The 70% Rule: What it tells you, and what it doesn't

The formula

Maximum Allowable Offer = (ARV × 70%) − Estimated Rehab

Example: ARV $350,000, estimated rehab $45,000 → MAO = ($350K × 0.70) − $45K = $245K − $45K = $200,000

The idea is that the 30% buffer covers all costs (closing, holding, selling) plus profit. At 70%, there should be enough room to pay for the deal and still make money.

When the 70% rule is useful

Use it early, when you're screening deals fast:

• A seller or agent sends you a price, does it even get close to the 70% MAO?
• You're scanning MLS listings for price-reduced homes, does the as-is asking price leave room?
• You want to quickly know if there's any possibility of making a deal work before you invest 2 hours in comp work.

If the asking price is already above the 70% MAO, that's your answer, either the seller needs to come down significantly, or the ARV needs to come up. Both of those are conversations, not calculations.

When the 70% rule breaks down

The rule assumes that 30% of ARV is enough to cover costs and generate a profit. That's often not true. Here's when it fails:

• High holding costs: If you're using hard money at 12% and holding for 8 months, your financing cost alone might eat 6–8% of ARV. That leaves 22–24% for everything else.
• Higher ARV deals: On a $450K ARV property, 30% = $135K in buffer. That sounds like a lot. But after $60K in rehab, $30K in holding costs, and $35K in selling costs, you're at $125K of costs, leaving only $10K profit. That's not a deal.
• Market softening: If the market softens 3–5% between acquisition and resale, your ARV drops. The 70% calculation was based on a number that no longer exists.
• Low ARV deals: On a $180K ARV property, 70% MAO − $30K rehab = $96K. The dollar amounts leave very little absolute room for error.

The all-in MAO: What you should actually use

The all-in MAO works backward from every actual cost:

All-in MAO = ARV − Rehab − Contingency − Buy-side closing − Holding costs − Selling costs − Target profit

This accounts for your actual financing cost, the actual number of months you'll hold, your actual selling costs (commission + title + concessions), and the profit you actually need to make the deal worth the risk.

Use the 70% rule to decide whether to underwrite. Use the all-in MAO when you're writing an offer.

Charlotte-specific note

Charlotte's mid-2026 market has ~48 median days on market and ~33% of listings with price drops. This means your selling timeline might be longer than you expect, which increases holding costs. Build that into your all-in MAO calculation, not just your 70% screen.

Also: selling costs in Charlotte often run 7–9% of sale price when you factor in commission (5–6%), title, transfer taxes, and buyer concessions. Factor that in, not just the commission number.