Yesterday, we discussed the 70 percent rule as it applies to flipping houses. Check out that previous blog post if you aren’t sure what the 70 percent rule is. Today’s question is whether you should ever pay more than the 70 percent rule suggests. For example, some beginner investors think that it’s OK to exceed the amount specified by the 70 percent rule in an appreciating market. After all, in a few months or by the time you finish your rehab, the After Repair Value should go up, right?
Typically, but that’s a big risk to take if it doesn’t! In markets like these, when it’s getting harder and harder to find deals and with dwindling inventory, stretching the 70 percent rule is something investors will do. That’s true. It’s a big gamble though and some say a huge mistake. What if the market stops appreciating?
Back during the housing crisis, most house flippers ended up getting into some major financial trouble. They thought the market would always rise, so didn’t think they needed to get a really good deal to make good money when flipping houses.
Look, it’s a really good rule to follow. It can help make sure that if prices don’t appreciate before you try to sell the house you just poured money into, that you’re investment is still safe!
Are You Looking for a Hard Money Loan to Flip a House Or Buy A Rental Property?
Paces Funding is a hard money lender offering hard money loans to purchase and renovate non-owner occupied residential and commercial properties throughout the Atlanta, Nashville, Florida, or the North and South Carolina metropolitan areas. Our application process for hard money loans is easy. Just fill out this very simple online form and you will be contacted shortly. Unlike other lenders, the window between applying and funding is very small. We have funded properties in as a little as one day, but typically funding hard money loans takes about seven to ten days.
Call us at 404-814-1644 or contact us online to find out whether you might qualify for this type of funding. In the meantime, check to ensure that you meet our loan criteria. Our loan amounts can be up to 65 percent of the after-repaired value of the collateral—and if you use the loan for renovation or construction, the loan amount can be based on the collateral’s improved value.