Maximum Offer = (ARV × 0.70) − Rehab Costs. ARV is the after-repair value — what the property will sell for fully renovated. Rehab is your estimated renovation cost. The formula tells you the ceiling on your offer price.
The 30% buffer covers: closing costs on purchase (1–2%), closing costs and commissions on sale (7–9%), holding costs during rehab and listing (4–6%), and your profit margin (10–15%). These costs are real and unavoidable.
ARV $350k, estimated rehab $55k. Max offer = ($350k × 0.70) − $55k = $245k − $55k = $190k. If the seller wants $210k, either negotiate down or walk. Never rationalize paying above your MAO.
In slower markets, higher-risk rehabs, or when you're less experienced, use 65% to build a larger buffer. The rule is a guide, not a mandate — adjust based on deal-specific risk.
The 70% rule is a screening tool, not a full deal analysis. Once a deal passes the 70% screen, run a complete profit model: full acquisition costs, itemized rehab, carrying costs by month, financing costs, and realistic sale price. The 70% rule gets you to the conversation; full analysis confirms it.
Dan White is a licensed Virginia real estate agent at Pearson Smith Realty and founder of FreeDealCalc.com. He has applied the 70% rule to hundreds of deals across Northern Virginia.