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	<title>House Flipping | DealCheck Blog</title>
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		<title>Flipping in a High-Rate Market: How to Adjust Your Strategy</title>
		<link>https://dealcheck.io/blog/flipping-high-rate-market-how-to-adjust-your-strategy/</link>
					<comments>https://dealcheck.io/blog/flipping-high-rate-market-how-to-adjust-your-strategy/#disqus_thread</comments>
		
		<dc:creator><![CDATA[Luke Babich]]></dc:creator>
		<pubDate>Tue, 12 Aug 2025 21:35:12 +0000</pubDate>
				<category><![CDATA[House Flipping]]></category>
		<guid isPermaLink="false">https://dealcheck.io/?p=4281</guid>

					<description><![CDATA[<p>The following is a post written by Luke Babich, a guest contributor to the DealCheck blog. After several years of booming sales and profits, the house flipping market has finally started to cool off. A recent ATTOM report looking into flipping activity found that sales of flipped homes have declined to a six-year low, and [&#8230;]</p>
<p>The post <a href="https://dealcheck.io/blog/flipping-high-rate-market-how-to-adjust-your-strategy/">Flipping in a High-Rate Market: How to Adjust Your Strategy</a> was originally published by <a href="https://dealcheck.io/blog/author/luke-babich/">Luke Babich</a> on <a href="https://dealcheck.io">DealCheck</a>. Get our latest updates via <a href="https://www.facebook.com/dealcheckapp">Facebook</a> or <a href="https://twitter.com/dealcheckapp">Twitter</a>.</p>
]]></description>
										<content:encoded><![CDATA[<p style="text-align: center;"><em>The following is a post written by Luke Babich, a guest contributor to the DealCheck blog.</em></p>
<p>After several years of booming sales and profits, the house flipping market has finally started to cool off. A recent <a href="https://www.attomdata.com/news/market-trends/flipping/q1-2025-home-flipping-report/" target="_blank" rel="noopener">ATTOM report</a> looking into flipping activity found that sales of flipped homes have declined to a six-year low, and profit margins in many markets have shrunk significantly.</p>
<p>Digging into the numbers reveals that while an average flipped home (defined as any property purchased and then later sold within a year) was bought for $260,000 and sold for $325,000, this 25% <a href="https://sparkrental.com/roi-on-real-estate/" target="_blank" rel="noopener">return on investment (ROI)</a> represented a steep decline from the 50% ROIs investors were seeing in late 2020.</p>
<p>The reasons for this are relatively clear: in a &#8220;hot&#8221; real estate market, it may be easier to <a href="https://cleveroffers.com/research/how-to-sell-your-house/" target="_blank" rel="noopener">sell your house</a> for a premium price, but it is also a lot harder to find undervalued bargains that make successful flips. Additionally, higher mortgage rates have made financing harder and more expensive.</p>
<p>Still, flipped homes accounted for 8.3% of all US home sales in the first quarter of 2025, so it remains a significant segment of the market. That means there&#8217;s still a lot of profit to be made from flipping in today&#8217;s hypercompetitive, high-rate market &#8211; it&#8217;s just going to take a smarter approach.</p>
<p>Here are a few tips to help you adjust your flipping strategy, find better deals, and increase your take-home profit:</p>
<h3>Follow the Money</h3>
<p>The ATTOM report highlights big differences between two types of markets. On one hand, you have mature, established areas that have reached a plateau. Investors saw very low ROIs in markets like Austin, TX (1% ROI), Houston, TX (5% ROI) and Dallas, TX (3.7%). There simply aren&#8217;t many cheap, undervalued homes left in these cities.</p>
<p>On the other hand, some &#8220;Rust Belt&#8221; and Midwest cities are still delivering strong returns. For example, Buffalo, NY, had the country&#8217;s highest average ROI, at 102.1%, while Pittsburgh, PA came in second at 100.4%. In Illinois, cities like Rockford (87.7% ROI) and Peoria (89.1% ROI) are showing high returns as well.</p>
<p>If you are an investor operating in a market with declining ROIs, you may want to consider relocating your operation to a city with greater growth and return potential, if the costs of such a move make sense in the long run.</p>
<h3>Get Creative With Deal Sourcing</h3>
<p>The foundation of any house flipping operation is to buy low and sell high. While it can be harder to find great deals in this environment, they&#8217;re still out there.</p>
<p>Try monitoring social media websites for fixer-uppers, and search online for distressed properties and pre-foreclosures. Look for sellers who are <a href="https://www.realestatewitch.com/how-to-sell-a-house-without-a-realtor/" target="_blank" rel="noopener">selling their home without an agent</a>, and research <a href="https://anytimeestimate.com/research/airbnb-neighborhoods/" target="_blank" rel="noopener">Airbnb neighborhoods</a> where declining popularity might be pushing short-term rental investors to sell. Motivated sellers are an excellent source for undervalued properties.</p>
<p>Another great strategy is connecting with local wholesalers in your market, who can often provide a great way to acquire off-market properties at a discount.</p>
<h3>Go for Higher Volume</h3>
<p>While flipped homes made up just over 8% of all sales nationally, some markets saw much higher concentrations of flipping activity.</p>
<p>In Macon, GA, a stunning 21% of all home sales were flipped properties, while over a fifth of all home sales in Warner-Robins, GA (20.6%) were flipped. Even Atlanta, GA, which has been booming for years, saw a 15.9% share of flips being sold.</p>
<p>While in the past, some flippers may have preferred to focus on a few methodical flips per year, many are switching to a volume-focused strategy, where they flip 10 or even 20 homes per year. A higher volume of flip projects can help offset lower ROIs that many flippers are seeing nowadays.</p>
<h3>Be Flexible</h3>
<p>Many successful house flippers tend to have a well-established routine and set rules. They work with the same contractors on the same types of projects, target specific neighborhoods consistently, and adhere to rules such as the <a href="https://dealcheck.io/blog/what-is-the-70-percent-rule/">70% ARV standard</a>. However, in a changing market, your strategies often need to be adapted, and it&#8217;s important to remain flexible.</p>
