The 70% rule states that an investor must pay no more than 70% of the post-repair value (ARV) of a property minus necessary repairs. The ARV is what a home is worth after it has been fully repaired. From there, it should be fairly easy to approximate how much money you can make by tipping homes, based on the average net profit and the total number of changes a home investor can realistically complete in a single year. Flipping and other self-employed professionals create income streams that vary and are based solely on investment potential, the current housing market, and risk tolerance and knowledge of the flipper.
If your home needs major or costly improvements, it might be easier to sell to a homebuyer rather than investing in renovations. Losing a job or deteriorating health for a family member can also cause unexpected problems paying your mortgage. A salary, which is defined as a periodic payment received by an employee and paid by an employer, does not come close to describing the way in which a real estate investor generates income. As some may also wonder if they need a license to invest homes, many flippers choose to obtain a state real estate license (and work for a real estate agency as a real estate agent), as this is a smart way to reduce the costs of doing business, in terms of real estate commissions paid for a purchase and a sale.
On the other hand, if you don't know a Phillips screwdriver from a flat screwdriver, you'll have to pay a professional to do the renovations and repairs. Theoretically, the potential profits of a real estate investor are unlimited, but they are not the result of making a one-time slaughter. Some companies offer a large deposit or assistance with moving costs, and some may even pay for the house upfront. Beginners may underestimate the time or money required and overestimate their skills and knowledge.
The exact attractiveness of your house for the fins depends on the price range, the work involved and the profit that the investor wants. Of course, paying cash for the property eliminates the cost of interest, but there are still costs of owning the property and opportunity costs of immobilizing your cash. The 70% rule is essentially the maximum amount that you, as an invested investor, must pay to avoid overspending. Real estate lovers make a living by changing many homes, as this investment strategy extends the inherent investment risk.
