1. What Is The 70 Percent Rule?

The 70 Percent Rule is a guideline used by real estate investors to determine the maximum price they should pay for a property when flipping. It ensures there's enough profit margin after accounting for repair costs and other expenses.

2. How Does The Calculator Work?

The calculator uses the 70 Percent Rule formula:

Where:

• \( \text{ARV} \) — After Repair Value (estimated property value after renovations)
• \( \text{Repair Costs} \) — Total estimated cost of repairs and renovations

Explanation: This formula ensures investors leave a 30% margin to cover holding costs, closing costs, profit, and unexpected expenses.

3. Importance Of The 70 Percent Rule

Details: Following this rule helps investors minimize risk and ensure profitability in property flipping ventures. It provides a quick way to evaluate potential deals and avoid overpaying for properties.

4. Using The Calculator

Tips: Enter the estimated After Repair Value in currency and the total Repair Costs in currency. Both values must be non-negative numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why use 70% instead of another percentage?
A: The 70% rule accounts for approximately 30% in various costs (closing, holding, profit margin), leaving a safe buffer for investors.

Q2: Is this rule applicable in all markets?
A: While it's a good guideline, market conditions may require adjustments. In highly competitive markets, the percentage might need to be higher.

Q3: What costs are included in repair costs?
A: Repair costs include materials, labor, permits, and any other expenses directly related to renovating the property.

Q4: How accurate should ARV estimates be?
A: ARV should be based on recent comparable sales of similar properties in the same area that have been renovated to similar standards.

Q5: Can this calculator be used for commercial properties?
A: While the principle is similar, commercial property flipping often involves different calculations and considerations.