How do you flip houses? You must buy homes at a reasonable price to make a good profit when you sell them. It will be much harder to make those big bucks if you overspend on the home purchase front.
How do you know if a home’s sale price is correct? The 70% rule may be a good guide.
This rule does not replace the hours of research that you will need to ensure you aren’t paying too much for a home that you want to turn into.
What is the 70% rule in house flipping?
The simple way home flippers make money is to buy a house cheaply, fix it up and then sell it for a higher price. Flippers aim to sell high and buy low to increase their profits.
Flippers can benefit from the 70% rule when looking at real estate listings. It basically states that investors shouldn’t pay more than 70% of a property’s after-repair value, minus the cost for repairs.
What does this all mean? What does this mean? Investors need to determine how much the property will sell once it has been renovated before they buy a home to flip. Then, they can multiply that number by 70% and subtract the cost of renovating the property.
This is the maximum price that property flippers should be willing to pay.
However, the key is to remember that the 70% rule is a guideline. You should research the market and consult real estate professionals to obtain a more accurate resale price. Also, meet with contractors to discuss how much and what renovations will be necessary.
What is the 70% Rule?
The 70% rule is based on a simple calculation.
After-repair Value (ARV) =.70 – Estimated Repair Costs = Maximum Buying Price
This maximum selling price will help you determine how much to spend on a house you intend on renovating or reselling. You could lose your profit margins if you go over that limit.
The 70% Rule is not a substitute for detailed analysis.
Flipping a house can be a profitable venture. However, this money-making strategy comes with its risks. If you have never owned a home flip, you should expect to spend more than you think and make less when you sell it. Flipping houses is not easy. Make sure you learn as much as possible about real estate markets before making any mistakes.
What about the 70% rule? It is a guideline. However, it is important to do thorough research about the area in which you are interested in buying. This includes researching the average sale prices and costs of renovating the property.
Read on if you are ready to jump in. investing in real estate So you are as prepared as possible