Using the standard 70% ARV formula, $340k * 70% less 100k rehab = $138k max purchase price.

The formula is:Yearly NOI / Acquisition Cost = CAP Rate Actual numbers:142,000 / 2,000,000 = 7.1%That number means if you paid all cash you would earn 7.1% return on your capital.

utm_source=BiggerPockets+Newsletter&utm_campaign=65d81ad5e0-January_17_2013_Newsletter&utm_medium=emailwhen I came across this paragraphSo based on the typical house flip formula of 70% of after-repaired-value, minus repairs, he should not pay more than $65,000 ($100,000 * .7 – $5,000 = $65,000).And I was just wondering if anyone is really sticking to the 70% rule in this competitive buying market?

Particular spreadsheets, formulas, guiding principles, etc

Failing to identify these differences will skew your analysis as valuation is not strictly a math formula of square footage costs and adjusting for amenities.These influences will be magnified as you move further away from the subject property.

Is anyone having any success with the 60-65% ARV formula during the decline?

If I were hiring the job out and acting as the project manager like I would normally do, I would figure the renovation cost at about $60k but may have altered the scope of work a little.That would still put it well within the formula for a profitable deal.($150,000 * 70%) - $60,000 = $45,000 max purchaseI paid $48k, but used cash so that there is no financing cost involved, that allows you to pay a little more.

But like any formula, it's not gonna assure you a "safe" rental.

So many people are searching for the magic formula, and it seems that what many of these seminars are selling is the hope that it's all real, rather than having to roll your sleeves up and build it one little bit at a time through hard work, discipline, patience, and careful choices.I'd say that a person who purchases homes with cash, or through sensible use of leverage with enough equity to balance risk/higher returns, is displaying those qualities and is far from "stupid and lazy"!!

As a rule a riser and tread formula works like this.