How to Analyze a Fix and Flip Deal Step by Step
The fastest way to lose money flipping houses is to “go with your gut” instead of running the numbers. A good looking property doesn’t always equal a good deal. A cheap purchase price doesn’t always equal profit. What separates successful investors from gamblers is a clear, repeatable deal analysis process. Here’s a step-by-step way to analyze a fix-and-flip deal before you ever make an offer.
1.Gather the Basic Property Details
Start with the facts:
Address
Bed/bath count
Square footage
Year built
Lot size
Property Type (single-family, small multi-family, townhome, etc.)
Current condition (light cosmetic vs. heavy rehab)
Also note:
Current occupancy (vacant, tenant, owner-occupied)
Obvious issues (roof, foundation, water intrusion, etc.)
You can’t analyze what you don’t define.
2. Estimate ARV (After Repair Value) Using Real Comps
ARV is the after repair value — what the property should realistically sell for once it’s fully renovated.
To estimate ARV:
Pull sold comps (not listings) from the last 3-6 months.
Stay within:
~0.25 - 0.5 miles
Similar square footage
Similar bed/baths
Same general neighborhood feel
Only use renovated properties as comps
Throw out obvious outliers (foreclosures, weird sales, super-luxury rehabs).
If your best three comps sold at $295K, $300K, $305K, a realistic ARV is around $300K — not $325K “if the market keeps going up.”
Conservative ARV = safer deal + easier financing.
3. Build a Realistic Rehab Budget
Now estimate what it will cost to get your property to comp level.
Break it down by category:
Demo and trash out
Foundation/structural (if needed)
Roof
Electrical
Plumbing
HVAC
Windows and doors
Insulation/drywall
Flooring
Kitchen (cabinets, counters, appliances)
Bathrooms
Paint (interior and exterior)
Bathrooms
Paint (interior and exterior)
Exterior (siding, gutters, landscaping, driveway, fencing)
Contingency
Best practices:
Get at least one detailed contractor bid (ideally more).
Add a 10%-20% contingency, especially on older homes or heavier rehabs.
If your rehab estimate is $60K, with 15% contingency, plan $69K
4. Estimate All Holding and Selling Costs
These are the “silent killers” of many flips.
Holding Costs (Monthly)
Loan interest
Property taxes
Insurance
Utilities (electric, gas, water, trash)
Lawn care/snow removal
HOA dues (if applicable)
Multiply by the number of months you expect to hold the property (and be conservative).
Selling Costs
Agent commissions
Title and closing fees
Transfer taxes
Seller-paid closing costs (if you offer concessions)
Staging, photos, and marketing
A simple rule of thumb:
Selling costs are often 8-10% of ARV
5. Don’t Forget Financing Costs
If you’re using a fix and flip or hard money loan, include:
Origination fees
Appraisal or underwriting fees
Interest (anything not covered by interest reserves)
Draw inspection fees
Extension fees (If the project goes long)
These aren’t optional — they’re real, and they come straight out of your profit.
6. Run the Core Deal Formula
Now that you have:
ARV
Rehab costs
Holding costs
Selling costs
Financing costs
You can back into your maximum allowable offer (MAO)
A common framework looks like this:
ARV
Rehab costs
Holding costs
Selling costs
Financing costs
Desired profit
= Max Purchase Price (MAO)
Simple Example
ARV: $300,000
Rehab: $70,000 (including contingency)
Holding: $15,000
Selling: $27,000 (9% of ARV)
Financing: $8,000
Target Profit: $40,000
MAO = $300,000 — $70,000 — $15,000 — $27,000 — $8,000 — $40,000 = $140,000
If the seller won’t come near $140,000, you’re not “missing out,” you’re avoiding a thin or negative profit deal.
7. Stress-Test the Deal
Before you fall in love with the numbers, flex them a bit:
Ask:
What if ARV comes in 5-10% lower
What if rehab runs 10-15% higher?
What if I hold the property 2-3 months longer than planned?
If the deal still makes acceptable profit under those conditions, you’re in safer territory.
If a small change wipes out your profit, it’s too thin.
8. Evaluate the Neighborhood and Buyer Demand
Numbers alone don’t tell the whole story. Ask:
Are renovated homes in this area selling quickly?
Is this an entry-level price point with strong demand?
Are there red flags (busy road, industrial nearby, crime, poor schools) that hurt resale?
Are you buying the worst house on a good street, or the nicest house on a weak street?
You want strong, consistent retail buyer demand at your expected price point.
9. Check for Zoning, Permit, or Regulatory Issues
A deal that looks great on paper can fall apart because of:
Non-conforming use (e.g., illegal duplex)
Historic district restrictions
Strict parking or setback rules
Long permit timelines
Before you close, confirm:
That your planned scope of work is allowed
Whether you need permits for major items (structural, electrical, plumbing, additions)
That there are no obvious zoning violations in the property’s current setup
Zoning surprises are expensive.
10. Confirm You Have the Right Financing Lined Up
Deal analysis isn’t complete until you know how you’re funding it.
Make sure you’ve
Talked to an investor-friendly lender
Confirmed approximate loan amount and terms
Understood the draw schedule for rehab funds
Verified you have enough cash for
Down payment
Closing costs
Initial rehab before first draw
A “great deal” without funding is just a good idea on paper.
Quick Deal Analysis Checklist
Before you make an offer, you should be able to answer “yes” to:
Do I have a conservative ARV backed by real comps?
Do I have a detailed rehab budget and contingency?
Have I included holding, selling, and financing costs?
Does the deal still make sense after a stress test?
Is this in a flippable neighborhood with solid buyer demand?
Am I funding this with a lender who understands fix and flip timelines?
If the answer is no to any of these, you’re not ready to write an offer yet.