
You need a fast home sale. Perhaps you’ve inherited an out-of-state property, or you’re facing a life change that demands quick relocation. You may be wondering how much a house flipper or “We Buy Houses” company will pay. One method investors use is the 70% rule — but what is the 70% rule in house flipping? Does it always apply? In this brief post, we explain this investor offer-price guideline and provide helpful insights before you commit to a flipper or house-buying company.
The 70% rule is a formula that many house flippers use to determine the maximum price they should pay for a property. The calculation is: Let’s say a house flipper estimates that your home will be worth $300,000 after repairs. They also calculate that it will take $50,000 to renovate the home. In this scenario, the flipper or We Buy Houses company would likely offer no more than $160,000 to ensure they make a profit while covering their costs. Seeing the dramatic difference between an after-repair value of $300,000 and a cash offer price of only $160,000 may be hard to swallow. You might think, “If I could come up with the $50,000 and time to repair the home, I could sell it for $140,000 more.” But there’s the rub when you need to sell quickly. After investing $50,000 and putting your plans on hold, you may only receive $90,000 more, and then you must weigh that amount against all other expenses related to your situation: For some, the convenience of a fast, all-cash sale outweighs the difference in final proceeds. When asking the question, What is the 70% Rule in house flipping? it’s important to note that not every house-buying company strictly follows this as a “rule.” While it’s a common guideline, there are some key factors that can influence a cash buyer’s offer:What is the 70% rule in house flipping?
70% rule example:
Do all house-buying companies use the 70% rule?