1. It Makes Financial Sense to Buy It
Before investing in a fixer-upper, do some quick math to make sure that it will actually be a good investment.
“There’s a crude rule of thumb in the flipping world called the ‘70 Percent Rule’ — never pay more than 70 percent of the [after repair value], minus repair costs,” said Brian Davis, real estate investor and co-founder or SparkRental. “Thus, if the ARV is $200,000, and the repair costs are $50,000, a flipper shouldn’t pay more than $90,000 for the property. Again, it’s crude and you should always run more detailed numbers, but it’s a good ‘back of the napkin’ exercise you can do in five seconds.”
