The 70% rule is a common term used by many Real Estate Investors when fixing and flipping houses. The rule is basically a standard equation to go by when figuring out how much you should pay for a property depending on its overall worth and investment costs. In general, this can be a helpful guide, but it is not a flawless solution that can be used without considering all factors of the property.
The rule states that the buyer/investor should be paying 70% of the ARV worth (after repaired value) minus the cost of any repairs needed. Therefore, if the home’s ARV is $130,000, 70% of that would be $91,000 – but the property needs a total of $15,000 in repairs. You would then subtract $15,000 from $91,000, meaning the 70% suggests that you should pay $76,000.CONTINUE READING