Does the 70% rule really work?

[Blaine Cox]

Reading about the 70% rule, but am interested if this really works for some on here.  For an easy example I'm looking at a smaller home for a quick turn around that is asking $74,500.00  The after repair value is going to be around $85,000 so they are already too high with an asking price.  However, with the 70% rule that would put me at a $42,150 which includes the estimated $10,000 fix up cost.  Thats over $30,000 off of the asking price......  Does this approach really work??

[J Scott]

I prefer to use actual numbers as opposed to relying on the 70% rule (which has issues for very high and very low priced houses).  Here is how I do it:

http://www.biggerpockets.com/renewsblog/2010/03/10...

To use the formula, you need to be able to accurately estimate ARV:

http://beta.biggerpockets.com/forums/311/topics/73...

You need to be able to estimate Fixed Costs:

http://www.biggerpockets.com/renewsblog/2010/03/17...

You need to be able to estimate rehab costs:

http://www.biggerpockets.com/flippingbook

And you need to determine your desired profits...I strive for 15% of resale value with a minimum of $15K (for lower priced projects).