Applying Rules of Thumb to Inflated Markets

[Joshua Durrin]

Hi there,

I'm looking to do some wholesaling in the east bay. However, when one considers the discount on the property after applying the 70% ARV rule of thumb, that's a pretty sizable chunk of money in this inflated market. Given a retail value of $600k, 30% discount on that is $180k. Is that still a reasonable discount or is the rule of thumb to be adjusted for higher ARV properties?

My understanding is that the rule of thumb is typical on a ~$160k property, thus equating to about a $48k profit margin.  Naturally, $180k is far different than $48k.  One can also argue that the risk is greater with a $600k house versus a $160k house.  But does that alone justify the huge margin in comparison?