1. What is the 70% Rule?

The 70% rule is a guideline used by real estate investors to determine the maximum purchase price they should pay for a rental property. It states that an investor should pay no more than 70% of the property's after-repair value (ARV) minus repair costs.

2. How Does the Calculator Work?

The calculator uses the simplified 70% rule formula:

Where:

• Rental Income — Monthly rental income from the property
• 12 — Months in a year
• 0.7 — The 70% rule multiplier

Explanation: This calculation helps investors ensure they leave room for expenses, vacancies, and profit while still making the investment worthwhile.

3. Importance of the 70% Rule

Details: Following the 70% rule helps investors maintain healthy profit margins, account for unexpected expenses, and build in a buffer against market fluctuations.

4. Using the Calculator

Tips: Enter your expected monthly rental income in dollars. The calculator will show you the maximum purchase price you should consider based on the 70% rule.

5. Frequently Asked Questions (FAQ)

Q1: Is the 70% rule always applicable?
A: No, it's a guideline. In competitive markets, you might need to adjust the percentage, while in distressed markets you might get better deals.

Q2: What expenses does the 70% rule account for?
A: It accounts for property taxes, insurance, maintenance, vacancies, property management, and capital expenditures.

Q3: Should I use gross or net rental income?
A: Typically use gross rental income, but experienced investors may adjust for known expenses in their market.

Q4: How does this relate to the 1% rule?
A: The 1% rule suggests monthly rent should be 1% of purchase price. The 70% rule is another way to evaluate deals that may complement the 1% rule.

Q5: What if my numbers don't meet the 70% rule?
A: You might need to negotiate a lower price, find ways to increase rental income, or consider passing on the deal if it doesn't meet your investment criteria.