What exactly does the 30% discount in the 70% Rule cover?

A common misconception is that the 30% discount represents pure profit. In reality, it acts as a comprehensive buffer. Generally, 10-15% goes toward fixed costs such as closing costs (both buying and selling), holding costs (property taxes, utilities, insurance), and financing costs (hard money loan interest and origination points). The remaining 15-20% represents your actual pre-tax net profit for undertaking the risk and effort of the flip.

Is the 70% Rule a hard and fast law for every real estate market?

No. While the 70% Rule is an excellent baseline, it must be adjusted based on the specific market and price point. In highly competitive, expensive coastal markets (where home values exceed $800,000), investors often use an 80% or 85% rule because the absolute dollar amount of a 15% profit is still massive. Conversely, in very low-income or rural areas with homes under $100,000, investors might use a 60% rule to ensure the dollar amount of profit is worth the time investment.

How do I determine an accurate ARV before I buy the property?

Determining an accurate ARV requires conducting a rigorous Comparative Market Analysis (CMA). You must find 3 to 5 'comps' (comparable properties) that have sold within the last 90 to 180 days, located within a half-mile radius of your subject property. These comps must have similar square footage, bed/bath counts, and be fully renovated to the exact standard you plan to achieve. Never use active listings or 'Zestimates' for your ARV.

What happens if I underestimate my repair costs?

Underestimating repair costs is the leading cause of failed house flips. If your repairs exceed your budget, every extra dollar spent eats directly into your net profit margin. If the overrun is severe enough, you may end up losing money or bringing cash to the closing table when you sell. This is why investors always add a 10% to 20% contingency fund to their initial contractor estimates before running their ARV calculation.

Can wholesalers use this calculator?

Absolutely. Wholesalers must use this exact calculator to determine their offer price. A wholesaler's job is to put a property under contract at a deep discount and assign it to a flipper. Therefore, a wholesaler must calculate the flipper's MAO and then subtract their desired wholesale assignment fee to determine their own Maximum Allowable Offer to the original seller.

After Repair Value (ARV) Calculator - Flip & Rehab Pro

Calculate the After Repair Value (ARV) and 70% rule Maximum Allowable Offer (MAO). Essential tool for real estate investors and house flippers.

Complete User Guide

Using the After Repair Value (ARV) Calculator is an essential first step for real estate investors, flippers, and wholesalers aiming to analyze the potential profitability of a distressed property. Follow these detailed steps to generate an accurate forecast:

Step 1: Determine the estimated ARV of the property. The ARV is what the property will be worth after all renovations are perfectly completed. You must derive this number by running a Comparative Market Analysis (CMA) — looking at recently sold, fully renovated homes in the exact same neighborhood with similar square footage, bed/bath counts, and lot sizes. Enter this estimated ARV into the calculator.

Step 2: Calculate the Total Repair Costs. Do not guess this number. Get itemized bids from licensed contractors covering all necessary renovations, including roofing, plumbing, cosmetic updates, and a 10-20% contingency buffer for unforeseen issues. Enter the total cost into the 'Estimated Repair Costs' field.

Step 3: Establish your desired Profit Margin or the Maximum Allowable Offer (MAO) rule. The industry standard rule of thumb for house flipping is the 70% Rule, meaning an investor should pay no more than 70% of the ARV minus the repair costs. This 30% buffer accounts for holding costs, closing costs, realtor commissions, and your net profit. Enter your percentage (e.g., 70%).

Step 4: Click the "Calculate" button.

Step 5: The calculator will output your Maximum Allowable Offer (MAO). This is the absolute highest price you should pay for the distressed property to ensure the project remains profitable based on your specific risk profile.

The Mathematical Formula

ARV = Current Value + Added Value. Max Offer = ARV × 70% − Repair Costs

The After Repair Value (ARV) and Maximum Allowable Offer (MAO) calculations rely on the foundational "70% Rule" heavily utilized in the real estate investing and house-flipping industries.

The standard equation is: Maximum Allowable Offer (MAO) = (ARV × Rule Percentage) - Estimated Repair Costs.

For example, imagine a distressed property in a neighborhood where fully renovated homes are selling for $300,000. This $300,000 is your ARV. After consulting contractors, you estimate it will take $40,000 in repairs to bring the property up to that top-tier standard. Using the standard 70% rule: MAO = ($300,000 × 0.70) - $40,000 MAO = $210,000 - $40,000 = $170,000.

In this scenario, $170,000 is the absolute maximum you should offer the seller. The 30% discount ($90,000) is not pure profit; it must cover your hard money loan interest, holding costs (taxes, insurance), selling costs (6% realtor commissions), and finally, your actual net profit.

About After Repair Value (ARV) Calculator - Flip & Rehab Pro

The After Repair Value (ARV) Calculator is a critical financial analysis tool for real estate investors, rehabbers, and wholesalers. When evaluating distressed real estate, the most catastrophic mistake an investor can make is overpaying for the initial acquisition. This calculator utilizes the industry-standard Maximum Allowable Offer (MAO) formula to establish a strict, emotionally detached purchase price ceiling. By factoring in the projected post-renovation market value and the estimated capital expenditures (CapEx) required to get it there, the calculator mathematically enforces a profit margin and risk buffer. It protects investors from margin compression caused by unforeseen holding costs, market fluctuations, and expensive contractor overruns.

This calculator is for informational purposes only and does not constitute financial advice. Always consult a qualified financial advisor or real estate professional before making capital investments based on these results.

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