The 70% rule for fix and flip deals
Maximum offer = after-repair value × 70% − repair costs
The 70% rule is a quick filter house flippers use to decide what to pay. If a home should sell for $320,000 once renovated and needs $45,000 of work, the rule gives a maximum offer of $179,000. The remaining 30% is meant to cover holding costs, selling costs, financing and your profit.
Why 70% and not more
Selling a house typically costs 6% to 8% of the price, and holding it for several months adds loan interest, taxes, insurance and utilities. Repairs also tend to run over budget. The margin in the rule absorbs those costs and still leaves a profit if the resale value holds. In expensive or fast-moving markets some investors accept 75%; on risky or slow projects they use 65%.
The number that matters most
The rule is only as good as the after-repair value. Base it on recent sales of renovated homes of similar size on nearby streets, not on list prices or online estimates. Get contractor bids for the repair budget before you commit.
Flip or keep?
If the numbers are close, compare the profit from selling with the cash flow from keeping the home as a rental. The BRRRR calculator models the buy, renovate, rent and refinance route, and the capital gains calculator shows the tax on a later sale. Profits on a home held under a year are generally taxed as ordinary income.