1. What is the 70 Percent Rule?

The 70 Percent Rule is a real estate investing guideline that helps investors determine the maximum price they should pay for a property. It ensures there's enough margin to cover repair costs and still make a profit after renovations.

2. How Does the Calculator Work?

The calculator uses the 70 Percent Rule equation:

Where:

• \( BP_{max} \) — Maximum Buying Price ($)
• \( ARV \) — After Repair Value ($)
• \( ERC \) — Estimated Repair Costs ($)

Explanation: The rule suggests that investors should pay no more than 70% of the property's after-repair value minus the repair costs to ensure adequate profit margin.

3. Importance of Maximum Buying Price Calculation

Details: Calculating the maximum buying price is crucial for real estate investors to maintain profitability, account for unexpected expenses, and ensure a safe investment return.

4. Using the Calculator

Tips: Enter the estimated after-repair value and repair costs in dollars. Both values must be non-negative numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why use 70% instead of other percentages?
A: The 70% rule provides a conservative margin that accounts for profit, holding costs, and unexpected expenses while remaining competitive in the market.

Q2: What if the calculated maximum price is negative?
A: A negative result indicates that the repair costs are too high relative to the ARV, making the investment potentially unprofitable.

Q3: How accurate is the After Repair Value estimate?
A: ARV should be based on comparable property sales in the same area. Professional appraisals provide the most accurate estimates.

Q4: Should repair cost estimates include contingency?
A: Yes, it's recommended to include a contingency buffer (typically 10-20%) for unexpected repairs and cost overruns.

Q5: Is this rule applicable to all real estate markets?
A: The 70% rule works best in stable markets. In highly competitive or rapidly appreciating markets, investors may need to adjust the percentage.