Maximum Offer = (ARV × 0.70) − Estimated Rehab Costs. Example: $300k ARV, $40k rehab → ($300k × 0.70) − $40k = $170k max offer. Everything above $170k eats into your profit margin.
The 30% buffer accounts for: closing costs on purchase and sale (6–8%), holding costs during rehab and listing (4–6%), realtor commissions (5–6%), and profit margin (10–15%). Miss any of these and the deal stops working.
In high-cost markets with very high ARVs, experienced investors sometimes use 65% to add more buffer. In strong seller's markets with fast turnover and low carrying costs, 72–75% can work. Beginners should stay at 70% or lower until they have 5+ completed flips.
The formula is only as good as your ARV estimate. Pull comps within 0.5 miles, same property type, sold within 90 days, similar condition after renovation. One bad ARV estimate blows up the entire calculation.
The MAO (Maximum Allowable Offer) calculator adds more line items — financing costs, specific closing costs, desired profit. It's more precise than the quick 70% rule. Use the 70% rule to quickly screen deals, then run a full MAO calculation on anything that passes.
Dan White is a licensed Virginia real estate agent at Pearson Smith Realty and founder of FreeDealCalc.com. Dan White is a fix-and-flip investor with 20+ years of experience and founder of FreeDealCalc.com.