When you first begin investigating how to flip houses, the majority of real estate agents will tell you that you absolutely must have an understanding of the numbers.
If you go into real estate deal without knowing your numbers cold, you can bet on one thing you will have a very short lived house flipping and real estate investing career.
The good news is that in the house flipping business, you don't have to have a PhD in mathematics in order to understand the math behind house flipping. When it comes to the math component, you only need to understand middle school grade level formulas.
So if you can grasp:
200,000 divided by 70 percent equals 140,000
Then great, you already possess the math skills necessary to flip houses for a profit.
Through the mathematics alluded to above, you will already have solved the most basic and virtually the most important house flipping formula of all. This formula will save you thousands and dollars in mistakes in your house flipping career, but also make you a lot of money of the course of your career.
The one thing you need to know is a bit of 5th grade level math.
The thing you must understand is just a tad of middle school mathematics.
Once you have determined the ARV, or after repair value of a home, the very next math step is to use the 70 percent rule.
The validity of the 70 percent rule depends highly upon the accuracy of your ARV which as with anything else, the more house flips you have under your belt the more accurate your ARV estimates will become.
The 70% rule can vary from house to house, it all hinges on what you choose for your ARV of the property. The higher the ARV, the more the 70% rule can may be, which can be up to 90 percent in some cases.
Yet the lower your after repair value is estimated at, and (we often use 200K as our ARV benchmark) it could contract to fifty or sixty percent in some instances. It all hinges on the type of home you are planning to invest in.
I usually flip houses in the first time home buyer price range, which I find to often times be in the $200,000 range. You may want to adjust the numbers depending on your own local real estate market.
The 70% Rule is definitely a good rule to review because using it properly is absolutely essential to success.
Let's say you and your real estate agent have determined that the average selling price or ARV for houses that are similar to the one that you want to flip have been selling around $200,000.
The next step would be to use the 70 percent rule to figure out how much you would spend on flipping the house, as well as using the rule to figure out the best offer on the property. So here is the math:
Investment amount for repairs equates to $40,000
70% rule = $140,000
Maximum offer on the property = 100 grand
This formula is simplified a bit here, however the important thing to take away from here is that the math involved in house flipping is simplistic.
The seventy percent rule can save you a lot of dough and prevent you from making bad deals. However, you must adhere to it each and every day of your house flipping career.
So stick to the 70% Rule when learning to flip houses. This simple rule could save you thousands of dollars and help you to make good money in this business.
If you go into real estate deal without knowing your numbers cold, you can bet on one thing you will have a very short lived house flipping and real estate investing career.
The good news is that in the house flipping business, you don't have to have a PhD in mathematics in order to understand the math behind house flipping. When it comes to the math component, you only need to understand middle school grade level formulas.
So if you can grasp:
200,000 divided by 70 percent equals 140,000
Then great, you already possess the math skills necessary to flip houses for a profit.
Through the mathematics alluded to above, you will already have solved the most basic and virtually the most important house flipping formula of all. This formula will save you thousands and dollars in mistakes in your house flipping career, but also make you a lot of money of the course of your career.
The one thing you need to know is a bit of 5th grade level math.
The thing you must understand is just a tad of middle school mathematics.
Once you have determined the ARV, or after repair value of a home, the very next math step is to use the 70 percent rule.
The validity of the 70 percent rule depends highly upon the accuracy of your ARV which as with anything else, the more house flips you have under your belt the more accurate your ARV estimates will become.
The 70% rule can vary from house to house, it all hinges on what you choose for your ARV of the property. The higher the ARV, the more the 70% rule can may be, which can be up to 90 percent in some cases.
Yet the lower your after repair value is estimated at, and (we often use 200K as our ARV benchmark) it could contract to fifty or sixty percent in some instances. It all hinges on the type of home you are planning to invest in.
I usually flip houses in the first time home buyer price range, which I find to often times be in the $200,000 range. You may want to adjust the numbers depending on your own local real estate market.
The 70% Rule is definitely a good rule to review because using it properly is absolutely essential to success.
Let's say you and your real estate agent have determined that the average selling price or ARV for houses that are similar to the one that you want to flip have been selling around $200,000.
The next step would be to use the 70 percent rule to figure out how much you would spend on flipping the house, as well as using the rule to figure out the best offer on the property. So here is the math:
Investment amount for repairs equates to $40,000
70% rule = $140,000
Maximum offer on the property = 100 grand
This formula is simplified a bit here, however the important thing to take away from here is that the math involved in house flipping is simplistic.
The seventy percent rule can save you a lot of dough and prevent you from making bad deals. However, you must adhere to it each and every day of your house flipping career.
So stick to the 70% Rule when learning to flip houses. This simple rule could save you thousands of dollars and help you to make good money in this business.
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