<p>The 70% rule, for example (which states that you should cap your purchase price at 70% of a home&#8217;s after-repair value, minus renovation costs), isn&#8217;t always effective in every situation. In more competitive areas, when you are bidding against other investors, you may need to aim for something like an 80% ARV target.</p>
<p>On the other hand, if you find yourself in a slower market or season, that target could be adjusted down to 60% to increase your profit margins. It&#8217;s very helpful if you have a deep, up-to-the-minute understanding of your local market to make these kinds of adjustments on the fly.</p>
<p><img loading="lazy" decoding="async" class="aligncenter wp-image-4288 size-full" src="https://dealcheck.io/wp-content/uploads/calculating-flip-and-rehab-project-costs.jpg" alt="Calculate flip and rehab project costs and profit margins ahead of time" width="600" height="400" srcset="https://dealcheck.io/wp-content/uploads/calculating-flip-and-rehab-project-costs.jpg 600w, https://dealcheck.io/wp-content/uploads/calculating-flip-and-rehab-project-costs-480x320.jpg 480w" sizes="(min-width: 0px) and (max-width: 480px) 480px, (min-width: 481px) 600px, 100vw" /></p>
<h3>Crunch Your Numbers</h3>
<p>Investors can sometimes forget that every dollar they spend on renovations, holding costs, or other expenses is a dollar lost in profit. You should regularly review your expenses to identify opportunities for cost savings.</p>
<p>Are your contractors charging reasonable rates? Are you paying people to do simple work like painting or landscaping that you could potentially handle yourself? How close are your final profit numbers to your initial projections? How accurate are your budget estimates? Are you taking into account rising insurance and financing costs?</p>
<p>If you find yourself repeatedly over budget or are finding it difficult to analyze potential flips with your existing tools, try <a href="https://dealcheck.io/features/house-flipping-calculator/">DealCheck&#8217;s house flipping calculator</a>, which is used by hundreds of thousands of flippers and investors on a daily basis. Not only will it help you itemize and forecast your rehab costs, but it can also assist with property valuation and calculating the maximum allowable offers to sellers.</p>
<h3>Time the Market</h3>
<p>While nobody can predict the future, it is often helpful to review the latest economic forecasts and buyer sentiment surveys, and compare them to typical buying patterns in your local market.</p>
<p>For example, if you finish a flip during an unfavorable time or season, it may be worth holding on to the property for a few months longer. The increased holding and carrying costs will often be offset by a higher final sale price.</p>
<p>You can even explore short-term rental strategies to generate some cash flow from your newly renovated properties, while you wait for the right time to sell. While this strategy isn&#8217;t for everybody, it can be a creative way to boost your returns.</p>
<h3>Leverage Modern Tech</h3>
<p>There are many ways you can use modern technology to increase your flipping profits and returns.</p>
<p>We&#8217;ve already mentioned using <a href="https://app.dealcheck.io">DealCheck</a> to help you find, analyze, and compare potential investment properties and markets in seconds, and to help you forecast and understand your profits and returns.</p>
<p>You can also look into incorporating smart home features into your renovations. While installing these gadgets can be more expensive than a quick, basic cosmetic rehab, they have considerable appeal for many buyers.</p>
<p>Similarly, sustainable home features like low-flow kitchen and bathroom fixtures, energy-efficient doors and windows, solar panels, and heat exchangers can be pricey, but in many markets they can significantly increase your property&#8217;s appeal and after-repair value.</p>
<p>You can also utilize technology for tasks such as virtual staging when marketing your properties. Instead of spending thousands of dollars on a professional staging service, you can use one of several virtual staging apps for your listings and create attractive 3D house tours that&#8217;ll appeal to young, tech-savvy buyers.</p>
<h3>Focus on Marketing</h3>
<p>In prior years, which were often characterized as being a <a href="https://dealcheck.io/blog/real-estate-investing-sellers-market-vs-buyers-market">seller&#8217;s market</a>, it was possible to run a successful flip operation without a strong focus on marketing or making a conscientious effort to attract buyers to your properties.</p>
<p>In today&#8217;s &#8220;cooler&#8221; market, however, it is often necessary to beef up your marketing efforts, increase outreach, and ensure that your property listings are seen by the largest number of potential buyers.</p>
<p>You can leverage social media to entice buyers by posting compelling listing photos, video walk-throughs or aerial drone footage of each property. You don&#8217;t even need to wait until the property is ready to sell &#8211; build anticipation by posting progress updates during a flip, and attract interest before the listing is even live.</p>
<p>Buyer incentives can also work well, such as a free home warranty or offering to cover some or all of the buyer&#8217;s closing costs. In uncertain and competitive markets, some buyers simply need a little nudge to commit to a deal.</p>
<h3>Don’t Give Up &#8211; Adapt Instead</h3>
<p>It can be discouraging to see your flipping profits and margins erode because of the lack of deals, higher interest rates, higher carrying and holding costs, and longer sale cycles.</p>
<p>But it&#8217;s important to keep in mind that the real estate market is dynamic and cyclical in nature, and it&#8217;s important to adapt your methods and strategies to the changing market conditions.</p>
<p>By staying flexible and creative, you can often succeed and thrive, while many other investors are throwing in the towel.</p>
