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Put simply, the 70 percent rule states that you shouldn't buy a distressed property for more than 70 percent of the home's after-repair value (ARV) ? in other words, how much the house will likely sell for once fixed ? minus the cost of repairs.
Although there is a potential to make money flipping real estate contracts, there are also some drawbacks. One drawback is that creating a large amount of income from flipping real estate contracts will require many deals. This will require investors to spend more time and effort evaluating potential deals.
It is without a doubt the easiest way to start out with no money and no experience. However, there are also some distinct disadvantages to flipping contracts. The main disadvantages to flipping contracts are: You are dependent on your buyers to close. You make no money if you cant flip the contract.
How to get started with house flipping Set a budget. A big financial drain is not having enough money to finance your project. ... Find the right property. If you don't have a massive budget, look for properties that best fit your current finances. ... Make an offer. ... Set a timeline. ... Hire trusted contractors. ... Sell your property.
Basically, the rule says real estate investors should pay no more than 70% of a property's after-repair value (ARV) minus the cost of the repairs necessary to renovate the home. The ARV of a property is the amount a home could sell for after flippers renovate it.