70 Percent Rule Calculator

What Is the 70 Percent Rule in Real Estate?

The 70 percent rule in real estate states that an investor should pay no more than 70% of a property's After-Repair Value (ARV) minus the cost of necessary renovations. It is the most widely used rule of thumb in house flipping because it builds a margin for all deal costs and profit into a single calculation. It does not account for taxes, which must be modelled separately.

Where the 70% rule comes from

The 70% rule originated in US house flipping circles as a practical heuristic calibrated to leave adequate margin across a wide range of market conditions. The threshold was not derived from a formal financial model — it reflects what experienced investors found, over decades of deal-making, leaves enough room to absorb typical transaction costs and still generate a meaningful profit. It has been widely adopted by Canadian investors with the important caveat that Canadian transaction costs — particularly land transfer tax and CRA income tax on flip profits — often require adjusting the threshold downward to 65%.

What the 30% buffer actually covers

The 30% of ARV withheld by the rule is intended to cover: agent commissions (typically 4–5% of sale price on the sell side in Canada), transaction costs on buy and sell sides (1–3% each), carrying costs during the renovation hold period (mortgage interest, property taxes, utilities, insurance — typically 3–9 months), and your net profit target. In Canadian markets, this buffer can feel tight once provincial land transfer tax is factored in, which is a significant buy-side cost not present in most US markets.

Limitations of the rule

The 70% rule does not account for CRA taxes on flip profits (which are typically classified as business income in Canada, not capital gains); provincial land transfer taxes on purchase; financing costs beyond basic carrying; or market timing risk if the ARV estimate proves too optimistic at the time of sale. It is a first-pass filter — a deal that passes the 70% rule still requires a full pro forma analysis before committing capital. Read the full conceptual treatment of the 70% rule in house flipping.

70 Percent Rule Formula

The 70 percent rule formula is: Maximum Purchase Price = (ARV × 0.70) − Renovation Costs. ARV is the estimated market value of the property after all renovations are complete, calculated using comparable sales of similar renovated properties sold nearby. Renovation costs include all labour, materials, permits, and a contingency buffer — typically 10–20% of the base estimate.

Worked example — deal that passes

ARV: $600,000 / Renovation: $80,000 → MAO = ($600,000 × 0.70) − $80,000 = $420,000 − $80,000 = $340,000 (verified). If the seller is asking $310,000, you have $30,000 of margin to absorb unexpected costs or extend your profit. This deal passes the 70% rule with a $30,000 buffer.

Worked example — deal that fails

Same ARV and renovation, but the seller is asking $380,000. Your MAO is still $340,000. The ask is $40,000 over your limit — the deal fails the 70% rule unless you can renegotiate the price, reduce renovation costs, or have strong evidence your ARV estimate is conservative. Walking away from deals that fail the 70% rule is the discipline that separates profitable flippers from break-even ones.

How to estimate ARV accurately

ARV accuracy is the most critical variable in the 70% rule calculation. The most reliable method is a comparative market analysis of similar renovated properties sold in the same neighbourhood within the past 90 days. Key variables to control for: property type, above-grade square footage, lot size, and proximity. In fast-moving markets, use the most recent 60–90 days only — stale comparables in a declining market can produce an ARV that is too optimistic.

70% Rule for House Flipping

For house flipping, the 70% rule sets the maximum allowable offer (MAO) on a potential flip. It protects the flipper's margin against renovation overruns, longer-than-expected hold times, and market softness at resale. In practice, experienced flippers use the rule as a first filter — deals that fail the 70% rule are passed unless there is a compelling specific reason to adjust.

Using the 70% rule as a first-pass filter

The 70% rule is designed to be applied in seconds, not hours. Enter ARV and renovation estimate — if the seller's ask exceeds your MAO, you move on without investing further analysis time. The rule filters out the majority of deals that will never pencil out, reserving your full due diligence effort for deals that survive the initial screen. Speed matters in competitive flip markets: a reliable first-pass filter gives you the ability to evaluate more deals with the same time investment.

When to walk away vs. negotiate

When a deal fails the 70% rule, there are three paths: walk away, attempt to renegotiate the purchase price down to your MAO or below, or identify a way to reduce renovation costs through scope reduction or contractor negotiation. The right path depends on how motivated the seller is, how accurate your renovation estimate is, and whether your ARV has legitimate upside you have not fully modelled. As a discipline, only proceed past the 70% rule threshold if you can explicitly quantify why this deal is an exception.

How the 70% rule interacts with house flipping taxes in Canada

The 70% rule's 30% buffer does not include CRA income tax on flip profits. In Canada, flip profits are almost always classified as business income — taxable at 100% of your marginal rate, not at the capital gains inclusion rate. This means your actual after-tax profit from a flip can be materially lower than the 70% rule's gross margin suggests. Always model tax separately using the house flipping calculator before committing to a deal. New to flipping? See our house flipping for beginners guide.

