The industry standard formula that ensures profitable deals for everyone in the chain.
Never pay more than 70% of a property's After Repair Value (ARV) minus repair costs. This leaves a 30% margin for profit and expenses.
That 30% margin accounts for:
Flipper's expected margin
Interest, taxes, insurance
Agent fees, closing costs
When market is hot, buyers compete for deals. Use 65% to ensure your deals sell fast and you maintain buyer relationships. More conservative = more certainty.
The default. Works in most markets, most situations. Start here unless you have a reason to adjust.
Landlords don't need flip margins - they make money on monthly cash flow. Can pay more because they hold long-term. Good for rental-heavy ZIP codes.
Only for experienced investors buying rentals in high-cash-flow areas. They don't care about ARV - only about monthly income. Rare situation.
| ARV | 65% | 70% | 75% |
|---|---|---|---|
| $200,000 | $130,000 | $140,000 | $150,000 |
| $300,000 | $195,000 | $210,000 | $225,000 |
| $400,000 | $260,000 | $280,000 | $300,000 |
| $500,000 | $325,000 | $350,000 | $375,000 |
* These are BEFORE subtracting repairs and your fee
The 70% rule isn't arbitrary - it's based on real costs that flippers face. Respect the rule and your deals will close. Ignore it and you'll struggle to find buyers.