70% rule in flipping

26 Replies

Here is a screen grab from my analysis spreadsheet. As you can tell I figure out ARV and then compare 65,70,75%. This is my first check to make sure I am in the right realm. I then go through profit scenarios with acutal costs and come up with my offer.

This particular deal I bumped up $20,000 because there was a 1 acre buildable parcel included that I would separate. 

Originally posted by @Dan Heuschele :

I have never flipped a property but my opinion is that it does not work well for the cheapest properties.  Those properties that @James Wise indicates is best left to experts.  I get emails from him, he is very open about the risks, that are dirt cheap.  Like literally in most of the nation you could not buy the dirt/land for the price he is requesting for the RE.

So lets say that his $15K duplex (I believe that is the price of the duplex he emailed me this weekend (again fully disclosing condition and the type of location - no slam to James Wise he seems to be very up front (with full disclosure) about the risks - just using his price range of properties as an example)). Lets say I can rehab it for a cost of $55K and it has an ARV of $100K. Meets the 70% rule. $30K profit, not bad. Take out selling fees and holding costs, $20K of profit if I can flip it fast (probably less for all but the most experienced flippers). That is a lot of work for a max upside of $20K. Most people who can actually bring this in at a profit of $20K deserve to be better compensated for their skills.

So my qualifier to the 70% rule is that the 30% must be greater than $50K in all markets and approaching $100K in my market.

Good luck

 Glad you're watching the show and reading the emails. Keep on keepin' on.