The MAO formula
The rule is arithmetic on two estimates, the ARV and the repair budget. Investors use it to screen deals and set a ceiling on their offer.
The 30% the rule leaves on the table isn't profit. It has to cover buying and selling costs, holding costs, financing and the margin itself. It's a rule of thumb for investors, not a lending standard. Lending programs size loans with leverage limits, which is where the confusion starts.
One caps the price, the other caps the loan
| 70% rule | 70% LTARV | |
|---|---|---|
| Used by | The investor | The lender |
| Limits | The purchase price (the offer) | The loan amount |
| Formula | 70% × ARV − repairs | 70% × ARV |
| Repairs | Subtracted | Not in the formula |
| On this deal | MAO $90,000 | Cap $140,000 |
Both start from 70% of the same ARV, so they're easy to blur. The rule subtracts the repairs to get a price. The lender's limit subtracts nothing, because it's a ceiling on all the money the lender puts in, purchase and rehab together. A borrower who hears “the lender does 70% of ARV” and an investor who hears “buy at 70% of ARV minus repairs” are describing different numbers: $140,000 and $90,000 here.
Where they meet: LTC binds
Add the repairs back to the MAO and you get the project's cost: $90,000 + $50,000 = $140,000. That is 70% of ARV, the same dollar amount as a 70% LTARV cap. So on a deal bought at the 70%-rule price, a 70% LTARV limit would allow a loan of 100% of the purchase and the repairs. Any LTC limit below 100% is lower, so LTC decides the loan.
Run it through the engine with a 90% LTC and 70% LTARV program and no as-is limit:
- As-Is LTVTurned off for this program
- Not used
- LTCBINDING90% of total project cost $140,000
- $126,000
- LTARV70% of ARV $200,000
- $140,000
- Financed project costPurchase price + 100% of rehab budget
- $140,000
Each limit is rounded down to the whole dollar. The maximum loan is the lowest applicable limit.
The maximum loan is $126,000, limited by LTC. The LTARV cap of $140,000 is $14,000 higher and never comes into play; the deal's actual LTARV is 63%. The borrower funds $14,000 of the purchase, the lender advances $76,000 at closing and holds back $50,000 for the repairs.
Published programs with higher limits land in the same place. Easy Street Capital advertises its EasyFix product at up to 93% LTC and 75% of ARV (company website, October 2026). On a 70%-rule purchase, 93% of cost is 65.1% of ARV, still under 75%, so LTC would bind there too. The result flips when the ARV limit is tight and the LTC limit is loose or absent. Bob Flynn's example program at Flynn Lending (April 15, 2024) caps the loan at 65% of ARV; on a 70%-rule purchase that is 92.86% of cost, so ARV binds unless a lower LTC limit, or his as-is limit on the amount funded at closing, cuts in first.
At other rule percentages
Same $200,000 ARV, $50,000 of repairs and 90% LTC / 70% LTARV program. Only the rule's percentage changes, and with it the purchase price:
| Rule | MAO | Cost | Max loan | Binding | Actual LTARV | Borrower cash before charges |
|---|---|---|---|---|---|---|
| 60% | $70,000 | $120,000 | $108,000 | LTC | 54% | $12,000 |
| 65% | $80,000 | $130,000 | $117,000 | LTC | 58.5% | $13,000 |
| 70% | $90,000 | $140,000 | $126,000 | LTC | 63% | $14,000 |
| 75% | $100,000 | $150,000 | $135,000 | LTC | 67.5% | $15,000 |
| 80% | $110,000 | $160,000 | $140,000 | LTARV | 70% | $20,000 |
Below the 77.78% crossover the loan is always 90% of cost, and the borrower's cash rises with the price. Above it, LTARV takes over and the loan stops growing, so every extra dollar of price comes from the borrower. A higher rule percentage doesn't just thin the investor's margin; past the crossover it also stops adding loan.
MAO and loan calculator
Change any input. The calculator works out the MAO, then runs that price through the same lending engine as the site's calculators to show the maximum loan, the binding limit and the borrower's cash. Leave LTC or LTARV blank to turn that limit off. As-Is LTV is off here because the rule doesn't use an as-is value; if the lender applies one, check the deal in the fix and flip loan calculator.
- As-Is LTVTurned off for this program
- Not used
- LTCBINDING90% of total project cost $140,000
- $126,000
- LTARV70% of ARV $200,000
- $140,000
- Financed project costPurchase price + 100% of rehab budget
- $140,000
Each limit is rounded down to the whole dollar. The maximum loan is the lowest applicable limit.
- Purchase price (MAO)70% × ARV − repairs, rounded down to the dollar
- $90,000
- Total project costMAO + repairs
- $140,000
- Actual LTC
- 90%
- Actual LTARV
- 63%
- Acquisition advanceFunded at closing
- $76,000
- Rehab holdbackReleased in draws
- $50,000
- Borrower cash at closingPurchase price − advance, before points, fees and third-party costs
- $14,000
- Rehab the borrower paysRepairs − holdback
- $0
- Borrower cash in the projectTotal project cost − loan
- $14,000
Interest rate and term don't affect sizing, so they're held fixed, and no points or fees are added. Borrower cash excludes lender charges and third-party closing costs. Example limits are illustrations, not a standard program.
What the rule leaves out
The rule's 30% has to absorb the financing. On the example deal, the $126,000 loan priced at 2 points and 12% interest for 6 months (illustrative terms) costs $2,520.00 in points and $7,560.00 in interest on the full balance. That's $10,080.00 of the $60,000 between cost and ARV, leaving $49,920.00 before closing costs, insurance, taxes, utilities, selling costs and profit.
The rule also trusts both estimates. If the appraisal puts the ARV lower, the lender's LTARV cap falls with it. A repair overrun is different: the holdback is set from the budget at closing, so in the calculators' model the borrower funds anything above it. And the rule says nothing about cash: on the example the borrower brings $14,000 toward the purchase before points and third-party costs. The cash to close guide adds those up, and the loan sizing calculator lets you test the same price against an as-is limit as well.
Questions
What is the 70% rule in house flipping?
An investor rule of thumb: pay no more than 70% of the after-repair value minus the cost of repairs. With a $200,000 ARV and $50,000 of repairs, that's $90,000.
Is the 70% rule the same as 70% LTV or 70% of ARV?
No. The 70% rule caps the price an investor pays and subtracts repairs. A 70% LTARV limit caps the loan at 70% of ARV with nothing subtracted. On the example, the rule gives a $90,000 price and the LTARV limit a $140,000 loan cap.
Will a lender lend 70% of ARV on a 70% rule deal?
Only if no other limit is lower. At the 70%-rule price, 70% of ARV equals the whole purchase price plus repairs, so any loan-to-cost limit below 100% caps the loan first. With a 90% LTC the loan is 90% of cost, or 63% of ARV.
What does MAO mean?
Maximum allowable offer: the highest price an investor will pay under their rule, usually the rule percentage times ARV minus repairs.
Does the 70% rule include closing and holding costs?
Not as separate lines. Closing, holding, financing and selling costs all come out of the 30% the rule leaves, along with the profit.
What changes if I use a 75% rule?
The maximum price rises by 5% of ARV, which is $10,000 on the example. With a 90% LTC / 70% LTARV program, LTC keeps binding up to a rule of 77.78%; above that, LTARV binds and the extra price comes entirely from the borrower.