The 70% Rule of Flipping
Professional flippers use the 70% Rule to determine the maximum price they should pay for a distressed property.
Maximum Purchase Price = (After Repair Value x 70%) - Renovation Costs
Why 70%? Because the remaining 30% acts as a buffer. It covers your holding costs (interest, taxes, electricity), your closing costs (stamp duty, brokerage), and leaves you with a 10-15% profit margin for your hard work.
- Holding Costs Kill Profits: Every month a property sits unsold, you are paying interest to the bank and taxes to the city. A project delayed by 3 months can wipe out your entire profit margin.