Every serious flipper has rules they live by. The 70% rule is the most famous one. There are four more that get less attention and matter just as much. Together they're the back-of-the-napkin filter a working flipper applies to a deal before they even open a spreadsheet.
We just rebuilt the StartupLenz house-flipping calculator so it runs all five of those rules automatically. You punch in the numbers and the calculator scores each rule pass, watch, or fail in real time. Adjust the offer price and the 70% rule flips color before your eyes. That part is the point.
This article walks through each of the five rules. What it actually tests. Why working flippers use it. How to read the calculator's verdict. And the one rule most beginners ignore that quietly kills more flips than the 70% rule ever does.
Why rules of thumb exist in the first place
A house flip has dozens of variables. Purchase price. After-Repair Value (ARV). Rehab budget. Financing. Holding time. Closing costs on both sides. Realtor fees. Insurance. Property tax. Utilities. Staging. Contingencies for the things you cannot see until walls come down.
A spreadsheet handles all of those. A spreadsheet also gives you a precise wrong answer if any one input is off by 10%. Working flippers know this, so they keep a handful of crude heuristics in their head that catch deals trying to lie. If a deal fails one of these rules badly, the spreadsheet is probably masking a problem.
The rules are not laws. They are alarm bells.
Rule 1: the 70% rule
The version every wholesaler quotes:
Maximum Allowable Offer = ARV × 70% − rehab cost.
If the ARV is $300,000 and the rehab is $40,000, the max offer is $170,000. Anything above that and the deal is running on a thinner margin than the rule allows for.
Why 70%? The 30% gap covers everything that is not the purchase price or the rehab. Holding costs. Financing. Loan points. Selling fees (which on a $300K sale alone are easily $20K between agent commission and closing). Staging. And profit.
The calculator runs the 70% check automatically the moment you enter ARV and rehab budget. Pass means your offer is under the max. Watch means you are $1 to $5,000 over (tight, but workable if your ARV is conservative). Fail means you are more than $5,000 over the line and the deal is depending on the market staying strong.
Where the rule fails: hot markets where 70% does not get you a deal anywhere, and very low ARV markets where the 30% gap is too thin in absolute dollars. Some flippers use 65% in declining markets and 75% in red-hot markets. The calculator uses 70% as the baseline. Tighten or loosen by adjusting your inputs.
Rule 2: margin must be at least 20%
This one is the headline rule the 70% rule is trying to enforce indirectly.
Gross profit margin equals net profit divided by ARV. If your projected profit is $45,000 on a $300,000 sale, the margin is 15%. Twenty percent means a margin floor of $60,000 on the same ARV.
Why 20%? Because rehab estimates are wrong about something on most flips. A 20% margin gives you room for one mid-sized surprise (foundation crack, roof, mold) without going underwater. Below 15%, a surprise wipes out half the profit. Below 10%, a surprise wipes out all of it and you are flipping for the experience.
The calculator scores margin three ways. Twenty percent and up is pass. Ten to twenty is watch. Under ten is fail. The watch zone is real money but the risk is fragile. You are betting that nothing meaningful goes wrong.
This is the rule beginners are most often surprised by. The 70% rule can pass on a deal where margin still ends up at 12% because financing and holding ate the cushion. The margin rule catches what the 70% rule misses.
Rule 3: holding time should be six months or less
A flip is a foot race. The longer you hold the property, the more you pay in things that are not making you money: interest on the loan, property tax, insurance, utilities, lawn care if it is summer, snow removal if it is winter.
The unwritten standard among working flippers is five months end to end. Buy, rehab, list, sell. Anything past six and the carry costs start eating real money. Past eight months and you are also exposed to seasonal demand cycles, which can shift the ARV out from under you.
The calculator scores holding time as pass at five months or less, watch at five to six, fail above six. If the calculator is showing fail, the move is usually either tighter rehab scheduling, a faster contractor, or accepting a lower list price to move the property.
The corollary nobody tells beginners: holding time compounds with rehab buffer. A 15% rehab buffer becomes a 20% effective buffer if you also hold the property an extra month, because that month's carry consumes the cushion. The rules talk to each other.
