The 70% rule for flips — and how to appraise a deal properly

Ask any flipper for a rule of thumb and you'll hear the 70% rule. It's a useful first filter — and a dangerous thing to buy on alone. Here's how to use it, and how to move from the rule to a real appraisal.

What the 70% rule says

The rule: don't pay more than 70% of the after-repair value (ARV), minus the refurbishment cost.

Max purchase price = (ARV × 0.70) − refurb cost

So a house that'll be worth £250,000 done up, needing £40,000 of work:

(£250,000 × 0.70) − £40,000 = £175,000 − £40,000 = £135,000 max

The 30% you're holding back is meant to cover everything that isn't bricks and mortar — buying and selling costs, finance, and your profit.

Why it's only a first filter

The rule bundles too much into one number. The 30% margin has to stretch across costs that vary enormously deal to deal:

• Buying costs — stamp duty (with the higher rates for additional property), legals, survey, and often the 3% surcharge that dwarfs everything else on a second home.
• Finance — bridging interest, arrangement and exit fees, and broker costs. On a slow project the interest clock alone can eat a chunk of the margin.
• Selling costs — agent fees, legals, and the void while it sits on the market.
• The refurb itself — and the contingency the rule quietly ignores.

Two deals with identical ARV and refurb can have completely different profit once those land. The 70% rule can't see that.

From rule of thumb to real appraisal

A proper flip appraisal replaces the single 30% with actual line items:

1. ARV / GDV — grounded in real comparables, not hope. Recently sold prices for the street matter more than asking prices.
2. Refurbishment cost — itemised and costed, with a contingency. A new kitchen and bathroom to the right spec for the market (see new kitchen cost) is where a lot of flip budgets live or die.
3. Buying costs — stamp duty at the correct rate, legals, survey.
4. Finance costs — modelled over a realistic timeline, not a hoped-for one.
5. Selling costs — agent, legals, and a void allowance.
6. Profit and margin — what's left, expressed as profit-on-cost and ROI so you can compare deals like for like.

Stress-test the exit

The number that sinks flips is the GDV, because it's the biggest and the least in your control. Before committing, ask: what if it sells for 5% less? What if it takes three months longer? A deal that only works at the top of the range and the fastest timeline isn't a deal — it's a bet.

That's why the flip deal appraisal calculator models profit against a range of GDVs and works costs, not a single optimistic pair. Use the 70% rule to bin the obvious no's fast — then appraise the survivors properly before you offer.