1. What is the 70% Rule?

The 70% Rule is a real estate investing guideline that helps investors determine the maximum offer they should make on a property. It states that an investor should pay no more than 70% of the After Repair Value (ARV) minus the repair costs.

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 rule ensures investors leave a 30% margin to cover holding costs, closing costs, profit, and unexpected expenses.

3. Importance of the 70% Rule

Details: Following the 70% Rule helps real estate investors maintain profitability, account for market fluctuations, and build in a safety margin for unexpected costs.

4. Using the Calculator

Tips: Enter accurate ARV and repair cost estimates. The ARV should be based on comparable sales in the area, and repair costs should include all anticipated renovation expenses.

5. Frequently Asked Questions (FAQ)

Q1: Is the 70% Rule always applicable?
A: While it's a good guideline, market conditions, property location, and investor strategy may require adjustments to this rule.

Q2: What if my calculated offer is rejected?
A: You may need to reassess your ARV estimates, repair costs, or consider if the deal meets your investment criteria before increasing your offer.

Q3: Does the 70% Rule include closing costs?
A: The 30% margin is designed to cover closing costs, holding costs, and profit, but specific calculations may vary by investor.

Q4: How accurate should my repair estimates be?
A: It's crucial to get detailed repair estimates from contractors to ensure your calculations are realistic and account for all necessary work.

Q5: Can I use a different percentage than 70%?
A: Yes, some investors use 65% or 75% depending on market conditions, property type, and their risk tolerance.