70% Rule

The 70% rule is a fast screening filter, not a valuation. It says your maximum offer should be no more than 70% of a property's after-repair value minus the renovation budget. If a place will be worth $800,000 done up and needs $80,000 of work, the rule caps your buy price at (0.70 × $800,000) − $80,000 = $480,000. Anything above that and the deal is starting to eat its own margin.

The number comes out of US flipping, where the 30% gap is meant to cover holding costs, buying and selling costs, financing and a profit. It travels to Australia only if you understand what the buffer is actually paying for here. AU deals carry heavier transaction costs than the US model assumes: stamp duty alone can be 4–5.5% of the purchase price, agent commission on the sale is typically 1.8–2.5%, and a short-hold flip is usually taxed as ordinary income rather than getting the CGT discount. Add holding costs over a six-month project and the real-world buffer a flip needs is often closer to 35–40% in high-duty states, not a flat 30%.

So treat 70% as the ceiling in a light-duty scenario and tighten it from there. Some AU operators work to a 60–65% rule on paper once they price in duty and tax. The rule is also only as good as its two inputs: get the ARV wrong by relying on optimistic comparable sales, or lowball the reno, and the whole thing gives you false confidence. It never replaces a line-by-line feasibility.

Use it the way it is meant to be used: to bin obvious overpriced deals in seconds, then run the survivors through a proper cost model. Our 70% rule calculator does the first pass, and the deeper breakdown of why the US formula needs adjusting here is in The 70% Rule in Australia.