Please Clarify 70% Rule and Wholesaling
How do the 70% rule fit in with wholesaling. Please clarify this for me. How do I use it when making a deal? Thanks in advance.
Most Popular Reply
As I understand it...
$100,000 ARV * .7 = $70,000 - $10,000 repairs = $60,000 sale price to investor
So your goal is to get the contract for somewhere under $60,000, the difference being your profit.
However, there is a lot of debate on how hard and fast this rule is. What I have learned from reading several posts about this topic is that it comes down to knowing your buyers. Some will buy at higher %, some don't use a percentage at all (like J Scott, who says he just decides how much he'd like to make on the deal) and buy-and-hold investors may just be happy with getting some equity and cash flow that makes sense to them.
I hope that helps some.