How to understand the 70% Rule

[Louis Wisinski]

A concept that comes up often in real estate investing is the “70% rule.”

For anyone new, it’s a quick way investors estimate what they should pay for a property when planning to renovate and resell.

The basic idea is:

Maximum Offer = (After Repair Value × 70%) – Repair Costs

Here’s a simple example:

If a property will be worth $200,000 after repairs, and it needs $40,000 in work:

$200,000 × 70% = $140,000

$140,000 – $40,000 = $100,000

In this case, an investor might aim to buy the property around $100,000 or less.

Why 70%?

That remaining 30% is meant to cover:

• Closing costs

• Holding costs

• Selling costs

• Profit margin

• Unexpected expenses

It’s not a perfect formula, and it can change depending on the market, but it’s a helpful starting point for quick analysis.

Over time, many investors adjust this percentage based on their experience, risk tolerance, and local conditions.

For those who use this rule regularly:

Do you stick close to 70%, or adjust it based on the deal and market?

[Joe Villeneuve]

I don't use it at all.  I always do an actual analysis with real numbers.  Using lazy rules can cause you to lose out on good/great deals and waste time working through ones you shouldn't have.  Just do the work from the start and stop trying to cut corners.