Decoding the 70% Rule: Does it Still Apply in McKinney's High-Price Market?

Hey there, fellow real estate enthusiasts and aspiring investors! I often get asked, "What's the 70% rule, and does it still apply to a high-price market like ours here in Plano or McKinney?" It’s a fantastic question, and one that’s top-of-mind for anyone looking to make smart moves in today’s competitive real estate landscape. So, let’s dive right in!

First off, what *is* the 70% rule? In a nutshell, it's a classic guideline used by real estate investors, particularly for fix and flips, to ensure a profitable venture. The rule states that an investor should pay no more than 70% of a property's After Repair Value (ARV), minus the cost of repairs. So, if a house is expected to be worth $400,000 after renovations, and the repairs will cost $50,000, your maximum offer price would be ($400,000 * 0.70) - $50,000 = $280,000 - $50,000 = $230,000. This 30% buffer is designed to cover holding costs, selling costs, and, most importantly, provide a healthy and secure profit margin for the investor. It’s a solid, time-tested principle for calculating potential ROI.

Now, for the million-dollar question: Does the 70% rule still apply in a high-price, fast-paced market like we see in Plano, Dallas-Fort Worth, and particularly right here in McKinney? The short answer, in many cases, is "not strictly." The real estate market has evolved significantly. We’re experiencing historically low inventory, high buyer demand, and steadily appreciating property values. This combination makes finding properties that fit the rigid 70% rule incredibly challenging, if not nearly impossible, for most investors.

As a top realtor in McKinney and an expert in real estate investing, I've seen firsthand how investors have had to adapt. The days of easily snagging deals at 70% of ARV are largely behind us in these hot markets. Competition is fierce, and properties, even those needing significant work, often command higher prices due to land value and location. Investors who strictly adhere to the 70% rule might find themselves sitting on the sidelines, unable to acquire properties.

So, what's an investor to do? This is where flexibility and a deep understanding of the local market come into play. Many successful investors in today's climate are operating with a slightly higher percentage, perhaps 75% or even 80% of ARV minus repairs, especially if they have efficient renovation teams, lower holding costs, or unique exit strategies. The key shifts from a fixed percentage to a more dynamic risk assessment. This demands even more precise calculations for ARV, repair costs, and a keen eye on market trends. My expertise in pricing strategies and listings strategies becomes invaluable here, ensuring you're working with accurate numbers.

That's where my experience as Brandon Scribner comes in. As your trusted top realtor in McKinney, I provide comprehensive Real Estate Investment Consultation. I can help you analyze potential deals, understand the true ARV in our specific sub-markets, and accurately estimate repair costs. We look beyond just the percentage and analyze the overall deal, including potential appreciation during the renovation period, and current buyer demand. Being an Accredited Buyer Representative, I’m skilled at finding those often-elusive opportunities that might not fit the old mold but still offer fantastic potential.

The 70% rule is a great starting point, a foundation for understanding investment principles. However, in our current high-value market, it needs to be viewed as a guideline that may require adaptation. Don't let a rigid adherence to an old rule prevent you from finding profitable opportunities.

Ready to explore how you can make smart real estate investments in our dynamic market? Whether you're a seasoned investor looking for your next fix and flip or considering your first venture into real estate investing, I’m here to help you navigate the complexities. Contact me today for a Free Consultation to discuss your goals and how my Home Buying Assistance can help you succeed. Let's make your real estate dreams a reality!