When you first begin investigating how to flip houses, all real estate investors will tell you that you must have a firm grasp of the numbers that are involved in the deal.
If you go into real estate deal without knowing your numbers cold, one thing is absolutely sure you will have a very short lived house flipping and real estate investing career.
The good news is that in the house flipping business, there is no need to remember funky and complex mathematical and algebraic calculations. When it comes to the math component, you only need to understand middle school grade level formulas.
As an example, if you can understand numbers such as:
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.
After you have figured out your ARV, (the after repair value of a home or property), 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 will change depending on the type of house you are working on, it all is dependent on your ARV estimate. The higher the ARV, the higher your 70% rule may be, which could even be as high as eighty or ninety percent.
And the lower your ARV is, and ($200,000 is often used as a good benchmark for after repair value) it could contract to fifty or sixty percent in some instances. The entire formula is flexible and depends highly on the situation and the type of house you are planning on flipping.
In Massachusetts, the house flipping market range is around $200,000. You may want to adjust the numbers depending on your own local real estate market.
It's a good rule to review to make sure that you understand it fully.
So lets assume that you have determined that the ARV of a house you want to flip is around the $200,000 price range.
You would then use the 70% rule to determine how much you should spend on your rehab, in addition to figuring out how much you should probably offer to buy the property in the first place.
Investment amount for repairs equates to $40,000
Seventy percent rule = $140,000
Max bid = $100,000
There are many other mathematical calculations that any successful real estate investor must do in order to be successful flipping houses, but the bottom line is that most important math in house flipping is very simple math.
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 when starting out, stick to the rules. The 70% rule in particular has helped many investors tremendously throughout the years. And I am confident it will help you as well.
If you go into real estate deal without knowing your numbers cold, one thing is absolutely sure you will have a very short lived house flipping and real estate investing career.
The good news is that in the house flipping business, there is no need to remember funky and complex mathematical and algebraic calculations. When it comes to the math component, you only need to understand middle school grade level formulas.
As an example, if you can understand numbers such as:
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.
After you have figured out your ARV, (the after repair value of a home or property), 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 will change depending on the type of house you are working on, it all is dependent on your ARV estimate. The higher the ARV, the higher your 70% rule may be, which could even be as high as eighty or ninety percent.
And the lower your ARV is, and ($200,000 is often used as a good benchmark for after repair value) it could contract to fifty or sixty percent in some instances. The entire formula is flexible and depends highly on the situation and the type of house you are planning on flipping.
In Massachusetts, the house flipping market range is around $200,000. You may want to adjust the numbers depending on your own local real estate market.
It's a good rule to review to make sure that you understand it fully.
So lets assume that you have determined that the ARV of a house you want to flip is around the $200,000 price range.
You would then use the 70% rule to determine how much you should spend on your rehab, in addition to figuring out how much you should probably offer to buy the property in the first place.
Investment amount for repairs equates to $40,000
Seventy percent rule = $140,000
Max bid = $100,000
There are many other mathematical calculations that any successful real estate investor must do in order to be successful flipping houses, but the bottom line is that most important math in house flipping is very simple math.
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 when starting out, stick to the rules. The 70% rule in particular has helped many investors tremendously throughout the years. And I am confident it will help you as well.
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