The flipping formula illustrates how many years it will take you to double your money.
Flipping Formula Revealed
Real estate flipping requires you to understand some methods to attain success. One of these strategies is the 70% Rule. Now, we are not sure how the 70% rule came about. We don’t know who invented it or created it. But we are often asked by new and experienced real estate investors. Realtors also inquire if we follow the 70% rule.
Let’s break it down for you:
The 70% Rule is a formula and it serves to know how many years it takes to double your variable (money). So, if you have $1,000 today and want to know how long it will take you to get $2,000, this is the rule you should apply. The most important thing for you to obtain a result is that you have the annual growth rate of the variable (money) that you are going to analyze.
According to this rule, the variable “money” with an annual growth of 1% will take 70 years to double. To obtain this result, 70 must be divided into the annual growth percentage of the variable (70/1 = 70).
In the same way, if the annual growth percentage is 8%, to mention an example, the variable “money” will take 8.75 years to double. And so on, according to the annual growth rate of the variable, which in this case is money.
Flipping Formula and Compound Interest
Generally, when we talk about money and want to apply the 70% Rule, we use the compound interest percentage. That is the one that is calculated taking into account the initial sum that we have plus the accumulated interest that it generates. This is important, that the money we are talking about is reinvested in the same vehicle and that the growth rate is constant. Because if the money is not reinvested and the interest rate varies, the final calculation will not be reliable.
This calculation can be done if, for example, you have your money deposited in a fund in a bank. Because when you open it, they tell you what the annual growth rate will be. And, generally, in the case of these funds, this rate is maintained. This way you can know how much time you need for your money to double. But also, how much money should you have saved or save so that you can meet a goal at a certain period.
The Flipping Formula Can Be Your Guide to Success
The flipping formula in its simplified terms ensures that you don’t take needless chances and that your flipping is highly structured. The 70% rule will help guarantee you make a profit even in the worst possible case. As easy as this is, you must adhere to this formula, while first learning how to flip properties, to prevent trouble and maximize profits. It also prevents you from falsifying your figures to win deals. The 70% rule will save you a ton of money and avoid the formation of a poor deal. You simply have to follow the flipping formula in detail.