How to Use the 70% Rule Calculator Without Fooling Yourself

What the calculator is actually doing

The 70% Rule Calculator does one piece of arithmetic: it takes the after-repair value of a house, keeps 70 percent of it, subtracts the repair estimate, and calls what is left your maximum allowable offer — MAO. That is the whole formula: MAO = (ARV × 0.70) − repairs. There is no hidden model and no market prediction inside it. Which means the calculator is never the hard part. The hard part is that the output is exactly as honest as the two numbers you type in, and both of those numbers are easy to fool yourself with.

It helps to know what the missing 30 percent is standing in for, because it is not a discount for its own sake. Out of that 30 percent, a buyer has to pay holding costs while the house is repaired and sold — loan payments, taxes, insurance, utilities. They pay selling costs at the end — commissions, closing costs, concessions. And whatever survives those two has to contain their profit, because nobody takes on a renovation, a loan, and a resale for free. When you offer at MAO, you are not being cheap. You are leaving the next person a complete, survivable deal. When you offer above it, you are spending their holding costs, their selling costs, or their profit — and experienced buyers can see exactly which one you spent the moment they run their own numbers.

Input one: ARV, the number that decides everything

ARV is what the house will be worth fully renovated, and it is proven one way only: by recent sales of similar finished homes nearby. Not the seller's asking price. Not the price of the nicest house in the neighborhood. Not an automated estimate by itself. Three to five sold comparables — similar size, similar beds and baths, sold in the last six months, as close as you can get — adjusted honestly for the differences. If the comps say $205,000, typing $225,000 into the calculator because the house "feels like it could get there" does not change what a buyer's appraiser will find. It only changes your offer, in the wrong direction, by about fourteen thousand dollars.

A practical discipline: run the calculator twice. Once with the ARV your best comp supports, and once with an ARV ten percent lower. If the deal only works at the optimistic number, it does not work — it hopes. The ten-percent-lower run is the version you should be able to defend out loud to the seller and to a buyer without changing the subject.

Input two: repairs, estimated like a buyer, not like an optimist

The repair line is where beginners go quiet and type something small. Resist that. A buyer will walk the house with a contractor's eye and price the work in tiers: the cosmetic refresh, the mid-level renovation with kitchens and baths, and the heavy lift with roof, systems, and structure. Your estimate does not need to be a contractor bid, but it has to be in the same tier the house actually needs. A house with a twenty-year-old roof, original plumbing, and a kitchen from another decade is not a $12,000 cosmetic job because $12,000 makes your MAO prettier.

Round repairs up, not down. If your walkthrough math lands at $31,000, type $35,000. The cushion protects your offer's credibility: when a buyer's own estimate comes in a little higher than yours — and it usually does — a rounded-up number keeps you in the conversation instead of making your whole sheet look invented.

The advanced layer: where the honest version of the number lives

The basic run assumes the 30 percent covers holding and selling costs for a typical deal. The advanced inputs exist for the deals that are not typical. A long rehab, a high insurance market, or expensive financing eats more than the standard cushion; a fast cosmetic flip in a strong market may eat less. If you know a deal carries six months of holding instead of three, say so in the advanced fields and watch the MAO move. That movement is not the calculator being pessimistic — it is arithmetic refusing to pretend time is free.

One setting deserves special care: whether your assignment fee sits inside or outside the MAO. Inside is the honest default — the buyer's total price stays at or under MAO, and your fee comes out of the seller contract price, exactly like the example above. Outside means the buyer pays MAO plus your fee, which means the buyer is paying above the number the formula just told you was their ceiling. Some buyers accept that on a genuinely strong deal. Most will simply re-run the math, find the extra, and re-price or walk. Know which one you are presenting before you present it.

Four ways people fool themselves with this calculator

First, the asking-price ARV: using what the seller wants as the value anchor. The market pays for sold evidence, not wishes. Second, the shrinking rehab: lowering the repair estimate until the offer fits the seller's price instead of the other way around. That is negotiating against your own buyer, in advance, without them in the room. Third, the double-counted fee: subtracting your fee from the offer and then marketing the deal as if the buyer still has the full spread. Buyers check. Fourth, the one-run habit: calculating once, at the first optimistic numbers, and treating the output as a promise instead of a ceiling that deserves stress-testing.

When the calculator's answer is "walk away"

Sometimes the run produces a MAO below what the seller can accept — sometimes far below. That is the tool doing its job, not failing at it. A negative or tiny spread is information delivered early, while walking away costs you nothing. The wrong moves are massaging inputs until the sheet says yes, or signing a contract at a price no buyer will take and spending your inspection period hoping. The right move is to show the seller the math plainly, leave the door open if their situation changes, and go find a deal where the numbers stand up on their own. Sellers remember the person who showed them honest arithmetic. That reputation is worth more than one forced contract.

What to do with the number once you trust it

A MAO you can defend becomes your negotiation anchor. You can show the seller the whole chain — comps, repair tiers, the formula — on one page, and explain that your offer is not a guess or an insult but the price at which the deal still works for the buyer who will actually close it. Then, if you email yourself the breakdown, keep it with the property file: when a buyer asks how you got your price, the same sheet answers them. The calculator takes ten seconds. The discipline around its inputs is the skill — and it is a skill any first deal can be built on, one honest run at a time.