What is the 70% rule in real estate?

The 70% rule caps your maximum offer on a flip at 70% of ARV minus the rehab budget - written as MAO = (ARV x 0.70) - Rehab. Take a Brighton Heights single-family with a $180,000 ARV and a $42,000 rehab: that pencils to a max offer of $84,000. In Allegheny County 2026, treat 70% as a starting filter - tight sub-markets push to 75%, distressed blocks allow 65% or less.

What is the 70% rule formula?

The formula has three inputs and one output:

• ARV (after repair value): the supportable resale price after a defined scope of repairs, anchored to renovated comparables in the same condition.
• Rehab: a realistic, line-item rehab budget for the scope you actually plan to do (not the bare minimum). DealScanner does not bake a contingency multiplier into its rehab estimate - if you want a buffer, add it explicitly.
• 0.70: a 30% buffer that absorbs selling costs, financing carry, rehab overruns, and your profit.

Output is the maximum allowable offer (MAO) - the highest price you can pay and still hit the implied profit margin. Bid above MAO and you are donating margin to the seller.

What does the 30% buffer actually cover?

The 30% gap between purchase + rehab and ARV is not pure profit. It absorbs:

• Selling costs (agent commissions, transfer taxes, concessions, staging)
• Closing costs on both legs
• Financing carry over the project timeline (if you are borrowing)
• Rehab overruns and timeline slippage
• Your target profit

On a typical Allegheny County flip with hard money, those line items eat 18-22% of ARV. What is left after that is your real profit - usually 8-12% of ARV when the deal goes well.

A Pittsburgh example, step-by-step

A 3-bedroom, 1-bath single-family on a B-class block in Brighton Heights is listed at $89,000. Sold comps within a half-mile show renovated 3/1s in the same condition closing between $172,000 and $188,000 in the last six months. Your ARV anchor: $180,000. Walk-through scope: roof, HVAC, kitchen, both bathrooms, refinish floors, paint, landscaping. Line-item rehab budget: $42,000.

Apply the formula:

MAO = ($180,000 x 0.70) - $42,000 = $126,000 - $42,000 = $84,000

The list price is $89,000 - $5,000 above MAO. Three options: negotiate down to $84,000 or below, sharpen the rehab budget honestly (not just lower it), or pass and find a better deal. Bidding $89,000 because "it is only $5k over" is exactly how flips end up at break-even.

When should I adjust the 70% multiplier?

Three scenarios where 70% is the wrong number:

Use 75% (looser) when

• You are paying cash and not financing the project.
• You are in a hot Allegheny County sub-market with low DOM and tight comp spreads (parts of Lawrenceville, Bloomfield, Squirrel Hill).
• You have a confirmed buyer or wholesale assignment lined up.

Use 65% (tighter) when

• You are using high-rate hard money with a long projected timeline.
• The comp spread is wide and ARV is uncertain (rural pockets, transitional blocks).
• The rehab is structural or has unknown systems issues - tighten the multiplier to give yourself more headroom for surprises.

Use a different rule entirely when

If you are buying to hold as a rental or BRRRR, the 70% rule is the wrong tool. Switch to refinance LTV math (typically 70-75% of ARV for a cash-out refi) and verify the property cash flows after PITI and operating expenses. See our BRRRR strategy guide for the full underwriting flow.

Common mistakes with the 70% rule

• Anchoring ARV on a single too optimistic comp. ARV should reflect recent comparable sales of single-family homes with similar bed / bath / square-footage and in the same condition - DealScanner's model already weights these together along with location and market trends. Trusting one high outlier inflates the headline and shrinks real margin.
• Lowballing the rehab to make the formula work. If a $60,000 rehab gets shrunk to $40,000 only so the deal pencils, the deal does not pencil.
• Forgetting wholesale assignment fees. If you are buying from a wholesaler, that fee is purchase cost - it goes on top of the price you pay to the seller, not below MAO.
• Treating MAO as your offer. MAO is the ceiling, not the offer. Your opening offer should leave room to negotiate up to MAO if you have to.