<div class="saboxplugin-wrap" itemtype="http://schema.org/Person" itemscope itemprop="author"><div class="saboxplugin-tab"><div class="saboxplugin-gravatar"><img loading="lazy" decoding="async" src="https://dealcheck.io/wp-content/uploads/luke-babich.png" width="100"  height="100" alt="Luke Babich Photo" itemprop="image"></div><div class="saboxplugin-authorname"><a href="https://dealcheck.io/blog/author/luke-babich/" class="vcard author" rel="author"><span class="fn">Luke Babich</span></a></div><div class="saboxplugin-desc"><div itemprop="description"><p>Luke Babich is a licensed real estate agent and is the co-founder of <a href="https://listwithclever.com/" target="_blank" rel="noopener">Clever Real Estate</a>, a real estate education platform committed to helping home buyers, sellers and investors make smarter financial decisions.</p>
</div></div><div class="clearfix"></div></div></div><p>The post <a href="https://dealcheck.io/blog/flipping-high-rate-market-how-to-adjust-your-strategy/">Flipping in a High-Rate Market: How to Adjust Your Strategy</a> was originally published by <a href="https://dealcheck.io/blog/author/luke-babich/">Luke Babich</a> on <a href="https://dealcheck.io">DealCheck</a>. Get our latest updates via <a href="https://www.facebook.com/dealcheckapp">Facebook</a> or <a href="https://twitter.com/dealcheckapp">Twitter</a>.</p>
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		<title>Upgrading Townhomes for Maximum ROI: Renovation Tips for Investors</title>
		<link>https://dealcheck.io/blog/upgrading-townhomes-maximum-roi-renovation-tips-investors/</link>
					<comments>https://dealcheck.io/blog/upgrading-townhomes-maximum-roi-renovation-tips-investors/#disqus_thread</comments>
		
		<dc:creator><![CDATA[Luke Babich]]></dc:creator>
		<pubDate>Mon, 08 Apr 2024 21:35:32 +0000</pubDate>
				<category><![CDATA[House Flipping]]></category>
		<category><![CDATA[Rental Properties]]></category>
		<guid isPermaLink="false">https://dealcheck.io/?p=4196</guid>

					<description><![CDATA[<p>The following is a post written by Luke Babich, a guest contributor to the DealCheck blog. Townhomes (sometimes called townhouses) are not the most common form of housing in many areas. But they&#8217;re growing in popularity, with many would-be homeowners and renters recognizing the value of these multi-level units, which are typically attached to neighbors [&#8230;]</p>
<p>The post <a href="https://dealcheck.io/blog/upgrading-townhomes-maximum-roi-renovation-tips-investors/">Upgrading Townhomes for Maximum ROI: Renovation Tips for Investors</a> was originally published by <a href="https://dealcheck.io/blog/author/luke-babich/">Luke Babich</a> on <a href="https://dealcheck.io">DealCheck</a>. Get our latest updates via <a href="https://www.facebook.com/dealcheckapp">Facebook</a> or <a href="https://twitter.com/dealcheckapp">Twitter</a>.</p>
]]></description>
										<content:encoded><![CDATA[<p style="text-align: center;"><em>The following is a post written by Luke Babich, a guest contributor to the DealCheck blog.</em></p>
<p>Townhomes (sometimes called townhouses) are not the most common form of housing in many areas. But they’re growing in popularity, with many would-be homeowners and renters recognizing the value of these multi-level units, which are typically attached to neighbors on one or both sides and often include front or back yards.</p>
<p>From their roots in the Northeast in the 1600s, to modern developments across the country, this affordable style of community living has become a solid investment as a rental or fix-and-flip.</p>
<p>But before getting to work, it’s critical to consider your <a href="https://dealcheck.io/blog/how-to-calculate-return-on-investment-rentals/">return on investment (ROI)</a> and ways to improve it.</p>
<h3>Are Townhomes a Good Investment?</h3>
<p>Some investors shy away from townhomes, believing they are a risky proposition due to their connection with other structures and homeowners’ association (HOA) fees.</p>
<p>But after single-family homes, townhouses offer the most bang for your buck on the rental market and may appeal to buyers with less to spend on a home. They can be more affordable than single-family homes, and because you aren’t responsible for as much exterior maintenance, some improvements are more affordable.</p>
<p>The same can’t be said of condos. Condominium ownership does not include the land beneath you — only the unit itself and a share of the condo’s common areas. In addition, many are only one level, a layout not suitable for all buyers or renters.</p>
<p>As with some townhouses, monthly HOA dues generally pay for some basic maintenance, including landscaping and exterior care, but these fees can sometimes soar into the thousands.</p>
<p>Meanwhile, some HOAs don’t offer much in the way of amenities or services but include significant restrictions on improvements or other changes you can make to the property.</p>
<h3>How to Determine Which Townhome to Buy</h3>
<p>It’s essential to do some research before <a href="https://www.maxrealestateexposure.com/what-is-townhouse/" target="_blank" rel="noopener">investing in townhomes</a>. Consider the initial investment, plus any renovations that will be needed before securing a tenant or flipping the property.</p>
<p>If you are buying a move-in-ready townhome, be prepared to pay a little more, but make sure you can rent it for a price that <a href="https://sparkrental.com/rental-property-roi-calculator/" target="_blank" rel="noopener">covers your costs</a>.</p>
<p>In either case, you can use DealCheck&#8217;s free <a href="https://dealcheck.io/features/rental-property-calculator/">rental property</a> or <a href="https://dealcheck.io/features/house-flipping-calculator/">fix-and-flip</a> calculators to help you analyze your potential profits and investment returns and decide whether a particular property is worth investing in.</p>
<h3>15 Ways to Maximize Your ROI</h3>
<p>While all investors want to maximize their profits, there are plenty of different ways to upgrade a property with ROI in mind. Here are 15 of the best strategies:</p>
<h4>1. Understand the Rental Market</h4>
<p>Like any real estate investment, a crucial part of buying a townhome (along with <a href="https://listwithclever.com/how-to-find-a-real-estate-agent/" target="_blank" rel="noopener">picking the right Realtor</a>) is understanding local market trends and buyer preferences. When upgrading a townhome already in your portfolio, the same due diligence is critical.</p>
<p>Pay attention to what the prospective occupants of your home are looking for. New families may want improved outdoor areas, but a younger demographic might prefer smart features and inside space for entertaining.</p>
