Do you always use the 70% rule when buying a flip?

[Melissa Harris]

I would like to get some insight from experienced investors on if you use the 70% rule for ALL your flips? Could someone explain a little bit more in depth what the 70% rule really means and why they suggest you buy a house with this rule minus your repairs?

[Shawn Clark]

Are you doing the rehab yourself or selling to an investor? Keep in mind there can be $30,000 in hard money costs on one like that. Plus $20,000 in commissions to sell it. Etc.

That still leaves roughly $50,000 profit IF your other numbers are correct. I would be fine with that myself. But I don’t use percentages. And I usually deal in lower priced properties. My minimum is $20,000 for profit but that equates to about 15%.

Keep in mind on the higher price properties the mistakes can be bigger too. So that’s why $50,000 might seem large for profit but what if the real ARV is $480k or the rehab is $45k or the sale takes longer? Or all of the above?