Calculator
The 70% rule calculator
Shows the rule's answer next to what your actual costs, hold time and required profit say you can pay - and how far apart they are on your deal.
The 70% rule says your maximum offer is 70% of ARV minus the rehab budget. The 30% gap is meant to cover selling costs, carrying costs, financing costs and your profit - four claims on one number, with no arithmetic.
This calculator does the arithmetic. Enter what those four things actually cost on your deal and it will show you the rule's answer, your answer, and the gap.
Why the gap usually goes one way
The rule was formulated by cash buyers, whose 30% covers three things rather than four. Add financing and you have added a claim that is commonly the second-largest line in the deal after the rehab itself. On leveraged projects with long holds, the rule is generally too generous - and it gets more generous the longer you hold.
The two different 70%s
Do not confuse the investor's rule with the lender's cap. Most hard money lenders will not let total debt exceed 70% of ARV, which is a real underwriting constraint that decides how much cash you need. Passing it does not mean the deal works - it means the lender is protected. The full explanation.
Questions people actually ask
What is the 70% rule for hard money loans?
The rule of thumb that you should not have more than 70% of a property's after-repair value tied up in it - so your maximum offer is (ARV x 0.70) minus the rehab budget. On a $400,000 ARV with $60,000 of rehab, that is $220,000.
Two things worth separating, because they get conflated constantly. As a lender cap, 70% of ARV is a real underwriting limit most hard money lenders apply, and it is the binding constraint on how much they will lend you. As an investor rule, the 30% gap is meant to absorb your holding costs, selling costs, financing costs and profit - all four - which on a leveraged deal it frequently does not. The rule is a screening filter, not an underwriting model. Run the real numbers.
What is the 2% rule for refinancing?
There is no established 2% rule for refinancing; the questioner is probably reaching for the old 2% rent-to-price rule of thumb (monthly rent of at least 2% of purchase price), which has been unattainable in most US markets for years. For a refinance exit the number that actually governs is DSCR - the ratio of rental income to the new loan's payment, taxes, insurance and HOA. Most rental lenders want 1.20 or better. Check yours.