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70% Rule and Maximum Allowable Offer (2026)
By Jaken Finance Group · Principal, Jaken Finance Group
The 70% rule for house flips in 2026 — maximum allowable offer formula, when to use 65% or 75%, holding-cost math, and worked investor examples.
The 70% rule is a screening tool, not a profit guarantee. It answers one question fast: what is the most I can pay for this house and still have room for rehab, sell costs, carry, and a profit? Used that way, it keeps you out of auctions you cannot win. Used as a substitute for a full P&L, it is how flippers overpay in 2026.
The formula:
Maximum allowable offer (MAO) = (ARV × 0.70) − rehab costs
In 2026, add a second version when interest-only carry is real money:
MAO = (ARV × 0.70) − rehab − estimated holding costs
This guide shows how to run both, when to move the 70% factor, and how the rule sits next to lender leverage. Build the two inputs first: how to calculate ARV and how to estimate rehab costs.
Key stats at a glance
- Classic MAO: (ARV × 0.70) − rehab
- 2026 MAO (safer): (ARV × 0.70) − rehab − hold
- What the 30% is for: profit + sell costs + buy costs + carry
- Typical sell costs: 6%–10% of ARV (commission, concessions, closing)
- Typical hold on a 4–6 month flip: $6,000–$18,000 depending on loan balance
- Tighter markets: use 0.60–0.65
- Hot, low-inventory luxury: some operators use 0.75 and accept less error room
- Lender ARV cap: often 70%–75% of ARV on the loan, independent of your offer
The formula in plain numbers
| ARV | Rehab | 70% of ARV | MAO |
|---|---|---|---|
| $180,000 | $35,000 | $126,000 | $91,000 |
| $250,000 | $45,000 | $175,000 | $130,000 |
| $320,000 | $70,000 | $224,000 | $154,000 |
| $450,000 | $85,000 | $315,000 | $230,000 |
| $600,000 | $110,000 | $420,000 | $310,000 |
If the seller wants more than MAO, you need a lower rehab, a higher defensible ARV, or a reason to change the 70% factor. “I really want this house” is not a reason.
What the leftover 30% actually has to cover
New flippers treat 30% as profit. It is not. A typical $320,000 ARV file:
| Use of the 30% ($96,000) | Typical dollars |
|---|---|
| Sell-side commission + closing | $19,000–$26,000 |
| Buyer credits / repairs at inspection | $1,500–$5,000 |
| Buy-side closing + lender points | $6,000–$12,000 |
| Holding costs (4–6 months) | $8,000–$14,000 — full breakdown |
| Contingency already inside rehab? | If not, another 15% of rehab |
| Left as net profit | Often $15,000–$40,000 if the inputs were honest |
That is why the rule exists: a 10% “spread” on purchase-plus-rehab is not a 10% profit. Sell costs alone can consume 8% of ARV.
The 2026 version: subtract holding costs
Interest-only hard money at 10.5%–12% plus taxes, insurance, and utilities is not a rounding error. On a $220,000 average balance for five months, interest alone is roughly $9,600–$11,000. See the holding cost guide for the full stack.
Worked comparison, $320,000 ARV, $70,000 rehab:
| Method | Math | Max offer |
|---|---|---|
| Classic 70% | (320,000 × 0.70) − 70,000 | $154,000 |
| 70% minus $11,000 hold | 154,000 − 11,000 | $143,000 |
| 65% (slow market) minus hold | (320,000 × 0.65) − 70,000 − 11,000 | $127,000 |
Paying the classic MAO in a five-month, 11% market is how a “rule-compliant” deal nets nothing.
When to change the 70% factor
The factor is a risk knob.
Use 60%–65%
- Class C or thin buyer pools
- Long days-on-market comps (90+ days)
- Heavy rehab, first-time GC relationship, or limited inspection
- Auction / as-is / no interior access
- You need a larger cash cushion to sleep
Stay at 70%
- Normal suburban or in-town flip with three solid renovated comps
- Mid-range rehab you have priced with a takeoff
- Your GC has finished two similar houses on time
Use 75% only with eyes open
- Low inventory, multiple offers, and comps that support a tight spread
- Cosmetic rehab, known GC, short schedule
- ARV is conservative (you used the median sold, not the best)
- You can still show $20,000+ net after hold and sell costs in the calculator
A 75% offer on a heavy gut is not aggressive. It is a donation.
