Fix and flip calculator vs 70% rule

[Jeff R.]

I have been using the 70 percent rule on my deals to determine the MAO. I used the fix and flip calculator in the tools tab and am having trouble understanding why the big difference in MAO. They both serve the same intent which is find, fix, and sell. Granted the 70 percent can be adjusted to fit a specific market. A recent analyses of a deal was $189,200 MAO using 70 percent rule, the other about $245,000 MAO using fix and flip calculator. Can someone shed some light on this?

Thanks

[Matt Crusinberry]

@Jeff R., I would say that the 70% rule is just that... 70% of the ARV, while fix and flip is going to be geared closer to a profitable number that you may be okay with. I wouldn't recommend using the 70% rule (personal preference) for properties that ARV over 250k. An example would be flipping a house in CA for $1 million dollars, 70% rule would suggest 700k with a 300k profit (obviously rough numbers w/o closing cost). While this would be an awesome deal and if you could land something like that in this market good for you, but the probability would be scarce. I would flip it for 80% or 90% of the ARV if the numbers looked like that. Really it comes down to what you're willing to accept as a return. I hope this helps, and good luck!

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