Does the 70% rule work for rental properties?

Not really — it prices a resale exit. Landlords buying to hold care about rent, cash flow, and current-condition value, so they'll often pay more than the 70% number for a stabilized-area rental. Use flip math for flippers and cash-flow math for landlords.

Does the MAO include my assignment fee?

The MAO is what your END buyer can pay. Your contract price with the seller must sit below it by at least your fee: if MAO is $110,000 and you want $10,000, you need the contract at $100,000 or less.

Is the 70% rule outdated in competitive markets?

The number flexes; the structure doesn't. In hot markets with light rehabs, experienced buyers stretch to 75–80%. What's outdated is applying any fixed percentage without checking what the deals actually clearing in your market are paying.

Why 70% and not some other number?

Because the typical flip's non-purchase costs — agent commissions and closing costs around 8–10% of ARV, holding and financing costs, plus a profit worth the risk — historically add up to roughly 30% of ARV. The rule is just that cost stack rounded into one usable number.

The 70% Rule Explained: The Math Behind Your Maximum Offer

The 70% rule is the most-quoted formula in real estate investing, and the most misapplied. Used right, it’s a ten-second filter that keeps you from overpaying. Used blindly, it prices you out of good deals in hot markets and into bad ones in rough neighborhoods. Here’s the whole picture.

The formula

Maximum Allowable Offer (MAO) = (ARV × 70%) − repair costs

Worked example:

ARV (after-repair value): $200,000
Repairs: $30,000
MAO: $200,000 × 0.70 = $140,000, minus $30,000 = $110,000

That $110,000 is the most a typical flipper can pay and still make the deal worth doing. Try your own numbers in the free MAO calculator.

What the 30% actually pays for

The margin looks fat until you itemize it. On that $200,000 exit, the missing 30% ($60,000) typically covers:

Selling costs: $16,000–$20,000. Agent commissions plus seller-side closing costs commonly run 8–10% of the sale price.
Holding costs: $4,000–$8,000. Taxes, insurance, utilities, and lawn care over a 4–6 month project.
Financing: $6,000–$12,000. Hard money points and monthly interest, which most flippers are paying.
Buyer’s closing costs on the purchase: $2,000–$4,000.
Profit: what’s left — roughly $20,000–$30,000. The payment for months of work and the risk of everything above going sideways.

Seen this way, the rule stops looking conservative. A flipper paying 80% of ARV on a full-rehab project is often working for free — they just don’t know it yet.

When to flex the number

The 70% is a dial, not a commandment:

65% or lower: rough neighborhoods, slow markets, heavy rehabs, cheap houses. On low-priced properties the percentage breaks down entirely — 30% of a $70,000 ARV is $21,000, which fixed costs and profit eat whole. Low-end deals need dollar-margin math, not percentage math.
70%: the standard for typical mid-priced flips with meaningful rehab.
75–80%: hot markets, light cosmetic projects, fast resale cycles — where holding and rehab risk are genuinely lower and buyers accept thinner margins to win volume.

The honest calibration source is your own buyers list: what percentage of ARV did the last three deals that actually closed in your market represent? That number outranks any rule of thumb.

The wholesaler’s version

The MAO is your end buyer’s ceiling, not your contract price. Your fee has to fit inside it:

Your contract price = MAO − your assignment fee

Using the example: MAO $110,000, target fee $10,000 → you need the seller at $100,000. Contract at $108,000 and you’re marketing a $2,000-margin deal that every buyer’s own math will reject. When a deal won’t spread, the answer is a lower contract price or a pass — never a “creative” ARV.

Work the formula backwards during negotiation, too. If a seller is firm at $118,000, you don’t have to guess whether that works — you can solve for what would have to be true: at 70% and $30,000 of repairs, the ARV would need to be about $211,000. If the comps won’t support that, the seller’s price and the market’s price are two different numbers, and no amount of hustle bridges them. Walking away from that gap quickly is the rule doing its job.

Garbage in, garbage out

The rule is only as good as its two inputs:

The ARV must come from renovated comps, not hopes. A 10% ARV miss on our example moves the MAO by $14,000 — greater than the entire assignment fee. Learn the method in ARV explained.
The repair number must be a real scope, not a guess to make the offer work. See how to estimate rehab costs.

This input-quality problem is exactly why we built deal analysis the way we did: PropTitan pulls the comps, produces the valuation, applies a structured repair estimate, and computes the offer range — with a conservative floor, the textbook 70% number, and a walk-away ceiling — on any address in about a minute. See the deal analysis feature for how the full calculation fits together.

Use it as a filter, not a bible

The 70% rule’s real job is triage. It answers “is this lead worth another hour?” in ten seconds, keeps your first offer anchored to math instead of emotion, and gives you a number to defend in negotiation (“here’s how every cash buyer in town will price this”). It doesn’t replace real comps, a real scope, or knowledge of what your buyers actually pay. Run the filter fast, then do the work on the deals that pass.