The biggest challenge with the 70% rule is coming up with an accurate figure when you calculate ARV. If you overestimate your home’s after-repair value, you could watch your profit dwindle as you’re forced to sell the property for a lower sales price.
To estimate your ARV accurately, it’s important to study the neighborhood where a home is located and research how much comparable properties there sell for. If homes similar to the one you’re buying and flipping sell for $180,000, don’t expect to fetch a much higher price when you go to sell. Keep in mind that a real estate agent may be able to help you find real estate comps to help establish your ARV.