1. What is the BiggerPockets 70% Rule?

The BiggerPockets 70% Rule is a real estate investing guideline that helps house flippers determine the maximum purchase price for a property. It ensures there's enough profit margin to cover all costs and provide a reasonable return on investment.

2. How Does the Calculator Work?

The calculator uses the BiggerPockets 70% Rule formula:

Where:

• \( \text{ARV} \) — After Repair Value (estimated property value after renovations)
• \( \text{Repair Costs} \) — Total cost of repairs and renovations
• \( \text{Holding Costs} \) — Costs during holding period (taxes, insurance, utilities)
• \( \text{Selling Costs} \) — Costs to sell the property (commissions, closing costs)

Explanation: The 70% rule accounts for a 30% margin to cover profit, contingencies, and unexpected expenses while ensuring the flip remains profitable.

3. Importance of the 70% Rule

Details: Following this rule helps real estate investors avoid overpaying for properties, maintain profit margins, and reduce financial risk in house flipping projects.

4. Using the Calculator

Tips: Enter accurate estimates for ARV and all costs. Use conservative numbers to build in a safety margin. All values must be non-negative currency amounts.

5. Frequently Asked Questions (FAQ)

Q1: Why 70% and not another percentage?
A: The 70% rule accounts for approximately 30% margin that covers profit, closing costs, carrying costs, and unexpected expenses that may arise during the flip.

Q2: Is the 70% rule applicable in all markets?
A: While it's a good guideline, market conditions may require adjustments. In hot markets, you might need to go higher, while in slower markets you might negotiate lower.

Q3: What if my calculated max offer is negative?
A: A negative result indicates the project may not be profitable with your current estimates. Reevaluate your numbers or consider walking away from the deal.

Q4: How accurate should my ARV estimate be?
A: Use comparable sales of recently sold similar properties in the same area. Consider getting a professional appraisal for more accurate valuations.

Q5: Should I include my profit in the calculation?
A: The 30% margin built into the 70% rule is designed to include your profit. The rule automatically accounts for profit without needing to add it separately.