<p>Don’t make changes based on what you’d like to have — upgrade for your area&#8217;s potential tenants and buyers. You may like the idea of a chef&#8217;s kitchen with upscale stainless appliances, but if you’re renting in a college town, you might be upgrading yourself out of your tenant base.</p>
<h4>2. Consider Eco-Friendly Materials</h4>
<p>An often-ignored way to improve a project’s ROI is to consider using eco-friendly materials for renovations or remodels.</p>
<p>Sustainable materials such as bamboo flooring, recycled glass countertops, or paints with fewer harmful chemicals are attractive to renters and buyers focused on eco-conscious options.</p>
<h4>3. Highlight the Curb Appeal</h4>
<p>One of the easiest ways to boost the value of a home is to spruce up its exterior.</p>
<p>Because townhomes offer a more manageable amount of space to improve, this is often one of the most affordable upgrades relative to the returns it can generate. Add a coat of fresh paint and containers of flowers or perennial plants to make a front porch more inviting.</p>
<p>Owners can also upgrade the house numbers and light fixtures to a more modern style and consider replacing an old, dated front door. However, since many townhomes are part of HOAs that may have restrictions on exterior changes, owners should always ensure they’re not violating any community rules first.</p>
<h4>4. Paint the Interior</h4>
<p>A fresh coat of neutral paint throughout the interior goes a long way toward affordably upgrading a space. It gives potential renters or buyers a blank canvas on which they can mentally paint their own style.</p>
<p>Fresh paint also gives the impression that the home has been well cared for, another significant advantage when it’s <a href="https://www.realestatewitch.com/homelight-reviews/" target="_blank" rel="noopener">time to sell</a>.</p>
<p><img loading="lazy" decoding="async" class="aligncenter wp-image-4202 size-full" src="https://dealcheck.io/wp-content/uploads/rehabbing-property-to-increase-rent.jpg" alt="Rehabbing rental properties in increase rent and ROI" width="600" height="331" srcset="https://dealcheck.io/wp-content/uploads/rehabbing-property-to-increase-rent.jpg 600w, https://dealcheck.io/wp-content/uploads/rehabbing-property-to-increase-rent-480x265.jpg 480w" sizes="(min-width: 0px) and (max-width: 480px) 480px, (min-width: 481px) 600px, 100vw" /></p>
<h4>5. Level Up Kitchen Appliances</h4>
<p>While they’re often the cheapest, ordinary white appliances show their wear quickly and can make even relatively new kitchens look dingy. Look instead for energy-efficient, stainless steel appliances for a timeless appeal.</p>
<p>Some investors believe outfitting a kitchen cheaply is important because renters might damage it, but it’s often a better move to upgrade appliances to attract more responsible tenants.</p>
<h4>6. Modernize Kitchen Materials</h4>
<p>Don’t pair your sleek new kitchen appliances with low-end Formica and particleboard. Provide a kitchen makeover by updating countertops, cabinets, and backsplashes with more contemporary materials like quartz, soapstone, and even sealed concrete.</p>
<p>If new cabinets are out of budget, consider refacing the doors and replacing drawer handles.</p>
<h4>7. Update Hardware and Fixtures</h4>
<p>While you’re changing out the door and drawer handles in the kitchen, you might as well make similar small upgrades throughout the house.</p>
<p>Swap outdated door handles, knobs, faucets, and light fixtures for streamlined options that are more appealing to modern buyers or renters.</p>
<h4>8. Reorganize the Floor Plan</h4>
<p>Open floor plans can make smaller homes seem more inviting and spacious. However, this may not be a great idea if your tenants or buyers will likely need separate spaces for remote work or other purposes.</p>
<p>If open floor plans are popular in your area, talk with a contractor to locate non-load-bearing walls and get ready to move things around. Make sure you do the ROI math first, as this can be one of the most expensive and time-consuming upgrades.</p>
<h4>9. Add Storage</h4>
<p>Townhomes are an excellent option for young families and first-time homeowners, but these residents need plenty of space to store their stuff.</p>
<p>Add innovative storage solutions like built-in shelving, under-stair storage, and closet organizers to maximize space and improve functionality.</p>
<h4>10. Improve Flooring</h4>
<p>Outdated flooring is a hallmark of cheap rental properties and beat-up homes. But there are durable, affordable, attractive flooring options that can boost your ROI and provide a luxurious look and feel at the same time.</p>
<p>Hardwood floors are popular but sit at the upper end of many homeowners’ budgets. Meanwhile, laminate and luxury vinyl have come a long way in recent years in both appearance and price, proving you don’t have to break the bank to upgrade flooring.</p>
<h4>11. Freshen Up the Bathroom</h4>
<p>On average, a full bathroom remodel offers a 70% return on investment, but you don’t need to empty your wallet to revitalize this critical part of the home.</p>
<p>Simple upgrades to fixtures, faucets, and lighting give bathrooms a modern and luxurious feel. Bring a spa atmosphere to your property by adding a rain showerhead or soaking tub if the budget and space allow.</p>
<h4>12. Get Better Lighting</h4>
<p>Brighter spaces look cleaner and more inviting. Install LED light fixtures to lighten up spaces and reduce energy costs for you and your renters. Dimmer switches are another easy upgrade that most investors can take care of themselves.</p>
<h4>13. Be Smarter</h4>
<p>Smart home technology like programmable thermostats, keyless entry systems, and security cameras appeal to tech-savvy tenants and buyers. Look for options that accommodate multiple users and can be easily reprogrammed.</p>
<h4>14. Upgrade Outdoor Living</h4>
<p>Outdoor living came into the spotlight during the height of the COVID-19 pandemic as many looked to outdoor entertaining as a safer alternative.</p>
<p>If your townhome’s outdoor space has seen better days, plan to improve balconies or patios. Add built-in seating areas if possible, and consider a firepit, small garden area, and fencing to attract young families or people with pets.</p>
