The 70% rule formula
Maximum offer = (after-repair value × 70%) − repair costs
A worked example
A house will be worth $289,000 once renovated and needs $42,000 of work. Seventy percent of $289,000 is $202,300. Subtract the repairs and the most you should offer is $160,300.
Where the other 30% goes
The rule sets aside 30% of the finished value for everything that is not the purchase or the rehab: closing costs on both ends, loan points and interest, taxes, insurance and utilities while you hold, agent commissions, and your profit. On a typical flip the costs take roughly half of that, leaving the rest as profit.
When to bend the rule
The 70% rule is a screen, not an appraisal. In expensive or competitive markets, investors often work at 75% or even 80%, because fixed costs are a smaller share of a higher price. On cheap houses, 70% can be too generous, because commissions and holding costs do not shrink with the price. Adjust the percentage above, or run the full numbers in a flip analysis.