The 70 percent rule is the single most important formula in house flipping. It's also the most misunderstood. Here's exactly what it means, how to apply it in South Florida, and when experienced flippers bend it.
The 70 percent rule is the foundation every house flipper builds on. It's a simple formula that tells you the maximum price to pay for a property — and it's designed to ensure you make money even when things go sideways. If you're flipping in Palm Beach, Broward, or Miami-Dade, you need to understand this rule before you make your first offer.
What is the 70 percent rule in real estate?
The 70 percent rule states that you should pay no more than 70% of a property's After Repair Value (ARV), minus your estimated repair costs. The formula:
- Maximum Purchase Price = (ARV × 0.70) − Repair Costs
The 30% margin isn't profit — it covers your profit target, selling costs (typically 6–8%), holding costs (financing, taxes, insurance, utilities), and unexpected overruns. Think of it as your safety buffer baked into every deal.
70 percent rule example in South Florida
Here's a real-world scenario in Fort Lauderdale. You find a 3/2 that needs a full kitchen and bath update. Renovated comps in the same neighborhood are selling at $480,000 — that's your ARV. Your contractor estimates $75,000 in repairs.
- ARV: $480,000
- 70% of ARV: $336,000
- Minus repairs: − $75,000
- Maximum offer: $261,000
If the seller wants $295,000, the deal doesn't pencil out. You either negotiate down, tighten your rehab scope, or walk away. The 70 percent rule made that decision in 30 seconds — before you invested a day in due diligence.
Why the 70 percent rule exists
The rule accounts for the real costs of flipping that beginners consistently underestimate:
- Selling costs: Agent commissions, closing costs, staging — typically 8–10% of ARV
- Holding costs: Hard money interest, property taxes, insurance, utilities — $3,000–$6,000/month in South Florida
- Rehab overruns: Almost every project runs over budget. The 70% rule absorbs this
- Your profit: After all the above, you should net 10–15% of ARV on a well-executed flip
When experienced flippers adjust the rule
The 70 percent rule is a starting point, not a law. Experienced South Florida flippers sometimes use an 80% rule when:
- The rehab scope is purely cosmetic (paint, flooring, fixtures) with minimal unknowns
- The market is rising fast and the ARV will be higher at resale than today's comps suggest
- They're buying cash with no financing costs, eliminating 3–5% of typical holding costs
- The property is in a high-velocity submarket (Coconut Grove, Coral Gables) where days-on-market are extremely short
But here's the honest truth: most flippers who stretch past 70% on their early deals regret it. Surprises happen. Stick to the rule until you have 10+ flips of experience in your specific market.
70 percent rule vs. 70 rule calculator — what's the difference?
They're the same concept — "70 percent rule" and "70 rule" both refer to the ARV × 0.70 − repairs formula. A 70 rule calculator is simply a digital tool that runs the math for you instantly across different ARV and repair scenarios. Use our Fix & Flip / BRRRR Calculator to model full deal returns beyond just the acquisition price.
Ready to find South Florida flips that actually pass the 70 percent rule? Tell us your buy box and we'll source off-market deals that work. For market data to help you nail your ARV, see Florida Realtors market statistics.
