I have heard this for sooooo long. It is such a popular equation, it has almost become a rule. People get mad if there is a property offered at less than 70% of ARV minus repairs. The fact of the matter is, that while popular in REIA groups, this simply is not the case on most investment deals. The large majority of investment properties are bought by people who never have and never will come to a REIA group. They are not on Biggerpockets right now reading this. The thing that attracted me most to Real Estate and "Real Estate Investing" when I first got involved was that I could make up the rules. I could structure deals as creatively as my mind would allow. I could sell a property for as high as the market would allow.

If you are not willing to purchase a deal that does not fall in the 70% of ARV rule that is fine. I completely understand. Let me ask you this question though. Would you purchase a property that needs $0 in rehab for 80% of ARV? How about 85% of ARV? How about a house that needs a minimal amount of work for 78% of ARV? What if there was a house that was new construction in a HOT area that you genuinely believed in; would you purchase it for 90% of appraised value?

The point is not everything fits into one category. There are different investors with different priorities. I have a Doctor friend who lives in another state who makes a TON of money and he asked me for some advice. I went on and on about all the things he could do and after a while he said “Scott, I work all day everyday and on the weekends when I have a small break I spend it with my family. I’m not going out to look at any F$%#ing houses on those days or chase around some partner who is supposed to be doing the work.” We talked more about it and concluded that a sound investment strategy for him would be to buy new to almost new houses and rent them out long term using a property management company. He had a Realtor handle a large amount of the front load of the work and a property management company handle a large amount of the back load. Is this a sound investment strategy? YES! You better believe it is for the number one reason that it fits into his lifestyle and he was comfortable doing it. Would someone who is a “Real Estate Investor” implore this strategy? Probably not.

Richmond, Virginia

4 Votes