<h4>15. Invest in Energy Efficiency</h4>
<p>Some energy investments like Energy Star appliances or more efficient HVAC systems can cost thousands of dollars, but that doesn’t mean more wallet-friendly and ROI-focused options aren’t available.</p>
<p>While budgeting for major improvements, take small steps toward energy efficiency.</p>
<p>Upgrade the windows, add attic and basement insulation, and make sure all windows, walls, and doors are properly sealed. These small improvements are budget-friendly and appeal to environmentally-conscious tenants or buyers.</p>
<h3>Plan Ahead — Upgrade Over Time for Maximum ROI</h3>
<p>Upgrading an investment property to achieve the maximum ROI can be stressful — and expensive. If you’re upgrading on a budget and want to get the most out of your improvements, start small and save for larger ticket items that take longer but yield solid, reliable returns.</p>
<p>If you can’t renovate a bathroom right now, swap out the fixtures, paint, and be on the lookout for deals on tubs, toilets, and sinks for when the time is right. No room in the budget for a two-story deck off the back of the townhouse? Invest in a multi-stage, two-story building plan that can be completed in phases.</p>
<p>The key to a solid return on your capital investment is good research and careful planning.</p>
<div class="saboxplugin-wrap" itemtype="http://schema.org/Person" itemscope itemprop="author"><div class="saboxplugin-tab"><div class="saboxplugin-gravatar"><img loading="lazy" decoding="async" src="https://dealcheck.io/wp-content/uploads/luke-babich.png" width="100"  height="100" alt="Luke Babich Photo" itemprop="image"></div><div class="saboxplugin-authorname"><a href="https://dealcheck.io/blog/author/luke-babich/" class="vcard author" rel="author"><span class="fn">Luke Babich</span></a></div><div class="saboxplugin-desc"><div itemprop="description"><p>Luke Babich is a licensed real estate agent and is the co-founder of <a href="https://listwithclever.com/" target="_blank" rel="noopener">Clever Real Estate</a>, a real estate education platform committed to helping home buyers, sellers and investors make smarter financial decisions.</p>
</div></div><div class="clearfix"></div></div></div><p>The post <a href="https://dealcheck.io/blog/upgrading-townhomes-maximum-roi-renovation-tips-investors/">Upgrading Townhomes for Maximum ROI: Renovation Tips for Investors</a> was originally published by <a href="https://dealcheck.io/blog/author/luke-babich/">Luke Babich</a> on <a href="https://dealcheck.io">DealCheck</a>. Get our latest updates via <a href="https://www.facebook.com/dealcheckapp">Facebook</a> or <a href="https://twitter.com/dealcheckapp">Twitter</a>.</p>
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		<title>What Is the 70% Rule in Real Estate and How Is It Useful When Making Offers?</title>
		<link>https://dealcheck.io/blog/what-is-the-70-percent-rule/</link>
					<comments>https://dealcheck.io/blog/what-is-the-70-percent-rule/#disqus_thread</comments>
		
		<dc:creator><![CDATA[Anton Ivanov]]></dc:creator>
		<pubDate>Tue, 21 Jun 2022 18:10:40 +0000</pubDate>
				<category><![CDATA[House Flipping]]></category>
		<category><![CDATA[Real Estate Analysis]]></category>
		<guid isPermaLink="false">https://dealcheck.io/?p=3908</guid>

					<description><![CDATA[<p>The so-called 70% Rule is commonly used by real estate investors, house flippers and wholesalers as a quick rule of thumb to calculate offer prices on flips, BRRRR&#8217;s, wholesale deals, and other projects that require rehab work. Although the rationale behind this rule is based on statistical data and the collective experience of many real [&#8230;]</p>
<p>The post <a href="https://dealcheck.io/blog/what-is-the-70-percent-rule/">What Is the 70% Rule in Real Estate and How Is It Useful When Making Offers?</a> was originally published by <a href="https://dealcheck.io/blog/author/anton-ivanov/">Anton Ivanov</a> on <a href="https://dealcheck.io">DealCheck</a>. Get our latest updates via <a href="https://www.facebook.com/dealcheckapp">Facebook</a> or <a href="https://twitter.com/dealcheckapp">Twitter</a>.</p>
]]></description>
										<content:encoded><![CDATA[<p>The so-called <strong>70% Rule</strong> is commonly used by real estate investors, house flippers and wholesalers as a quick rule of thumb to calculate offer prices on <a href="https://dealcheck.io/features/house-flipping-calculator/">flips</a>, <a href="https://dealcheck.io/features/brrrr-calculator/">BRRRR&#8217;s</a>, <a href="https://dealcheck.io/features/real-estate-wholesaling-calculator/">wholesale deals</a>, and other projects that require rehab work.</p>
<p>Although the rationale behind this rule is based on statistical data and the collective experience of many real estate investors, the 70% Rule does have some drawbacks that should be kept in mind when using it to make offers to sellers.</p>
<p>In many markets and situations, the percentage used in this rule&#8217;s formula needs to be adjusted either up or down, creating other variations of this rule, like the 65% Rule or the 75% Rule. The discussion of the 70% Rule below applies to its variations as well.</p>
<h3>The 70% Rule Formula</h3>
<p>The 70% Rule can be used to calculate a maximum allowable offer or purchase price an investor is willing to pay for a property using the following formula:</p>
<p><img loading="lazy" decoding="async" class="aligncenter wp-image-3911" src="https://dealcheck.io/wp-content/uploads/70-percent-rule-formula.png" alt="70% Rule Calculation Formula" width="600" height="109" /></p>
<p>This formula states that the purchase price of a property should be less than or equal to 70% of its after repair value (ARV), minus the rehab costs. If using a variation of the 70% Rule, you can substitute your desired percentage in the formula above.</p>
<p>A property&#8217;s after repair value is an estimate of what its value or sale price will be after the rehab work is complete. Investors often look at sales comps and perform a comparative market analysis (CMA) to help them estimate ARVs. <a href="https://app.dealcheck.io/">DealCheck</a> can help you do this for any property in the US.</p>
<p>The rehab costs should include all expenses that will be paid to rehab the property, improve its condition or perform any necessary repairs or upgrades. Experienced investors will often estimate the rehab costs themselves, or get an estimate from a general contractor.</p>
