70% Flip Rule When You Are A REALTOR

2 Replies

Hi All,

As a licensed REALTOR in the flipping business do you all still use the 70% rule when considering buying a below market value property?? For example a property ARV is 200K and needs about 25K in repairs what would be the most you would pay for a 25K profit? Let me know what you all think.

Hey @Justin Cousins-Lee ! Here's how I see it:

Your buyer's agent commission will be 3%, so that'd take your price from $200k to $194,000.

Subtract your desired profit of $25k, and your expenses of $25k.

I've never been under budget :) so add yourself a contingency of $5k. You'll want to take your closing costs into account on both sides of the sale, buy and sell. You'll also want to consider holding costs for how long it'll take you to finish your project from close to close. I'm not sure what those numbers look like in your area, but I'd guesstimate another $10k. If you're financing the deal, you'll also want to add financing costs (loan origination fees etc). into your expenses.

This would put me at a purchase price of ~$129k to be able to gross a $25k profit. $125k to be extra sure with financing costs.

Hope this helps a bit! Best of luck!

Thank you for the response!
Originally posted by @Luke Trovinger :

Hey @Justin Cousins-Lee! Here's how I see it:

Your buyer's agent commission will be 3%, so that'd take your price from $200k to $194,000.

Subtract your desired profit of $25k, and your expenses of $25k.

I've never been under budget :) so add yourself a contingency of $5k. You'll want to take your closing costs into account on both sides of the sale, buy and sell. You'll also want to consider holding costs for how long it'll take you to finish your project from close to close. I'm not sure what those numbers look like in your area, but I'd guesstimate another $10k. If you're financing the deal, you'll also want to add financing costs (loan origination fees etc). into your expenses.

This would put me at a purchase price of ~$129k to be able to gross a $25k profit. $125k to be extra sure with financing costs.

Hope this helps a bit! Best of luck!

 

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