Key takeaways
- 70% leaves margin for cost and appraisal overruns.
- Bending the rule requires conservative ARV.
- 75% works only in stable, well-comped markets.
- Pure value-add deals can sustain 65%.
- Always model 65/70/75 sensitivity.
Core concepts
Origin
Flipper margin baked in — adapted to BRRRR to ensure refi-out.
Math
Purchase + rehab + carrying ≤ 70% × ARV.
When to bend
Tight market with verified comps and seasoned operator.
Step-by-step framework
- 1Pull 5 ARV comps.
- 2Compute 65/70/75 ceilings.
- 3Offer at 70 max.
- 4Walk if seller won't move.
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Common mistakes to avoid
- Inflating ARV.
- Excluding carrying costs.
- Treating contractor's estimate as final.
Frequently asked questions
Can BRRRR work at 75%?
Yes if appraisal is rock-solid and refi LTV holds.
What if seller won't sell at 70?
Walk. Pipeline solves single-deal scarcity.
Is 70% before or after rehab?
ARV is post-rehab. Subtract rehab to find max purchase.
Does the rule apply to commercial BRRRR?
Replaced by cap-rate underwriting on 5+ units.
Action checklist
- ☐5 ARV comps.
- ☐Carrying costs included.
- ☐65/70/75 modeled.
- ☐Offer at 70 ceiling.
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