The 70% rule is a guideline house flippers use to cap their offer. It says to pay no more than 70% of the after-repair value (ARV), minus the cost of repairs. The result is often called the maximum allowable offer (MAO). The 30% held back is meant to cover closing, financing, holding and selling costs, plus your profit.
Maximum offer = (ARV × 70%) minus repair costs
Suppose a house will be worth $300,000 once it is fixed up, and it needs $40,000 of work. 70% of $300,000 is $210,000. Subtract the $40,000 of repairs and the rule caps your offer at $170,000. The $90,000 held back must cover every other cost of the flip before any of it is profit.
The answer is only as good as the two numbers you feed it. If your ARV is $20,000 too high, the rule tells you to pay $14,000 too much, and every dollar of repairs over budget comes out of your profit. Be conservative on both.
The 70% figure is not fixed. In competitive or higher-priced markets, some investors work at 75% or more. On lower-priced houses, costs that do not shrink with the price take a bigger share, so some use 65%. Treat the result as a first filter, then itemize every cost in a full flip analysis before you offer. All figures are pre-tax.