The 70% rule: how to calculate your maximum offer on a refurb project

Before you make an offer on a refurbishment project, you need to know the maximum you can pay and still make a profit. The 70% rule is the formula most property investors use to calculate that number.

It is simple, it is widely used, and in the right conditions it works well. But it has limits, particularly in the UK market where stamp duty, finance costs, and regional price variance add layers of complexity that the basic formula does not account for.

Here is how to use it properly.

What is the 70% rule?

The 70% rule states that you should pay no more than 70% of a property's after refurbishment value (ARV), minus the estimated cost of refurbishment.

The formula: Maximum offer = (ARV x 0.70) minus refurb costs.

The remaining 30% is your buffer. It covers your profit margin, buying and selling costs, finance costs, stamp duty, and a margin for error. The rule originated in the US property flipping market and has been adopted by UK investors as a quick sense check on whether a deal is worth pursuing.

The formula explained with a UK example

A 3 bed terraced house in the North West has an estimated after refurbishment value of £180,000. The refurbishment will cost an estimated £25,000.

Maximum offer = (£180,000 x 0.70) minus £25,000 = £126,000 minus £25,000 = £101,000.

At a purchase price of £101,000, you have a 30% gross margin to cover all your other costs and still make a profit. If the asking price is £120,000, the deal does not meet the 70% rule and you either need to negotiate the price down, reduce your refurb scope, or walk away.

When the 70% rule works (and when it does not)

The rule works well as a quick filter when you are assessing multiple properties. It gives you a fast yes or no before you invest time in detailed analysis.

It works less well in areas where property values are high relative to refurbishment costs. In London and the South East, a 30% margin on a £500,000 property is £150,000. That is more buffer than most developers need, and applying the rule strictly means you will never find a deal that passes. Many London investors work to 75% or even 80% of ARV, accepting a thinner margin in exchange for higher absolute returns.

It also struggles with BRRR deals where the exit is a refinance rather than a sale. In a BRRR, you are not paying selling costs or estate agent fees, so the 30% buffer is more generous than it needs to be. Some BRRR investors adjust the rule to 75% of ARV minus refurb costs to reflect the lower exit costs.

Adjusting for UK stamp duty and finance costs

The original 70% rule does not explicitly account for stamp duty, which in the UK includes an additional 5% surcharge on second properties (from April 2025). On a £101,000 purchase, that adds over £5,000 to your costs. Bridging finance interest, arrangement fees, and valuation fees add another £3,000 to £8,000 depending on the loan size and term.

For a more accurate calculation, work backwards from your target profit:

Target profit + refurb costs + stamp duty + finance costs + buying legal fees + selling legal fees + agent fees = total costs. ARV minus total costs = your maximum offer.

This is more work than the simple 70% formula, but it gives you a number you can actually rely on. A flip calculator does this arithmetic for you and shows the full cost breakdown so you can see exactly where your money goes.

How accurate refurb costs change your maximum offer

The 70% rule is only as good as your refurb estimate. If you guess the refurb at £20,000 and it actually costs £35,000, your maximum offer was too high by £15,000 and your profit evaporates.

This is the weakness in any formula based approach. The output is only as reliable as the inputs. A cost per square metre estimate gives you a vague starting point, but it cannot distinguish between a property that needs decoration and one that needs a full rewire, new heating system, and structural work.

The solution is a room by room estimate using current labour and material rates for the specific works the property needs. When your refurb number is accurate, your maximum offer is accurate, and the 70% rule becomes a genuinely useful decision making tool rather than a rough guess wrapped in a formula.

A faster way to run the numbers

You do not need to do this on the back of an envelope. The flip calculator and the BRRR calculator let you model a full deal in minutes, including purchase price, refurb costs, stamp duty, finance, and your target profit. Adjust any variable and see how it affects the outcome.

Combine that with a refurb estimate based on what you actually see at the viewing, and you can go from first viewing to informed offer in under an hour. That speed matters when good deals move fast.