Rule 4: rehab contingency of at least 15%
Walls hide things. Foundations hide things. The previous owner hides things, sometimes deliberately. Every working flipper carries a buffer on top of the rehab bid for the things that surface once demo starts.
The floor is 15%. Experienced operators carry 20%. Beginners often go in with 5% or no buffer at all, which is the same thing as betting that nothing will surprise you. Surprises are the only certainty.
The calculator scores buffer at 15% and up as pass, 10 to 15 as watch, under 10 as fail. Most flippers who hit fail here are either underestimating the rehab scope or relying on contractor quotes that have never been tested under demo.
The article-length version of this rule is: if you can't afford a 15% buffer, you can't afford the flip.
Rule 5: cash-on-cash return should beat 20% annualized
The last rule is the one that asks whether the work is worth doing at all.
Cash-on-cash equals annual profit divided by the cash you actually have at risk. Not the project value. The cash. Down payment plus closing plus rehab plus loan points plus carry costs. The number that, if the property burned down uninsured tomorrow, would be gone.
If you are putting $80,000 of your own cash at risk per flip and clearing $20,000 profit per flip, doing four flips a year, that is a cash-on-cash return of 100%. Strong.
If you are putting $200,000 of cash at risk to clear $25,000 profit per flip on two flips a year, that is 25%. Fine, not exciting.
If you are putting $300,000 of cash at risk for $15,000 profit per flip on one flip a year, that is 5%. The work is not paying.
The calculator scores cash-on-cash above 20% as pass, 10 to 20 as watch, under 10 as fail. Why 20%? Because below that, a passive deployment of the same capital at the same risk level is competitive. Below 10%, the alternatives are clearly better and the flip is paying you in experience, not return.
How to use the rules as a system
One fail is a yellow flag. Two fails is a red flag. Three or more fails and the deal is broken; renegotiate the offer or walk.
Multiple watches together also matter. A deal with watches on margin, holding time, and cash-on-cash is a deal where every input has to land exactly right for the flip to clear. That is not a deal; that is a hope.
The calculator's value is showing you which inputs are doing the damage. Move the offer slider down $10,000 and watch the 70% rule and margin rule both pass. Drop the holding time from seven months to five and watch cash-on-cash flip from watch to pass. The rules teach you, in real time, where the deal's actual sensitivity lives.
What the calculator gets right that mental math misses
A few things working flippers know that the rules of thumb alone do not capture, and the calculator does.
Interest is a monthly drip. The interest rate on the loan is annualized. The actual cost is interest × the months you hold the property. Six percent on $200,000 is $1,000 a month. Five months of holding is $5,000 of interest before you pay the loan back. The calculator does this math for you and rolls it into the cash-on-cash return.
Selling fees scale with ARV, not purchase price. A 6% realtor commission on a $300,000 ARV is $18,000. That is real money that beginners often forget to subtract before bragging about their gross profit number.
Down payment is not "the cash you need." Down payment plus closing plus rehab plus points plus carry is the cash you need. The cash-on-cash return uses the full number. The calculator separates them in the breakdown so you can see where the money actually goes.
The numbers we use as defaults
The calculator ships with defaults pulled from current market data on financing rates, realtor commissions, closing costs, and holding cost averages. These are not what your specific market or deal will be. They are a starting point.
The defaults update when the broader market moves. We did a default audit in late June 2026 that tightened realtor commission from 6.0% to 5.7%, closer to where actual median commissions have settled post-NAR settlement. The defaults will keep moving as the market does.
The point of defaults is to spare you the research up front. The point of letting you override every input is so the calculator answers your deal, not the average deal. Both matter.
What to do next
Open the house-flipping calculator and run a real deal. Take a property you are looking at, or one you recently passed on, and put the numbers in. Watch the five rules score it.
The rules are not the answer. They are the alarm. The answer is in the cost breakdown, the cash-on-cash number, the margin, and the holding-cost math the calculator runs underneath.
If a deal scores three passes, two watches, and a profit you can live on, you might have something. If it scores three fails and a tight profit, the spreadsheet is hiding what the rules already said: the deal is not the deal it looks like.
That is what the rules of thumb are for. The rest is execution.