70% Rule for Wholesaling

Wholesalers use the 70% rule differently than flippers: the wholesaler calculates the maximum price the end buyer (the flipper) will pay using the 70% rule, then subtracts their own assignment fee to determine the maximum price they can pay for the contract.

Wholesaler's modified 70% rule formula

The wholesaling formula is: Wholesaler's Max Contract Price = Flipper's MAO − Assignment Fee. The flipper's MAO is calculated normally: (ARV × 70%) − Renovation Costs. The wholesaler then subtracts their assignment fee from this figure to get the maximum price they can put under contract and still leave the flipper's numbers intact.

Accounting for assignment fees

Example (verified): ARV $600,000 / Renovation $80,000 → Flipper's MAO = $340,000. Assignment fee = $15,000 → Wholesaler's maximum contract price = $325,000. The wholesaler must get the property under contract at or below $325,000 to complete the assignment at $15,000 while keeping the end buyer's numbers intact. Never use the flipper's MAO as your own ceiling — your ceiling is always MAO minus your fee.

Why wholesalers sometimes use 65% to leave room

Some wholesalers apply 65% (rather than 70%) when calculating the flipper's MAO, to build in additional room between the contract price and the end buyer's ceiling. This makes the deal easier to assign, since the flipper sees more margin in the deal. The tradeoff is that using 65% narrows the range of deals that will pencil out, since you are effectively asking the seller to take a lower price.

The 70 Percent Rule in Canada

The 70% rule applies in Canada the same way as in the US, but Canadian investors must adjust for costs that don't appear in US calculations: provincial land transfer taxes on purchase, CMHC insurance if applicable, and CRA business income tax on flip profits — which is typically taxed at 100% of marginal rate, not capital gains treatment (50% inclusion on annual gains up to $250,000, or 2/3 on gains above that threshold, as of January 1, 2026).

Canadian-specific costs to factor in beyond the 70% rule

The key costs the 70% rule's 30% buffer does not cover in Canada: (1) Ontario Land Transfer Tax — on a $340,000 purchase, approximately $3,725; (2) Toronto Municipal Land Transfer Tax — roughly the same amount again for Toronto buyers, doubling the LTT cost; (3) BC Property Transfer Tax for British Columbia investors; (4) CRA business income tax on the full flip profit, at marginal rates. These costs must be modelled separately in your deal analysis. Use the land transfer tax calculator and the house flip tax calculator to add these figures to your deal model.

LTT impact on maximum purchase price

Land transfer tax is a buy-side cost that reduces your effective maximum purchase price below the 70% rule's MAO. On a $340,000 Ontario purchase, Ontario LTT is approximately $3,725. Toronto buyers pay a further ~$3,725 in Municipal LTT — total LTT of approximately $7,450. This means a Toronto flipper's effective out-of-pocket ceiling is roughly $332,550, not $340,000. In practice, the LTT cost should either be deducted from your MAO or absorbed into the renovation cost estimate to keep the deal model accurate.

When Canadian investors use 65% instead of 70%

Most experienced Canadian investors default to 65–70% rather than the classic 70%, specifically because of higher combined transaction costs (LTT plus legal fees plus any CMHC premium if applicable) and the full income tax treatment of flip profits at CRA. In Toronto and Vancouver, where LTT costs are highest and hold times are often longer, 65% is the more common default threshold. In smaller markets with lower transaction costs and faster renovation timelines, 70% may be appropriate.

Adjusting the 70% Rule — When to Use 65% or 75%

The 70% threshold is a starting point, not a fixed constraint. Experienced investors adjust it up or down based on market conditions, deal characteristics, and their own cost structure. In Canada, most investors default to 65–70% to account for higher transaction costs and tax exposure.

Market conditions that call for 65%

Use 65% when: you are in a slower or declining market where ARV comparables may not hold through your renovation timeline; renovation cost estimates carry high uncertainty (e.g., older properties with unknown structural or mechanical issues); comparable sales data is sparse or more than 90 days old; transaction costs are above average (Toronto with MLTT, Vancouver with BC PTT); or you are newer to flipping and need more margin for error. In these conditions, 65% provides a meaningful additional buffer against the most common sources of deal failure.

When stretching to 75% is justified

Stretching to 75% should only be considered in strong, fast-moving markets with abundant recent comparable sales, a renovation budget based on firm contractor quotes (not estimates), and an ARV supported by multiple recent sales of genuinely similar renovated properties. Even in these conditions, the extra 5% of ARV at risk significantly narrows your profit margin if any single assumption proves wrong. Most experienced Canadian investors do not use 75% as a standard threshold — it is an exception for highly specific circumstances, not a routine adjustment.

Using the calculator to stress-test multiple thresholds

The most practical use of the 70% rule calculator is to run the same deal at multiple thresholds — 65%, 70%, and 75% — to understand how much margin you have at each level and what ask price would be required for each threshold to work. This stress-test approach gives you a negotiating range rather than a single number, and makes it explicit which threshold you are actually applying and why.

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