70% Rule Calculator: Find Your Max Allowable Offer
The 70% rule is one of the most trusted formulas in real estate investing. It helps house flippers and wholesalers determine the absolute maximum price they should pay for a distressed property to ensure a secure profit margin.
70% Rule MAO Calculator
How the 70% Rule Formula Works
To use the maximum allowable offer (MAO) formula manually, use the following calculation:
Max Offer = (ARV × 0.70) – Rehab Costs
This formula builds in a vital safety buffer to protect your investing business from hidden closing costs, holding fees, carrying costs, and unexpected structural repair surprises.
Step-by-Step Example Scenario
Let’s say you find a distressed property with the following baseline numbers:
- After Repair Value (ARV): $400,000
- Estimated Rehab Costs: $60,000
Using the MAO calculation sequence:
- $400,000 ARV × 0.70 = $280,000
- $280,000 – $60,000 Rehab Costs = $220,000 Max Offer
If the seller demands $250,000, you walk away. If they accept $220,000 or less, you have a viable investment deal.
When to Adjust the 70% Rule
- Hot Markets: Real estate investors may stretch their limits up to 75% or 80% if local property resale velocity is incredibly high.
- Heavy Structural Rehabs: Drop your threshold down to 60% or 65% to protect your cash margins against extensive foundation or roofing jobs.
- Wholesale Deals: Drop your entry down to 60% to leave enough spread for your end-buyer’s target profit.
Internal Investor Resources
- Explore our Fix & Flip Loans Program for funding details.
- Check out our comprehensive Loan Requirements Guide for approval criteria.
- All of your questions about fix and flips can be found on our fix and flip FAQ’s page.