Does the 70% rule work for wholesaling?

Yes — wholesalers offer 65–68% of ARV minus rehab, then assign to an end-buyer who underwrites at 70%. The 2–5 point spread is the assignment fee.

What contingency should I add to rehab estimates?

10% for light cosmetic, 15% for standard flips, 20% for heavy rehabs, 25%+ for unknowns (foundation, mold, undisclosed permits).

How do I get accurate comp data?

Best: MLS access via an agent or PropStream/Privy. Second-best: Redfin and Zillow sold filter (limit to last 90 days, exclude foreclosure and short-sale).

Should I underwrite to rent instead of flip?

Always underwrite both. The better number is your real exit strategy; the other gives you optionality if the market shifts mid-project.

ARV, Rehab, and the 70% Rule — Investor Underwriting

ARV, rehab, and the 70% rule — practical investor underwriting.

Every flipper and BRRRR investor underwrites with some version of the 70% rule: pay no more than 70% of After-Repair Value (ARV) minus rehab. It is a useful starting point — and a dangerous oversimplification. Here is how experienced investors actually use it.

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Calculating ARV correctly

ARV is what your renovated home will sell for, not what it could sell for. Pull 6–10 truly comparable sold comps from the last 90 days. Match on: same school zone, same general layout, same square footage (within 10%), and similar condition to your finished product.

Take the median price-per-square-foot of the comps and multiply by your subject's square footage. Resist any urge to use the top of the comp range as ARV — it is the median that prices fast on the MLS.

Estimating rehab — line items, not 'gut feel'

Walk the property with a written checklist. Major systems first: roof, foundation, HVAC, electrical, plumbing. Then kitchen and bathrooms. Then floors, paint, landscaping.

Rough 2026 ranges (national average; coastal cities run 2–3x):

Full cosmetic refresh (paint, flooring, light fixtures): $15–$25/sqft
Standard flip (cosmetic + kitchen + 2 baths): $30–$45/sqft
Heavy rehab (above + HVAC + roof + electrical + windows): $55–$85/sqft
Gut + addition: $100–$175/sqft

The 70% rule and when it doesn't apply

The 70% rule bakes in: closing costs (~3%), holding costs (~5%), selling costs (~7%), and target profit (~15%). On a flip with 6–8 month timeline, this math holds.

Adjust the multiplier based on context:

Slow-moving markets / large homes / luxury price points → use 65%.
Fast markets, small light-cosmetic flips → 72–75% works.
BRRRR (refi and rent) → 75–80% may underwrite, since you are not paying selling costs.
New investors → use 65% on your first 5 deals. The buffer protects against estimation errors.

Holding costs are real money

Investors who only count purchase + rehab consistently lose to investors who also count: property tax, insurance, utilities, hard-money interest, and HOA dues during the rehab and listing period.

A $250K project with $80K rehab and a 6-month timeline at 11% hard-money will accrue ~$15K in interest alone. Underwrite holding costs explicitly — do not bury them in 'contingency.'

Common mistakes

Using zip-code average price-per-sqft instead of pulling specific comps.
Counting the highest-priced comp as the ARV target.
Underestimating rehab by 20–40% on first walkthrough.
Forgetting permit costs in rehab-heavy zip codes.
Skipping the contingency line (10–15% of rehab budget) entirely.