The 70% Rule Explained: How to Calculate Maximum Purchase Price
The 70% rule is the most widely used formula in fix-and-flip investing. Learn how it works, when to use it, and when to break it.
Pricing strategy is as important as the renovation itself. Price too high and you sit; too low and you leave money on the table.
Pricing a completed flip is a balance between maximizing profit and minimizing holding time. Every day on market costs money — loan interest, insurance, taxes, utilities, and the opportunity cost of capital that could be deployed on the next deal.
Start with your ARV analysis and adjust for current market conditions. Your pre-purchase ARV estimate was based on comps that may be 2–6 months old by the time your flip hits the market. Pull fresh comps and adjust your pricing accordingly. If the market has appreciated, you may be able to price above your original ARV estimate. If it's softened, adjust down.
Study the active competition. Your flip isn't competing against sold comps — it's competing against the other homes currently on the market in the same price range and neighborhood. Tour competing listings, assess their condition relative to yours, and price accordingly.
Consider the psychological pricing effect. Buyers search in price bands ($200K–$250K, $250K–$300K, etc.), and listing at $299,900 captures an entirely different buyer pool than $305,000. If your ARV analysis supports $300,000–$310,000, pricing at $299,900 exposes your listing to more potential buyers.
The first two weeks on market are critical. Properties generate the most buyer interest when they're new to the market. Price reductions after 30+ days signal desperation and invite low offers. It's better to price slightly below market and generate multiple offers (which often push the final price above asking) than to price high and chase the market down with reductions.
Track your days-on-market across all your flips. If you're consistently selling in under 14 days, you may be leaving money on the table. If you're averaging 45+ days, your pricing strategy needs adjustment.
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