Fix n Flip 70% rule

[Shayan Sameer]

Hello Everyone,

I have a few questions for all the fix/flip investors.  I did 2 fix flips last year.  One, I made a profit; other one, I kinda even out.  I learned a lot from both projects and hope to learn more.  I wanted to know what are your thoughts on the 70% rule.  Do you guys still apply that rule?  For all the deals here in South Florida, I'm not able to do 70%, and it seems like the profit margin is really small.  What dollar amount or percentage do you guys usually look for in fix/flip properties? 

My 70 % rule...

ARVx70% - rehab cost = purchase price.  

2nd question.... I know with a hard money lender, you lost good amount of profit.  Do you guys use hard money lender for a rehab or use your own cash?  

[Chris Seveney]

Quote from @Shayan Sameer:

Hello Everyone,

I have a few questions for all the fix/flip investors.  I did 2 fix flips last year.  One, I made a profit; other one, I kinda even out.  I learned a lot from both projects and hope to learn more.  I wanted to know what are your thoughts on the 70% rule.  Do you guys still apply that rule?  For all the deals here in South Florida, I'm not able to do 70%, and it seems like the profit margin is really small.  What dollar amount or percentage do you guys usually look for in fix/flip properties? 

My 70 % rule...

ARVx70% - rehab cost = purchase price.  

2nd question.... I know with a hard money lender, you lost good amount of profit.  Do you guys use hard money lender for a rehab or use your own cash?  

 70% rule is very different on a $100,000 property vs a $1,000,000 property. I never go off of a flat percentage on anything, I analyze the costs to get to a specific return I target and analyze the risk that is involved. 70% may be an initial metric to see if it is even worth pursuing, but every deal should be evaluated independently based on costs, time and risk involved. As you mention, if you are using hard money yes you are paying more in interest and if you hvae the cash I would recommend using cash over hard money due to the high interest rate that you are paying.