I'm new to real estate investing and had a quick question:
Does buying at 70% of retail house price always apply?
@Anush P. I personally don't think so, too many other factors at play. If I can buy a house at 80% retail and the numbers still work out... well, the numbers still work our. I think it's important to have a go to property analysis approach that works for you specifically and your goals / plan.
I do mostly buy and hold and have had success that I am pleased with... and all w/out ever reaching the "2% rule".
@Anush P. No. Assuming a flip, the general rule is 70% of after repair value (ARV) minus repairs. It depends on:
1. How expensive your money is. If you are paying 15% interest to a hard money lender you need to make sure there is enough room for profit.
2. The ARV of the house. More expensive houses can be good deals at higher than 70% minus repairs. For really low priced houses you may need to only pay 50% ARV minus repairs in order to have enough of a profit cushion that you can handle an expensive gotcha or two.
3. How many deals you want. The more you'll pay the more deals you'll get. And vice versa.
No % rule of thumb always applies. Those are used as a way of sorting through the crap to find the deals upon which it is actually worth spending your time.
It is a very general rule of thumb. On a property that is very cheap, that 30% discount may not provide enough margin for a good amount of profit. On a very expensively priced property you may only need to buy at a 20% or even a 15% discount to have plenty of margin for profit.
Thank you all! Your guidance is much appreciated.