What is the 70% rule in the BRRRR method?

The 70% rule says to pay no more than 70% of the after-repair value minus repair costs. On a property worth $260,000 fixed up that needs $40,000 of work, the maximum offer is $142,000.

The rule comes from flipping, where the 30% gap covers selling costs and profit. BRRRR investors use it because a cash-out refinance typically lends 75% of appraised value. If purchase plus rehab is 70% of that value, the refinance covers both and leaves 5% for closing costs, points, interest and holding costs.

Those soft costs usually run 5 to 6% of ARV on a hard money deal, so buying at exactly 70% leaves a little cash in. Getting every dollar back means buying closer to 65 to 68% all-in. Treat the rule as a screen, then run the full numbers with your lender's actual terms.