To calculate the maximum purchase price (MPP) for a house flip using the 70 Percent Rule, multiply the After Repair Value (ARV) by 0.7 and then subtract the estimated repair costs (RC).
The 70 Percent Rule Flipping Calculator is an invaluable tool for the real estate investors. It helps the real estate investors to estimate the maximum price they should pay for a property they intend to flip. The rule helps ensure that investors leave enough room for profit after covering repair costs and other expenses.
By using the formula, you can quickly assess whether a deal is worth pursuing, based on the projected after-repair value (ARV) and renovation costs.
Formula:
| Variable | Description |
|---|---|
| MPP | Maximum Purchase Price (what you should pay for the property) |
| ARV | After Repair Value (projected value after renovations) |
| RC | Repair Costs (estimated renovation and repair costs) |
Solved Calculation:
Example 1:
| Step | Calculation |
|---|---|
| After Repair Value (ARV) | $200,000 |
| Repair Costs (RC) | $50,000 |
| Maximum Purchase Price Calculation | |
| Result |
Answer: The maximum price you should pay for the property is $90,000.
Example 2:
| Step | Calculation |
|---|---|
| After Repair Value (ARV) | $300,000 |
| Repair Costs (RC) | $80,000 |
| Maximum Purchase Price Calculation | |
| Result |
Answer: The maximum price you should pay for the property is $130,000.
What is 70 Percent Rule Flipping Calculator?
The 70 Percent Rule Flipping Calculator is a valuable tool that is used by real estate investors for making fair deals. With the help of this tool, the real estate investors can assess the maximum price they should pay for a property in order to make a profit when flipping it.
The rule suggests that investors should not pay more than 70% of the After Repair Value (ARV) of a property, minus the estimated repair costs. This helps ensure there’s enough room for profit after covering renovation and selling costs.
If the ARV of a house is $200,000 and the estimated repairs are $30,000, the calculation would be:
Maximum Offer = ($200,000 × 0.70) – $30,000 = $140,000 – $30,000 = $110,000
This means the highest price you should pay for the property is $110,000 to ensure a profitable flip.
In this way, tools like the house flip calculator in Excel, ARV calculators, and fix and flip analysis apps can help automate this process. Many real estate investors use these calculators, as well as max offer calculators, to make informed decisions about whether to buy a property for flipping.
Final Words:
To sum things up, the frequent use of these calculators gives the real estate investors a fair chance to make profitable deals. More importantly, all these calculators follow the 70% rule, leaving a comfortable margin for profit.
