When flipping a property, what are your parameters? Is there a general rule of thumb?
Do you project to make a certain percentage profit? (I’ve read 15%)
Do you buy only up to a certain percentage based on fair market value? (I’ve read 70%)
For example, if a house is worth $200K after renovations, than you would buy the house for only up to $140K. ($200K*.7=140) Then you would expect your profit to be $30K after renovations (200*.15=30).
Most seem to use 65 to 70% of ARV - repairs. You can check the 123Flip or FlippingJunkie blogs for lots of information on the deals they do.
So if a home has an ARV of $200k and needs $30k of repairs, they’re going to be offering in the $100 to $110k range.
A few logic points. With an ARV of $200k, they will likely list at $190 to sell faster due to their high carrying costs. They also tend to figure about 10% of sales price in concessions/fees to close. That knocks them down to $171k at closing. If they’re $140k into the property plus carry fees of $5 - 8,000 they’re looking at a profit of about $20,000 to $25,000.