The rule of thumb is that you should almost never purchase a home for more than 70% of the ARV.
If you do, there’s a good chance that you won’t profit.
What if the electrical system is outdated, or the plumbing is about to go, or the ventilation system isn’t being filtered properly? You might even consider hiring a specialist to check for things a carbon monoxide leak or high radon levels.
The only situation where you wouldn’t have to get the property inspected ahead of time is if, within the purchase contract, there is a clause stating that the sale is valid if and only if there are no major problems after the inspection.
As a real estate investor, one of the most important pieces of information before you buy is the ARV of the property.
Real Estate Flipping Business Plan Personal Essay Grade 4
As you probably already know, the ARV, or “after repair value” is the approximate amount of money that the house will be worth after it is renovated.
To eliminate this unpredictability, you should do the proper research and get rid of as many variables as possible.
If you fail to do this, you will be at risk of sinking your venture.
For most regular folk, especially beginners in house flipping, risk is a dangerous word, that could mean the loss of your life’s savings, or falling into a deep pit of debt. Instead, lay out a house flipping business plan, outlining your risk-free strategy.
Leave the risk to the hedge funds and the wealthy that can afford to take a loss on a property.