How closely do you follow the 70% rule?
Where I live, I have seen wholesalers post houses at 88%. I am trying to get into both rehabbing and wholesaling. I think that if I'm waiting for a house at 70% value, I will be waiting a long time. I'm in central Florida, which I'm told is a heavy seller's market right now.
I think I should even be happy with 90% at this point. (10% profit). Anything is better than nothing.
What about all the experienced rehabbers (and wholesalers) out there? Should I adjust to reality and go well above 70%?
Most Popular Reply
With the 70% rule, the 30% is not just profit -- it's profit plus fixed costs (buying costs, holding costs, and selling costs).
Typically, between 10-20% of the ARV will be spent in fixed costs, so, with the 70% rule, you're profit is somewhere in the 10-20% of ARV range.
If you buy at 90%, you are almost guaranteed to not make a profit -- and potentially lose money.