In one line: A flipper's rule of thumb: pay at most 70% of after-repair value, minus repair costs.
The 70% rule says the most an investor should pay for a property is 70% of its after-repair value minus the cost of the repairs. A home worth $400,000 fixed up, needing $50,000 of work, prices out at $230,000 under the rule.
The missing 30% is not all profit: it has to cover buying and selling costs, financing, taxes and insurance while holding, and the margin for what the walls turn out to hide. In practice experienced buyers flex the percentage: hot markets squeeze it toward 75-80%, expensive mistakes push it lower.
It is a screening tool, not an appraisal. It tells you which listings deserve a real budget, not what to offer.
A worked example
ARV $400,000 × 0.70 = $280,000. Minus $60,000 of repairs leaves a maximum offer of $220,000. A listing asking $260,000 fails the screen unless the 70% is really 80% in that market.
Questions people ask
Where does the 30% go?
Closing costs twice, financing or the cash's opportunity cost, taxes, insurance and HOA dues while holding, the surprises behind the walls, and only then the profit. On a typical flip the profit is a third of it at best.
Does the 70% rule work for a home I will live in?
As a screen, yes: it tells you whether the discount covers the work. But an owner-occupier does not need the profit margin, so paying more than the rule allows can still be sensible if the finished home is worth it to you and you will stay.