1. What is the 70 Rule for Rental Property?

The 70 Rule is a real estate investing guideline that helps investors determine the maximum purchase price for a rental property. It ensures the investment remains profitable after accounting for renovation costs.

2. How Does the Calculator Work?

The calculator uses the 70 Rule formula:

Where:

• \( \text{ARV} \) — After Repair Value of the property ($)
• \( \text{Rehab} \) — Renovation/Repair costs ($)

Explanation: The rule suggests that an investor should pay no more than 70% of the ARV minus the repair costs to ensure adequate profit margin.

3. Importance of the 70 Rule

Details: This rule helps real estate investors quickly evaluate potential deals, maintain profit margins, and avoid overpaying for properties that require rehabilitation.

4. Using the Calculator

Tips: Enter the estimated After Repair Value and expected rehabilitation 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% factor accounts for holding costs, closing costs, and profit margin while remaining conservative enough to protect against market fluctuations.

Q2: When should I use the 70 Rule?
A: This rule is particularly useful for fix-and-flip investors and rental property investors who need to quickly screen potential investment opportunities.

Q3: What if my calculated Max Purchase is negative?
A: A negative result indicates the rehabilitation costs are too high relative to the ARV, making the deal potentially unprofitable.

Q4: Are there limitations to this rule?
A: The 70 Rule is a guideline, not an absolute rule. Market conditions, location, and individual circumstances may require adjustments to the percentage used.

Q5: How accurate is the ARV estimation?
A: ARV accuracy is crucial. It's recommended to get professional appraisals or thorough comparative market analysis for precise ARV estimates.