Applying Rules of Thumb to Inflated Markets
Hi there,
I'm looking to do some wholesaling in the east bay. However, when one considers the discount on the property after applying the 70% ARV rule of thumb, that's a pretty sizable chunk of money in this inflated market. Given a retail value of $600k, 30% discount on that is $180k. Is that still a reasonable discount or is the rule of thumb to be adjusted for higher ARV properties?
My understanding is that the rule of thumb is typical on a ~$160k property, thus equating to about a $48k profit margin. Naturally, $180k is far different than $48k. One can also argue that the risk is greater with a $600k house versus a $160k house. But does that alone justify the huge margin in comparison?