Quick Answer — What Is ARV and the 70% Rule?
ARV (After Repair Value) is the projected market value of a property once renovations are complete, typically estimated from comparable recent sales of similarly renovated properties nearby. The 70% rule says your maximum offer should be no more than 70% of ARV minus repair costs — the formula is Max Allowable Offer (MAO) = (ARV × 0.70) − Repair Costs.
Quick reference: a property with a $240,000 ARV needing $45,000 in repairs has a max allowable offer of ($240,000 × 0.70) − $45,000 = $123,000. Pay more than that and the deal's margin for profit and error starts disappearing fast.
The remaining 30% of ARV isn't profit margin alone — it's the buffer that covers closing costs, holding costs (loan interest, taxes, insurance during the rehab period), selling costs (agent commission, closing costs on the sale), and the actual profit you're trying to make. That's why 70% is the standard starting point rather than something closer to 90% or 95%: there's real cost baked into that 30% before profit even enters the picture.