The 70% Rule is one of the most common formulas used in real estate investing—especially among BRRRR and fix-and-flip investors. It’s quick, easy to remember, and can serve as a helpful back-of-the-napkin check to see if a deal might pencil out.
The basic formula:
ARV x 70% – Repairs = Maximum Allowable Offer (MAO)
But here’s the thing: It’s not always that simple.
At Low Tide Lending, we work with real estate investors in a variety of markets and strategies, and we can tell you from experience—there are a lot of cases where the 70% Rule doesn’t apply cleanly.
Why the 70% Rule Exists
The rule is designed to leave room for:
- Acquisition costs
- Rehab costs
- Holding costs
- Financing
- Profit margin
For example, if a property’s ARV (After Repair Value) is $300,000 and it needs $40,000 in repairs, the rule says:
$300,000 x 0.70 = $210,000
$210,000 – $40,000 = $170,000 MAO
But that 30% cushion may not always be necessary—or realistic.
When the 70% Rule Breaks Down
Here are some examples of where a rigid 70% Rule can lead investors astray:
1. Hot or High-Cost Markets
In competitive or appreciating markets, deals are often bought closer to 75–80% of ARV. Investors can still win with solid execution and favorable terms.
2. Creative Financing Options
When you’re working with a private lender (like Low Tide), you may not be bound to the same constraints as traditional hard money or banks. Faster closings, interest-only payments, and more flexible terms can allow you to pay slightly more if the cash flow or exit supports it.
3. Long-Term Rentals or STRs
If you’re planning to refinance and hold, cash flow and long-term equity can sometimes justify a higher acquisition price—even if it doesn’t hit that 70% target.
Our Advice: Use the Rule, But Know the Why
The 70% Rule is a tool—not a rulebook.
Before walking away from a deal that doesn’t hit the perfect number, ask:
- What’s my exit strategy?
- Can I negotiate better financing or rehab terms?
- Is there potential value the numbers aren’t capturing (e.g. zoning, expansion, STR potential)?
At Low Tide Lending, we help investors look beyond surface-level math to see the full picture—and structure funding that fits the deal and the investor.
Need Help Crunching the Numbers?
We love talking deal analysis. Whether you’re brand new or scaling up, Low Tide Lending can help you review numbers, evaluate risks, and find the right funding strategy for your project.
📩 Reach out to us anytime. Your next great deal might be closer than you think.