70 Percent Rule Flipping Calculator

Formula

The formula to calculate the Maximum Purchase Price (MPP) is:

\[ MPP = ARV \times 0.7 - RC \]

Where:

$MPP$ is the maximum purchase price (\$)
$ARV$ is the after repair value of the property (\$)
$RC$ is the estimated repair costs (\$)

What is the 70 Percent Rule Flipping?

The 70 percent rule is a common term used among real estate investors when flipping houses. It states that an investor should pay no more than 70% of the after-repair value (ARV) of a property minus the repairs needed. The ARV is what a home is worth after it is fully repaired. This rule is a guideline that investors use to determine how much to pay for a property to make a profit after it’s renovated and resold.

Example Calculation

Let's assume the following values:

After Repair Value (ARV) = $300,000
Estimated Repair Costs (RC) = $50,000

Using the formula to calculate the Maximum Purchase Price (MPP):

\[ MPP = ARV \times 0.7 - RC = 300,000 \times 0.7 - 50,000 = 210,000 - 50,000 = 160,000 \text{ dollars} \]

The Maximum Purchase Price (MPP) is $160,000.