<h3>Using the 70% Rule to Make Offers to Sellers</h3>
<p>The primary use case of the 70% Rule is to quickly calculate the maximum purchase price when making offers to sellers on flips, BRRRR&#8217;s or other projects requiring substantial rehab work.</p>
<p>For example, consider a property with an estimated after repair value (ARV) of $350,000 and a projected rehab budget of $100,000. According to the 70% Rule, the maximum price an investor should pay for this house is calculated as $350,000 * 70% &#8211; $100,000 = <strong>$145,000</strong>.</p>
<p>An investor can then use this figure to make an offer to the seller for this amount, or attempt to negotiate with them for an even lower purchase price.</p>
<h3>The Rationale Behind the 70% Rule</h3>
<p>The 70% Rule aims to accomplish two things:</p>
<ol>
<li>Give investors, flippers or wholesalers a safety margin in case they have unforeseen expenses or rehab cost overruns</li>
<li>Allow them to make a profit after rehabbing and selling a property, or have some starting equity if they keep it as a rental (as is done with BRRRR&#8217;s)</li>
</ol>
<p>You can think of the 70% Rule as giving you a profit or operating margin that is built in to the transaction right at the time of property purchase.</p>
<p>As long as the ARV and the rehab costs were estimated correctly, that margin should (for the most part) become your profit after selling the property.</p>
<p><img loading="lazy" decoding="async" class="aligncenter wp-image-3914" src="https://dealcheck.io/wp-content/uploads/70-percent-rule-offer-calculation.png" alt="Example max allowable offer calculation with 70% Rule" width="600" height="197" /></p>
<h3>The Drawbacks of the 70% Rule</h3>
<p>While the 70% Rule is widely used, it does have some drawbacks that are important to keep in mind, especially if you are a new investor without a lot of experience.</p>
<p>The first drawback is that it relies on having an accurate after repair value (ARV) estimate for each property. If the ARV is over-estimated, the 70% Rule will cause you to overpay for properties and potentially lose money on those projects. To counteract this, it is important to develop a system for estimating ARV as accurately as possible.</p>
<p>Similar to the above, the 70% Rule requires an accurate estimate of the rehab costs. New and inexperienced investors may underestimate the rehab costs on their first few projects. It may also be difficult to come up with an estimate if you don&#8217;t have access to a property or don&#8217;t know its exact condition. It is often helpful to work with a general contractor who can help you estimate the rehab costs before making offers.</p>
<p>And finally, because the 70% Rule uses a percentage, the actual profit or operating margin as a dollar amount will vary greatly depending on the ARV range of the property. This rule may work great for properties worth $500,000 or more, but it may need to be adjusted if you&#8217;re rehabbing lower-cost homes, as discussed below.</p>
<p>Here are some things you can do to work around these drawbacks:</p>
<ul>
<li>Calculate your projected profit as a dollar amount and determine if it will be acceptable</li>
<li>Take your time to estimate ARVs as accurately as possible. Use <a href="https://app.dealcheck.io/">DealCheck</a> to help you look up sales comps for your properties</li>
<li>Add a &#8220;cost overrun&#8221; amount (for example, 10%) on top of your rehab costs for an additional safety margin</li>
<li>Consider using a variation of the 70% Rule as discussed below</li>
</ul>
<h3>Variations of the 70% Rule</h3>
<p>As mentioned earlier, it is common for investors to adjust the percentage used in this rule&#8217;s formula up or down to meet their specific profit margin goals, or to be more competitive in their local market.</p>
<p>Below are some example scenarios when you may consider lowering or raising the percentage used by this rule:</p>
<p><strong>When to Lower the 70% Percentage</strong></p>
<p>The lower the rule&#8217;s percentage, the more restrictive it becomes when calculating offer prices, which may make your offers less competitive against other buyers. However, this will increase your potential profit and give you an additional buffer for unforeseen expenses.</p>
<p>Consider lowering the percentage down from 70% when:</p>
<ul>
<li>The market you operate in is not very competitive, so it&#8217;s less likely another investor will outbid you</li>
<li>You are purchasing cheaper homes (less than $100,000 in value, for example). At lower price points you may need a larger percentage margin for your profit</li>
<li>You are not confident in your ARV or rehab cost estimates and would like a larger safety margin</li>
</ul>
<p><strong>When to Raise the 70% Percentage</strong></p>
<p>The higher the rule&#8217;s percentage, the higher the purchase price values it will calculate for you, making your offers more competitive against other bidders. However, higher percentages will lower your potential profit and safety margin.</p>
<p>Consider raising the percentage up from 70% when:</p>
<ul>
<li>You operate in a highly competitive market where properties receive multiple competing offers</li>
<li>You are rehabbing higher-value homes, so a lower margin will still give you enough profit and safety margin</li>
<li>You are confident in your ARV and rehab cost estimates, making the 70% Rule calculation more accurate</li>
</ul>
<h3>Calculate the 70% Rule and Dozens of Other Metrics in Seconds</h3>
<p>The DealCheck property analysis app makes it easy to calculate and use the 70% Rule, along with dozens of other <a href="https://dealcheck.io/blog/category/real-estate-analysis/">property analysis metrics</a> for flips, BRRRR&#8217;s and rehab projects <strong>in seconds</strong>.</p>
<p>You can start using DealCheck to analyze investment properties for free <a href="https://app.dealcheck.io/">online</a>, or by downloading our <a href="https://itunes.apple.com/app/apple-store/id1001869134?pt=117777570&amp;ct=Website%20Link&amp;mt=8" target="_blank" rel="noopener noreferrer">iOS</a> or <a href="https://play.google.com/store/apps/details?id=com.fortnofffinancial.dealcheck_rentals&amp;referrer=utm_source%3DWebsite%26utm_campaign%3DWebsite%2520Link" target="_blank" rel="noopener noreferrer">Android</a> app to your mobile device.</p>
