The 70% Rule Explained — And Why We Use a More Accurate Formula at Beck Developments

If you’ve spent more than five minutes researching fix-and-flip real estate, you’ve probably heard of the 70% rule. It’s often treated like gospel, simple, fast, and supposedly foolproof.

But here’s the truth most people won’t tell you:

The 70% rule is a starting point, not a strategy.

At Beck Developments, we use the 70% rule as a filter, not a decision-maker. Behind the scenes, we rely on a more detailed internal formula that reflects how construction actually works in the real world, and that formula has saved us from bad deals more times than we can count.

Let’s break it down.

What Is the 70% Rule?

The 70% rule is a quick way for investors to estimate the maximum price they should pay for a property.

The basic formula looks like this:

Maximum Offer = (After Repair Value × 70%) − Estimated Rehab Costs

Example:

• ARV (After Repair Value): $300,000

• Rehab Costs: $50,000

$300,000 × 0.70 = $210,000
$210,000 − $50,000 = $160,000 Maximum Offer

The idea is that the remaining 30% covers:

• Holding costs

• Closing costs

• Financing

• Selling costs

• Profit

On paper, it’s clean. In practice, it’s incomplete.

Why the 70% Rule Falls Short

The biggest issue with the 70% rule isn’t that it’s wrong, it’s that it’s too generic.

Here’s what it doesn’t account for:

• Market-specific labor rates

• Construction complexity

• Timeline risk

• Permit delays

• Financing structure

• GC vs self-managed projects

• Scope creep

• Material volatility

Two houses with the same ARV and rehab budget can have wildly different risk profiles depending on execution.

That’s where most new flippers get burned.

How We Use the 70% Rule at Beck Developments

We still use the 70% rule, but only as a first-pass screening tool.

Think of it like this:

If a deal doesn’t work at 70%, it doesn’t even make it to the whiteboard.

Once it passes that initial filter, we move into something much more detailed.

The Beck Developments “Real-World” Formula (The Part Most People Skip)

Without giving away the entire system (yet), here’s what our internal formula does differently:

• Breaks rehab costs into trade-by-trade line items

• Separates materials vs labor

• Factors in construction sequencing

• Accounts for timeline-based holding costs

• Adjusts profit margins based on risk level

• Builds contingency intentionally, not emotionally

In other words, we don’t just ask:

“Does this deal work?”

We ask:

“How does this deal fail, and can it still survive if it does?”

That mindset comes from construction project management, not investor hype.

Why We Built Our Own Formula

Most spreadsheets online are designed for:

• Speed

• Simplicity

• Mass appeal

Ours was designed for:

• Accuracy

• Repeatability

• Decision-making under pressure

As builders and developers, we needed a system that could:

• Translate a walkthrough into real numbers

• Communicate clearly with contractors

• Prevent budget creep before it starts

So we built one.

And we keep refining it.

What’s Coming Next

As Beck Developments continues to grow, we plan to release our internal deal-analysis spreadsheet, the same one we use to evaluate fix-and-flip opportunities.

Not as a gimmick.
Not as a “get rich quick” tool.

But as a construction-minded framework for investors who want to underwrite deals the right way.

Until then, the 70% rule is a fine place to start, just don’t let it be where you stop.

“The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty.” — Proverbs 21:5