1. What is the 70% Rule?

The 70% Rule is a real estate investing guideline that helps house flippers determine the maximum price they should pay for a property. It states that an investor should pay no more than 70% of the After Repair Value (ARV) minus the cost of repairs.

2. How Does the Calculator Work?

The calculator uses the 70% Rule formula:

Where:

• \( \text{ARV} \) — After Repair Value (USD)
• \( \text{Repair Costs} \) — Estimated repair costs (USD)

Explanation: This formula ensures that investors maintain a 30% margin to cover holding costs, closing costs, and profit while accounting for repair expenses.

3. Importance of the 70% Rule

Details: Following the 70% Rule helps real estate investors minimize risk, ensure profitability, and make informed purchasing decisions when flipping properties.

4. Using the Calculator

Tips: Enter the estimated After Repair Value and repair costs in USD. Both values must be non-negative numbers to get accurate results.

5. Frequently Asked Questions (FAQ)

Q1: Why use 70% instead of another percentage?
A: The 70% rule provides a conservative margin that typically covers all expenses (closing costs, holding costs, repairs) while leaving room for profit.

Q2: What if my repair costs are underestimated?
A: Always add a contingency buffer (10-20%) to your repair estimates to account for unexpected expenses that may arise during renovation.

Q3: How accurate is the ARV estimation?
A: ARV should be based on recent comparable sales of similar properties in the same area that have been fully renovated.

Q4: Does this rule work in all markets?
A: The 70% rule works best in stable markets. In highly competitive markets, investors may need to adjust the percentage upward, accepting lower margins.

Q5: What other costs should be considered?
A: Besides repair costs, consider closing costs, holding costs (mortgage, utilities, insurance), selling costs, and contingency funds.