<div class="call-to-action" style="text-align: center; margin-top: 15px; margin-bottom: 45px;"><a href="https://app.dealcheck.io/">Analyze Properties with DealCheck</a></div>
<div class="saboxplugin-wrap" itemtype="http://schema.org/Person" itemscope itemprop="author"><div class="saboxplugin-tab"><div class="saboxplugin-gravatar"><img loading="lazy" decoding="async" src="https://dealcheck.io/wp-content/uploads/anton-ivanov.jpg" width="100"  height="100" alt="Anton Ivanot, Founder &amp; CEO" itemprop="image"></div><div class="saboxplugin-authorname"><a href="https://dealcheck.io/blog/author/anton-ivanov/" class="vcard author" rel="author"><span class="fn">Anton Ivanov</span></a></div><div class="saboxplugin-desc"><div itemprop="description"><p>Anton is a real estate investor, entrepreneur and founder of <a href="https://dealcheck.io">DealCheck</a> and <a href="https://rentcast.io" target="_blank" rel="noopener">RentCast</a>. He has built a portfolio of 40 rentals and $20k+ in monthly cash flow in less than 5 years, and is passionate about helping others build wealth through real estate investing. <a href="https://dealcheck.io/about-anton-ivanov/">Read more</a> about Anton.</p>
</div></div><div class="clearfix"></div></div></div><p>The post <a href="https://dealcheck.io/blog/what-is-the-70-percent-rule/">What Is the 70% Rule in Real Estate and How Is It Useful When Making Offers?</a> was originally published by <a href="https://dealcheck.io/blog/author/anton-ivanov/">Anton Ivanov</a> on <a href="https://dealcheck.io">DealCheck</a>. Get our latest updates via <a href="https://www.facebook.com/dealcheckapp">Facebook</a> or <a href="https://twitter.com/dealcheckapp">Twitter</a>.</p>
]]></content:encoded>
					
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		<title>How to Calculate the Return on Investment (ROI) for Flips and Rehab Projects</title>
		<link>https://dealcheck.io/blog/how-to-calculate-return-on-investment-flips/</link>
					<comments>https://dealcheck.io/blog/how-to-calculate-return-on-investment-flips/#disqus_thread</comments>
		
		<dc:creator><![CDATA[Anton Ivanov]]></dc:creator>
		<pubDate>Tue, 08 Jun 2021 19:02:49 +0000</pubDate>
				<category><![CDATA[House Flipping]]></category>
		<category><![CDATA[Real Estate Analysis]]></category>
		<guid isPermaLink="false">https://dealcheck.io/?p=3454</guid>

					<description><![CDATA[<p>Note: This article describes the ROI calculation specifically for flips and rehab projects, and not rental properties, which is calculated differently. The return on investment, abbreviated as ROI, is a primary measure of investment return used by investors when analyzing and comparing the profitability of house flip projects. The cumulative ROI metric shows the total [&#8230;]</p>
<p>The post <a href="https://dealcheck.io/blog/how-to-calculate-return-on-investment-flips/">How to Calculate the Return on Investment (ROI) for Flips and Rehab Projects</a> was originally published by <a href="https://dealcheck.io/blog/author/anton-ivanov/">Anton Ivanov</a> on <a href="https://dealcheck.io">DealCheck</a>. Get our latest updates via <a href="https://www.facebook.com/dealcheckapp">Facebook</a> or <a href="https://twitter.com/dealcheckapp">Twitter</a>.</p>
]]></description>
										<content:encoded><![CDATA[<p style="text-align: center; padding-bottom: 2em !important;"><em>Note: This article describes the ROI calculation specifically for flips and rehab projects, and not rental properties, which is <a href="https://dealcheck.io/blog/how-to-calculate-return-on-investment-rentals/">calculated differently</a>.</em></p>
<p>The <strong>return on investment</strong>, abbreviated as <strong>ROI</strong>, is a primary measure of investment return used by investors when analyzing and comparing the profitability of <a href="https://dealcheck.io/features/house-flipping-calculator/">house flip projects</a>.</p>
<p>The cumulative ROI metric shows the total return you will receive on your invested capital after completing the rehab work and selling a property for a profit.</p>
<p>The annualized version of the ROI shows a hypothetical yearly rate of return you will receive on your invested capital based on the current flip, and is often a more accurate metric when comparing flips with each other or with other investments.</p>
<h3>The Cumulative Return on Investment Formula</h3>
<p>The cumulative return on investment from a fix and flip can be calculated by dividing the total profit by the sum of the total invested cash and holding costs:</p>
<p><img loading="lazy" decoding="async" class="aligncenter wp-image-3461" src="https://dealcheck.io/wp-content/uploads/cumulative-return-on-investment-forumua-flips.png" alt="The Cumulative Return on Investment (ROI) Formula" width="600" height="127" /></p>
<p>In the formula above, the total profit is the final net amount you will receive as profit from a flip after selling the property and paying off any outstanding loans.</p>
<p>The total invested cash represents all capital that was originally used to purchase and rehab the property. This usually includes the down payment on the loan (or the purchase price, if not using financing), purchase and closing costs, as well as rehab costs.</p>
<p>The denominator of the formula also includes holding costs, which are all recurring expenses you will incur while rehabbing a property, such as loan payments, dumpster fees, and other overhead costs.</p>
<p>To simplify the above formula, you can simply divide the total profit by all out-of-pocket costs or capital spent during the flip process.</p>
<h3>The Annualized Return on Investment Formula</h3>
<p>To calculate the annualized version of the ROI (in other words &#8211; the ROI projected to a yearly rate of return), you can multiply the cumulative ROI by 12 and divide it by the holding period of the flip, measured in months:</p>
<p><img loading="lazy" decoding="async" class="aligncenter wp-image-3460" src="https://dealcheck.io/wp-content/uploads/annualized-return-on-investment-forumua-flips.png" alt="The Annualized Return on Investment (ROI) Formula" width="600" height="127" /></p>
<p>The ROI used in the above formula is the cumulative ROI calculated as described in the previous section.</p>
