80% rule

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I believe that somewhere I saw that one should only buy a property at 80% of what's it's worth. That's some great advice, but how do I know what the actual value of a property to see what 80% would be. I think I read this in the real estate investing book written by Brandon Turner. Not 100% sure though. Any advice on if the 80% rule is actually a thing or if I'm just making stuff up. All help appreciated.

Hi Elijah. Investors look to contract a property at the lowest possible price for the most part. 80% perhaps is just a rule of thumb. I've seen anywhere from 50%-85% of the value as a goal price. But analysis will determine if it's actually a deal at any percentage. But to answer your question, a properties value is determined by the market. Houses will sell for what buyers are willing to pay. So what are buyers willing to pay? Well, we tend to use sale comps(comparables) to determine market trends and home values. So for example, if you have a 4bed, 3bath, with a two car garage built in 2000 with 2500 sqft. You would look for recent sales in your market with similar features. This will tend to give you an idea of what your similarly featured home will sale for...or in essence, the market value of your property. Agents will have insight on this if you need help. Hope that helps. Good Luck.