Underwriting
70% Rule
A quick underwriting shortcut: pay no more than 70% of ARV minus rehab cost.
Definition
The 70% rule is the most widely used underwriting heuristic in real estate investing. It states that a flipper should pay no more than 70% of a property's ARV minus the estimated rehab cost. The 30% spread covers profit, holding costs, closing costs, and a safety buffer. It's a shortcut, not a science — experienced investors often run 68-72% depending on market conditions.
Example
$250K ARV × 0.70 = $175K. Subtract $40K rehab = $135K max offer.
Related terms
ARV (After Repair Value)
The price a property will sell for once all renovations are complete, established from rec…
MAO (Maximum Allowable Offer)
The highest price an investor can pay for a property and still hit their target profit.
BRRRR
Buy, Rehab, Rent, Refinance, Repeat — a rental-acquisition strategy using short-term debt …
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