<p>The holding period is the number of months it will take for you to purchase, rehab and sell the property from start to finish. This is the total number of months you will have the property in your possession throughout the project.</p>
<h3>Return on Investment Example</h3>
<p>Let&#8217;s assume you found a property for sale for $100,000, that will need $50,000 in rehab work and will sell for $200,000 after it is rehabbed. You also estimate that it will take you 7 months to complete the rehab and sell it, which will be your holding period.</p>
<p>Let&#8217;s also assume that your lender is willing to finance 70% of the purchase price of this property and your total holding costs (including loan payments) will be $10,000 over the course of the rehab period.</p>
<p>First, let&#8217;s calculate how much capital you will need to purchase and rehab this property &#8211; your total invested cash:</p>
<p><strong>Total Invested Cash</strong> = Down Payment + Rehab Costs = $30,000 + $50,000 = <strong>$80,000</strong></p>
<p>Next, let&#8217;s calculate your total net profit from this project:</p>
<p><strong>Total Profit</strong> = Sale Price &#8211; Holding Costs &#8211; Total Invested Cash = $200,000 &#8211; $10,000 &#8211; $80,000 = <strong>$110,000</strong></p>
<p>Finally, let&#8217;s calculate your cumulative and annualized return on investment:</p>
<p><strong>Cumulative ROI</strong> = Total Profit / (Total Invested Cash + Holding Costs) = $110,000 / ($80,000 + $10,000) = <strong>122%</strong></p>
<p><strong>Annualized ROI</strong> = 12 * ROI / Holding Period = 12 * 122% / 7 = <strong>210%</strong></p>
<h3>Cumulative ROI vs. Annualized ROI</h3>
<p>The main difference between the cumulative and annualized ROI metrics when evaluating flips, is that the cumulative ROI <em>does not</em> take into account how long it will take to rehab and sell a property, while the annualized ROI <em>does</em> take that into account.</p>
<p>Because of this, the annualized ROI is often a better indicator of the profitability of a particular flip, especially when comparing and deciding which projects to take on next.</p>
<p>To illustrate this, let&#8217;s compare two hypothetical flip scenarios:</p>
<ul>
<li><strong>Flip 1</strong>: $100,000 total investment, 12 month holding period, $150,000 total profit, <strong>150%</strong> cumulative ROI</li>
<li><strong>Flip 2</strong>: $65,000 total investment, 6 month holding period, $75,000 total profit, <strong>115%</strong> cumulative ROI</li>
</ul>
<p>Looking at the two examples above, at first glance you may believe that Flip 1 is a better investment, since it will net a larger total profit and a higher cumulative return on your investment.</p>
<p>But let&#8217;s calculate the annualized ROI for each of these projects:</p>
<ul>
<li><strong>Flip 1</strong>: 150% annualized ROI</li>
<li><strong>Flip 2</strong>: 230% annualized ROI</li>
</ul>
<p>As you can see, the annualized ROI is much higher for the second flip. This is because its projected holding period is much shorter, even though the total profit and cumulative ROI are less.</p>
<p>Choosing projects similar to Flip 2 above will allow you to purchase, rehab and sell more properties for a larger total profit over the course of the year, instead of tying up your capital in longer projects similar to Flip 1.</p>
<p><img loading="lazy" decoding="async" class="aligncenter wp-image-3462" src="https://dealcheck.io/wp-content/uploads/flip-roi-return-comparison.png" alt="Fix &amp; Flip ROI Comparison" width="600" height="415" /></p>
<p>Of course, it&#8217;s important to consider all factors when choosing properties to flip, but you may want to pay special attention to the annualized ROI metric, instead of focusing exclusively on the total profit and cumulative ROI.</p>
<h3>Calculate ROI and Dozens of Other Metrics in Seconds</h3>
<p>The DealCheck property analysis app makes it easy to calculate the return on investment, along with dozens of other <a href="https://dealcheck.io/blog/category/real-estate-analysis/">property analysis metrics</a> for house flips and rehab projects <strong>in seconds</strong>.</p>
<p>You can start using DealCheck to analyze investment properties for free <a href="https://app.dealcheck.io/">online</a>, or by downloading our <a href="https://itunes.apple.com/app/apple-store/id1001869134?pt=117777570&amp;ct=Website%20Link&amp;mt=8" target="_blank" rel="noopener noreferrer">iOS</a> or <a href="https://play.google.com/store/apps/details?id=com.fortnofffinancial.dealcheck_rentals&amp;referrer=utm_source%3DWebsite%26utm_campaign%3DWebsite%2520Link" target="_blank" rel="noopener noreferrer">Android</a> app to your mobile device.</p>
<div class="call-to-action" style="text-align: center; margin-top: 15px; margin-bottom: 45px;"><a href="https://app.dealcheck.io/">Analyze Properties with DealCheck</a></div>
<div class="saboxplugin-wrap" itemtype="http://schema.org/Person" itemscope itemprop="author"><div class="saboxplugin-tab"><div class="saboxplugin-gravatar"><img loading="lazy" decoding="async" src="https://dealcheck.io/wp-content/uploads/anton-ivanov.jpg" width="100"  height="100" alt="Anton Ivanot, Founder &amp; CEO" itemprop="image"></div><div class="saboxplugin-authorname"><a href="https://dealcheck.io/blog/author/anton-ivanov/" class="vcard author" rel="author"><span class="fn">Anton Ivanov</span></a></div><div class="saboxplugin-desc"><div itemprop="description"><p>Anton is a real estate investor, entrepreneur and founder of <a href="https://dealcheck.io">DealCheck</a> and <a href="https://rentcast.io" target="_blank" rel="noopener">RentCast</a>. He has built a portfolio of 40 rentals and $20k+ in monthly cash flow in less than 5 years, and is passionate about helping others build wealth through real estate investing. <a href="https://dealcheck.io/about-anton-ivanov/">Read more</a> about Anton.</p>
</div></div><div class="clearfix"></div></div></div><p>The post <a href="https://dealcheck.io/blog/how-to-calculate-return-on-investment-flips/">How to Calculate the Return on Investment (ROI) for Flips and Rehab Projects</a> was originally published by <a href="https://dealcheck.io/blog/author/anton-ivanov/">Anton Ivanov</a> on <a href="https://dealcheck.io">DealCheck</a>. Get our latest updates via <a href="https://www.facebook.com/dealcheckapp">Facebook</a> or <a href="https://twitter.com/dealcheckapp">Twitter</a>.</p>
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