70 Percent Rule House Flipping in Australia: Does It Work?

The 70 percent rule mentioned in many house flipping books is based on the US market and a cost base that differs from that of Australia. In the United States, the biggest cost of selling is the selling costs, but in Australia, Stamp Duty and the interest rates play a much bigger role.

By way of summary, this the rule is a good first cut but can not be used to determine a precise pricing. In the following discussion, 70 percent of an $850,000 transaction as an offer yields 21.5 percent profit while the 15 percent target requires far less. (In the rest of this discussion, we will work backwards to determine what percent is allowed by Australian expenses).

70 Percent Rule House Flipping Cost Gap: US Guides vs Australian Bills

The margin built into the rule by Flipper Force, a software company, takes into account a buying cost of around 1 to 3 percent, holding costs of $500 to $1,000/month, and a selling cost of 6 to 8 percent. The rest of the margin is usually split between around 15 percent costs and 15 percent profit. Australian costs are substantially different.

Stamp duty estimate is from Propboss's estimated figures of 2026, from 3.2% in Queensland to 5.4% in Victoria. Propboss have inconsistencies so check the stamp duty with your state revenue office. Agent commissions are from Property Now, a flat-fee agent business; and Your Property Guide, who states they take referral fee from agents. Both say the commissions estimates for New South Wales and Victoria is roughly 2.35%. Agents generally quote a price without GST. Cost of marketing an average property is between $3000 and $6000, according to Your Property Guide.

Put simply, Australia swaps a fat selling bill for a fat buying bill. The totals land closer than you expect, but not on the same percentage.

70 Percent Rule House Flipping Test Run: One $850,000 Deal Through the Rule

Say the ARV is $850,000 with a $90,000 rehab. Apply the rule to see the maximum offer using the purchase rule of 70 percent of ARV, minus repair costs. You arrive at an offer of $505,000. What is the reality of your costs at that offer?

The following assumptions were made: Stamp duty of 4.3% of price. Loan of 80% of purchase at 6.2%. Term of 6 months. Buying legal costs of $3000. Rates, insurance and utilities of $1000 a month. Selling legal costs of $1500. Commission of 2.35% of ARV (2.6% less GST). Marketing of $5000. Renovation in cash.

This leads to a difference of $55,661. This difference in a competitive market can make or break a contract. $44,242 is the profit before income tax and, in the Australian Tax office view, reselling profit is in most cases treated as ordinary income as opposed to a discounted capital gain.

70 Percent Rule House Flipping Multiplier Map: What Percentage Australia Allows

Flipper Force gives you a formula to calculate your percentage: 1 - (Costs + Profit)/ARV. This same formula was used at different profit targets, ARV bands and duty levels. The number shows purchase plus repairs as a percent of ARV, which is how the 70 percent rule does it.

70 percent rule is placed between the 20 percent and 25 percent rows, so it is safe. However, it remains silent on how wide the profit margin is, which is around 21 to 22 percent.

Now, leave the profit goal at 15 per cent and change the remaining inputs.

Less than three per cent separates different states and prices. The profit target has a stronger impact than the state does. An article from Smart Property Investment in 2021 said that the rule of thumb for house flips in Sydney and Melbourne can push this up to 80 to 85 percent. (It gives no data, but the 10 per cent row above is in that range).

70 Percent Rule House Flipping Stress Test: What the Extra Five Points Buy

The gap between 70% and 76% is not waste. It is insurance. So test what that insurance covers.

An actual ARV can be lowered by as much as 22.1% at a 70% offer and still break even. At a 15% offer, an ARV can be lowered by as much as 15.4%. What if that ARV was 8% lower, the renovation cost was 25% over budget, and the project was held for nine months?

Both alternatives are still feasible after this analysis. The result shows that under this approach the 15% price is still profitable against the worst combination of impacts but can only withstand a little bit of shock.

Four things need to be monitored carefully:

1. ARV by $10,000 will cost you $7,717. Because of the three-month delay on the data for RP Data, you should look for the latest sales data on realestate.com.au or domain.com.au.
2. Each extra month diminishes the percentage by about 0.35 points. By the time the holding period lengthens to 12 months, the 15% multiplier drops to 73.9%.
3. Interest Rate: 5.0% at the rate of interest, 76.4%. 7.5% at the rate of interest, 75.8%. Rate of interest does not have significant effect than holding period.
4. Reselling an existing home is not liable for GST and there is no ability to claim a credit for associated expenses. The ATO views significantly renovated homes as a new building but the indications as to what would qualify were not established in the sources reviewed. Contact a tax professional before quoting on a large renovation project.

70 Percent Rule House Flipping Offer Sheet: Four Lines to Replace the Shortcut

You can solve for the maximum offer directly. The formula folds duty and interest into the price, so you need no iteration.

Worked on the test deal: $850,000 minus $28,600 selling, minus $127,500 profit, minus $90,000 renovation, minus $3,000 legals, minus $6,000 holding gives $594,900. Divide by 1.0678 and the maximum price is $557,127.

Applying the same approach to a smaller deal. Suppose an ARV of $450,000 with cost assumptions as stated, ten percent renovation costs and a five month holding. Using the 70% approach and assuming a 15% profit margin the maximum offer is $270,000. This results in a profit of $91,610 or 20.4%, which means by applying this rule the investor would receive a 20.4% return. Using the formula for a 15% target maximum offer is $292,667, which is 75.0% of the ARV. This shows a differential of $22,667 which is the opportunity cost of applying the rule as a pricing guide.

The rule should be used to three tiers: first, use at 70% to immediately rule out bad deals, then plug the formula with our profit targets and our estimate to get a price, then take that price and deduct five points for 'solved' percentage for comps being available and scope being uncertain. That last step has nothing to do with the formula, it's just personal opinion.

Other software providers like Deal Check advise to determine dollar profit and also to adjust for possible surprise costs in the renovation budget. Flipper Force add the advice that the rule does not apply to BRRRR (Buy, Renovate, Rent, Refinance, Repeat) deals. These insights are all valid in an Australian context.

How FlipSync IQ Tracks 70 Percent Rule House Flipping Against Actuals

The formula generates the first offer, FlipSync IQ real-time analyzes if the deal is worth it when the costs show up. The ARV simulator calculates the maximum purchase prices and the cap on the fly. Margin protection guarantees that the minimum profit will be stored in the result.

Cost Library includes purchase, hold, sale, and renovation items, with custom lines available for stamp duty. Availability of built-in state duty tables cannot be guaranteed, so the user should use his or her own figures. Budget versus actual analysis will reveal discrepancies, and holding costs are calendar aligned, which is the same as converting any time slippage into dollars.

The Flip vs BRRRR analyser covers the rental exit when a sale stalls. Plans start at A$39.99 a month for three projects, and every plan starts with a 7-day free trial.