What is the 70% rule in real estate?
The 70% rule says an investor should pay no more than 70% of a property’s after-repair value minus the cost of repairs. Wholesalers also subtract their own fee to find the most they can offer the seller.
The remaining 30% of ARV covers the buyer’s profit, closing and holding costs. Some markets use a higher or lower percentage depending on how competitive they are and what investors need to make a deal worthwhile.
Common mistakes
- Applying 70% in every market. Expensive or fast-moving markets often support a higher percentage, slow ones a lower one.
- Forgetting to subtract repairs after taking 70% of ARV.
- Using the rule for rentals, where buyers price on rent and cash flow, not resale.
- Stopping at the rule instead of checking real comps and a real repair estimate.
More questions
Where does the 30% go?
It covers the investor’s profit plus buying, holding, financing and selling costs. Expensive renovations or long holds eat into it quickly.
Do wholesalers use the 70% rule?
Yes, as a starting point: the investor’s maximum price comes from it, and the wholesaler subtracts their fee to find their offer. Confirm the percentage with real buyers.
Is the 70% rule the same as MAO?
The 70% rule gives the investor’s maximum price. A wholesaler’s maximum allowable offer goes one step further and also subtracts the wholesale fee.