A GUIDE TO THE 70 PERCENT RULE IN REAL ESTATE
70 percent rule formula:
To calculate the 70 percent rule for flipping houses, determine the property’s after repair value and total repair costs. The ARV refers to the estimated value of the property after you complete all repairs. It’s typically used by investors seeking to complete fix and flip projects within one year. After you determine these values, insert them into this formula to get an estimate of what the property will sell for after renovations. ARV x 70% – Repair Costs = Offer Price
Is the 70 percent rule accurate?
The 70 percent rule will typically give you an accurate prediction of your property’s final selling price after renovations. In certain cases, however, you may need to adjust the formula to suit your unique project. For this reason, many people prefer to use the X percent rule instead. The basic principles and formula behind the X percent rule are essentially the same as the 70 percent rule in real estate. The only difference between the two rules is that the percentage can be any value, not just 70. Since it’s an adjustable formula that accounts for various factors, you can come up with a more individualized prediction as to how much your project will make. Depending on a project’s scope, time frame, financing options, local market, and the investor’s goals, one may choose to change the percentage to 60, 80, or even 90. As such, the 70 percent rule serves as more of a general guideline than a strict rule. If you’re looking at taking out a loan to fund your fix and flip project, Streamline Mortgage can help. Our hard money lenders in Henderson, Reno, and Las Vegas offer a wide range of loan options to suit your project’s specific needs. Apply online or visit us at one of our locations today.