Worked deal: the rule says yes, the P&L says no
Purchase ask $165,000. ARV $280,000. Rehab takeoff $62,000 + 15% = $71,300.
| Screen | Number |
|---|---|
| 70% of ARV | $196,000 |
| Minus rehab | $124,700 MAO |
| Seller ask | $165,000 |
| Rule result | Fail — $40,300 over MAO |
Now the seller drops to $125,000. Classic rule passes. Full P&L:
| Line | Amount |
|---|---|
| Purchase | $125,000 |
| Rehab | $71,300 |
| Points + close (buy) | $8,500 |
| Hold 5 months @ 11% IO on ~$176k + tax/ins | $11,400 |
| Sell costs 8% of ARV | $22,400 |
| All-in | $238,600 |
| Sale at ARV | $280,000 |
| Net | $41,400 |
That is a pass. Same house at the original $165,000 ask: all-in rises to about $278,600 against a $280,000 sale — about $1,400 net. The 70% rule caught the first ask. The P&L is what you take to a partner or a lender.
The 70% rule caught the first ask. The P&L is what you take to a partner or a lender.
How this sits next to hard money leverage
Lenders do not care that you “followed the 70% rule.” They care about:
- Loan-to-cost — often up to 90% of purchase + rehab on qualified files
- After-repair value cap — often 70%–75% of ARV
- The lesser of those two is your max loan
Example: $125,000 purchase, $71,300 rehab, $280,000 ARV.
| Cap | Amount |
|---|---|
| 90% of cost ($196,300) | $176,670 |
| 70% of ARV | $196,000 |
| 75% of ARV | $210,000 |
| Typical max loan (lesser of LTC and ARV cap) | $176,670 |
| Cash to close (gap + reserves) | the rest |
If you pay $165,000 instead of $125,000, 90% LTC rises — but 70% of ARV does not. You eat the extra purchase in cash, and the file has no air. That is the operational meaning of MAO: stay inside both the offer rule and the loan rule.
Details: understanding loan-to-cost and fix-and-flip loan mechanics.
MAO for wholesalers and assignment deals
If you are buying a contract, MAO is still calculated on your rehab and your ARV, not the wholesaler’s marketing ARV. Discount their repair number until you have walked it. Assignment fee sits on top of the purchase and must fit under MAO.
| Item | Number |
|---|---|
| ARV you believe | $250,000 |
| Rehab you believe | $48,000 |
| Classic MAO | $127,000 |
| Assignment fee | $12,000 |
| Max you can pay the seller (via assignor) | $115,000 |
If the marketing sheet shows a $140,000 “you can pay,” the fee already broke the rule.
Common 70% rule mistakes
- ARV from Zillow or list prices — ARV is sold, renovated comps. See how to calculate ARV.
- Rehab without contingency — MAO using the contractor’s happy number
- Counting the 30% as profit — sell costs and carry live there
- 75% in a heavy-gut Class C zip — wrong knob
- Ignoring days on market — a 90-day list adds a full extra hold cycle
- Using the rule after you are emotionally in — run MAO before the second showing
- Forgetting the lender’s ARV cap — you can “win” the house and still be cash-short at close
Wholesaler sheets vs your MAO (a second pass)
A marketing ARV of $340,000 with “$40,000 cosmetic” is a pitch, not a file. Rebuild both numbers the same day. If your ARV comes in at $305,000 and rehab at $68,000, classic MAO is $145,500 — often $20,000–$40,000 below the “you can pay” line on the flyer.
When you assign or double close, the fee is purchase. It does not get a free pass because it is not “rehab.” If MAO is $145,500 and the fee is $15,000, the seller (or the assignor’s purchase) must fit in $130,500. That is how you stay out of deals that only work on someone else’s spreadsheet.
A one-page MAO checklist
- Pull 3–5 sold renovated comps; set ARV at the median, not the trophy
- Walk with a takeoff; add 15%–20% contingency
- Estimate hold from schedule × rate × taxes/insurance
- Compute classic MAO and hold-adjusted MAO
- Compare seller ask to both
- Run the full P&L in the fix-and-flip calculator
- Check 90% LTC vs 70%–75% ARV so the loan can actually fund the plan
If two partners disagree on the factor, write both MAOs on the sheet and list the risk that justifies 65% versus 75%. The debate is useful. Changing the factor in your head after you fall in love with the porch is not.
Related guides
- How to estimate rehab costs
- How to calculate ARV
- Fix-and-flip holding costs
- Average fix-and-flip rehab costs
- Scope of work templates
- Instant ARV estimate
Jaken Finance Group provides fix-and-flip financing with rehab holdbacks. We underwrite the property and the exit, not a W-2 story.
Rates, terms and conditions offered only to qualified borrowers and are subject to change at any time without notice. All loans are subject to full underwriting for loan approvals. Jaken Finance Group only finances non-owner occupied investment properties.
70% Rule and Maximum Offer — next step (2026)
Run MAO before you write the offer — then confirm the loan can fund the same numbers.
Submit scenario · Pre-qualify · (833) 264-7776.