65%, 70% or 75%? Choosing the Multiplier for a House Flip Offer
Each 5 points you add to or take off the 70% rule moves your maximum offer by 5% of the after-repair value (ARV). On a $300,000 house that's $15,000. This article shows the numbers on one example deal and explains which features of a deal argue for 65% and which for 75%. It also explains why the percentage is a screening heuristic, not a federal ARV rule.
The rule in one line
Maximum offer = ARV × multiplier − repair costs. Rocket Mortgage explains the standard 70% version of this formula. If you want the full explanation and what the gap is meant to cover, read The Flipper's Filter first. This article is only about choosing the multiplier.
One deal, three multipliers
Example only, not a real property: a house with a $300,000 ARV that needs $50,000 of repairs.
| Multiplier | ARV × multiplier | Minus repairs | Maximum offer | Left for costs and profit |
|---|---|---|---|---|
| 65% | $195,000 | $50,000 | $145,000 | $105,000 |
| 70% | $210,000 | $50,000 | $160,000 | $90,000 |
| 75% | $225,000 | $50,000 | $175,000 | $75,000 |
The last column is ARV minus repairs minus the offer. It is the amount left for buying, holding, financing and selling costs, plus profit.
What the table shows:
- Each 5-point move is worth $15,000 here. That is 5% of the $300,000 ARV. Repairs don't change the swing, because you subtract the same repair figure at every multiplier.
- The swing grows and shrinks with ARV. On an $80,000 ARV house, the same 5 points is only $4,000.
- Going from 65% to 75% costs $30,000 of cushion. At 75% you can offer $30,000 more than at 65%, but the amount left for costs and profit is $30,000 lower.
Why some investors drop to 65% or lower
Smaller dollar margins. On a lower-ARV deal, each 5-point move buys fewer dollars of room. The arithmetic above shows it: on an $80,000 ARV house, 5 points is $4,000. If the costs in your budget need more room than that leaves, use a lower multiplier or pass on the deal.
Borrowed money and a selling agent. Put each financing and selling cost into your written deal budget before you choose a multiplier. Those costs must come out of the amount left after repairs and the offer, so a larger cost estimate calls for more room.
Why some investors push to 75% or higher
Competition. A higher offer may be the only way to compete for a particular house. That does not create more room in the deal: it reduces the amount left for costs and profit. Use 75% only after the written budget still leaves the room you require.
Lower costs. A written budget may show lower financing or selling costs for one deal than another. That can leave more room after the offer, but check every cost before raising the multiplier.
The risk runs one way. In the table above, going from 70% to 75% cuts what is left for costs and profit from $90,000 to $75,000.
Work out your own percentage
Instead of choosing between 65, 70 and 75 by habit, write down the ARV, repairs, buying costs, holding costs, financing costs, selling costs and profit target for the property you are screening. Compare those costs with the amount left after repairs and the offer. Deal-analysis software or a spreadsheet makes it quick to run the same check on every property.
Is this a lender's rule or a regulator's?
Rocket Mortgage describes the 70% rule as a rule of thumb. Use it here as a screening heuristic: a quick way to test whether the purchase price leaves room for the costs and profit target in your own budget. This article does not determine any individual lender's underwriting terms. The same property can produce a different maximum offer when the repair scope, financing, selling costs or profit target changes.
A federal rule on quick resales doesn't use ARV either. The CFPB's rule on higher-priced mortgage loans, 12 CFR 1026.35, can require a second appraisal when a home is resold soon after the seller bought it at a much higher price. It depends on how soon the home is resold and how far the price has risen. It affects the loan your eventual buyer can get. It does not set a 65%, 70% or 75% limit on what you pay.
This is general information, not legal or financing advice. Lender terms change, and rules vary by state.
Which multiplier fits your deal: a checklist
Start at 70% and adjust:
- Rehab scope. List the repair, holding, financing and selling costs for this scope before you choose a multiplier. The Flipper's Filter has a separate screening guide for repair scope and reserves.
- Price level. Whatever the price, work out what each 5 points is worth in dollars: 5% of the ARV, so $4,000 on an $80,000 house and $15,000 on a $300,000 house. If that does not leave enough room for the budget, lower the multiplier or pass.
- Market speed. Competition may make a higher offer necessary, but it does not increase the dollars left for costs and profit. Do not raise the multiplier unless the written budget still works.
- How you finance and sell. Include every financing and selling cost in the deal budget. A higher cost estimate leaves less room for the offer.
- Your experience. Do not use a higher multiplier to make an uncertain repair scope fit. Price the work and the reserve before you make an offer.
- Check the dollars, not just the percentage. Before you offer, work out the "left for costs and profit" figure from the table above for your own deal. Then run the formula for your own percentage.
Next steps
To see how a site-built flip compares with a mobile home flip on dollar profit and return, read Mobile Home vs. Traditional Home Flipping: ROI Comparison. For the full sequence of steps from finding a deal to selling it, see Your Blueprint to Flipping Success.