently Asked Questions

What is a Maximum Allowable Offer (MAO)?

A Maximum Allowable Offer (MAO) is the highest price a real estate investor should pay for a property to maintain a target profit margin. It accounts for the After Repair Value, repair costs, and the investor's desired return percentage.

What is the 70% rule in house flipping?

The 70% rule states that an investor should pay no more than 70% of a property's After Repair Value (ARV) minus the estimated repair costs. The formula is: MAO = ARV × 0.70 − Repair Costs. The remaining 30% covers closing costs, holding costs, and profit.

When should I use a different percentage than 70%?

The percentage depends on your market, experience, and risk tolerance. In competitive markets, experienced investors sometimes go up to 75-80%. In slower markets or for beginners, 65% is more conservative and safer. The 70% rule is a starting point — always run full deal analysis before making an offer.

What costs does the 70% rule cover?

The 30% margin in the 70% rule is meant to cover closing costs (buying and selling), holding costs (mortgage, taxes, insurance, utilities during renovation), financing costs (hard money or private loan interest and points), and your profit margin.

How accurate is the 70% rule?

The 70% rule is a quick screening tool, not a precise analysis. It works well for average deals but may be too conservative for low-rehab deals or too aggressive for high-cost markets. Always follow up with a detailed profit analysis that includes actual holding costs, closing costs, and financing terms.

Automate deal screening at scale.

Vortonic automatically screens every deal against your criteria — including MAO thresholds, market conditions, and comp quality — so you only spend time on properties that pencil.

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