The 70% Rule in House Flipping, Explained

Fix and Flip

The short version, then the substance.

The formula. Pay no more than 70% of the ARV minus repair costs. On a $300,000 ARV with $50,000 of rehab, the rule says a maximum purchase of $160,000. It exists to force in profit and cushion at the buy.

Why it works and when it bends. The 30% gap covers holding costs, selling costs, financing, and your profit. In hot submarkets experienced flippers shade to 75% and survive on volume and speed. New flippers should not. The rule is training wheels that happen to also be good math.

How lenders see it. A deal that respects the 70% rule almost always fits inside our loan-to-value guidelines naturally. When a borrower has to argue with the rule to make the numbers work, that is usually the deal telling both of us something.

The South Texas angle. Averlend underwrites this every week in San Antonio and across Bexar County. If you are working a deal in Alamo Heights or anywhere else in the metro, the theory above comes with a local desk attached: see our San Antonio lending page or send the deal directly.