The 70% Rule

[Iverem Rose]

Why is 70% of ARV the benchmark for making offers on properties?

[Jon Holdman]

Its just math. If your purchase plus rehab costs are about 70% of ARV, a HML will lend you 70% of ARV, you hold for six months, stick to your rehab budget and sell for your projected ARV, your net profit will be about 13% of ARV after all the holding, money, purchase and sale costs. That gives you some leeway so you can go over budget on the rehab, hold longer than you expect, and sell for less than you expect and still have a profit.

If any of those assumptions don't apply (e.g., you have your own cash and don't need a HML, you have your own construction crew instead of having to hire contractors) you may be able to do thinner deals and still turn a profit.