Your Maximum Offer: The 70% Rule Done Right
Work backward from the finished value: ARV times 70%, minus repairs. Here is what that 30% margin actually pays for.
The maximum allowable offer answers the only question that matters at the moment of offer: what is the most I can pay and still be safe? The classic screen is the 70% rule. Multiply ARV by 70%, subtract the rehab budget, and that is your ceiling.
What the 30% actually covers
The 30% you are holding back is not profit. It has to pay for buying costs, holding costs for the full project, selling costs, your financing, and your profit, and then absorb whatever you got wrong. Commissions and concessions run 7 to 8% of ARV by themselves.
| ARV, from renovated comps | $200,000 |
| Held back by the rule (30% of ARV) | $60,000 |
| Transaction and holding costs, roughly | $25,000 |
| Left for profit and error combined | $35,000 |
That is why the rule holds up: it is not conservative, it is barely adequate.
Work the direction that cannot fool you
The formula only protects you if you work backward from value. The order of operations is the whole discipline.
ARV first
From renovated comps, before you know or care what the seller wants.
Rehab second
From scope, not from what would make the deal work.
Offer last
The output of the first two numbers, never an input.
Beginners run it forward: start from the asking price and hunt for an ARV that justifies it. The same arithmetic, pointed the wrong direction, becomes a rationalization machine.
When to adjust the percentage
The 70% figure is a screen, not scripture. Adjust it for the economics of the deal, and only for the economics of the deal.
| Situation | Adjustment | Why |
|---|---|---|
| Higher-priced property | Experienced investors may go to 75 to 80% | Fixed costs are a smaller share of ARV |
| Thin or declining market | Tighten below 70 | The exit value is less certain |
| Deep-scope project | Tighten below 70 | The rehab number itself is soft |
| The seller said no | None, ever | The number came from the deal's economics; the seller's response does not change those |
Write it down before you tour
Compute your maximum offer before you see the property or hear the asking price. Anchoring is real, and the asking price is designed to be the anchor.
A number written down in advance is the only one that survives a negotiation.
Run an address through the Deal Analyzer's offer calculator. It builds the max offer from ARV and rehab, shows the rule checks, and lets you stress the assumptions: drop ARV five percent and see whether the deal survives. If it only works at your best-case ARV, it does not work.
Put this lesson to work on a live address.
Get a max offer on any address
