The 70% Rule...does it still work in this market?

[Rashad S.]

Greetings! I wanted to know what you all think about the 70% rule as it pertains to flipping houses.

How do you feel about it in this current market? I live in Atlanta Georgia where the market feels a bit saturated and it’s pretty hard to find deals using the 70% rule. I find myself looking for subcontractors that do very good work, but for cheaper prices, which requires more management from me.

I personally feel like there’s a lot of money being left on the table when you pass up an investment opportunity because it falls slightly below the 70% rule.

Now if you’re getting construction bids done at $12 - $20 per square feet like J and others do, then I’m sure you can go below the 70% rule (by the way how in the world can I get to those numbers for rehab bids!?!? Lol).

[Jeff Copeland]

This is very location-specific. But in most markets, the 70% "rule" went extinct years ago. 

And it's more of a guideline that a hard and fast rule. If you are leaving money on the table "because it falls slightly below the 70% rule", then you missed the point.

Ultimately, it depends on what the opportunity cost is: 

• If you flip a house bought at 80% of ARV, that's great if your alternative (the opportunity you're giving up) is doing nothing. 
• On the other hand, if you're buying 80% houses instead of 70% houses, then you're not doing it right.