In flipping, you make your money when you buy. Overpay on the acquisition and no amount of rehab hustle earns it back. Your Maximum Allowable Offer (MAO) is the ceiling — the most you can pay and still hit your profit target — and disciplined investors never chase a deal above it.
The 70% rule starting point
The classic formula is MAO = (ARV × 0.70) − repair costs. ARV is the after-repair value — what the finished home sells for based on comparable sales. The 30% haircut is meant to cover holding costs, selling costs, and profit in one blunt number. It's a fast screen, not a final answer.
Tighten it with real numbers
The 70% rule hides your actual costs. A more accurate MAO subtracts them explicitly: MAO = ARV − repairs − holding costs (loan interest, taxes, insurance, utilities) − selling costs (agent commission, closing) − your target profit. On thin-margin markets, back into MAO from the profit you require rather than trusting a flat percentage.
Be conservative on ARV
The fastest way to lose money is an optimistic ARV. Use recent sold comps — similar size, condition, and location, ideally within the last 3–6 months and a half-mile — and take the median of adjusted comps, then shave a little more. Never underwrite to the single highest comp on the street.
Run every deal the same way
The Flip MAO Calculator applies an ARV haircut, the 70% rule, and your holding and selling costs to produce a defensible offer — and generates an offer letter — so emotion stays out of your acquisitions.
Open the free Flip MAO Calculator →
Frequently asked questions
What is the 70% rule in house flipping?
It states your max offer should be about 70% of the after-repair value minus repair costs: MAO = (ARV × 0.70) − repairs. The 30% buffer is meant to absorb holding costs, selling costs, and profit.
How do I calculate ARV?
Base ARV on recent sold comparables of similar size, condition, and location — ideally within 3–6 months and a half-mile. Use the median of adjusted comps and stay conservative rather than using the highest sale.
Is the 70% rule always right?
No — it's a quick screen. In competitive or thin-margin markets, back into your offer from explicit holding costs, selling costs, and required profit instead of a flat percentage.