How to Make an Offer on a Fix and Flip Property
Finding a property with fix and flip potential is only the beginning. The next challenge is determining what you’re actually willing to pay and making an offer that protects the economics of the deal.
For real estate investor, an offer shouldn’t be based on the listing price alone. It should reflect the property’s expected After Repair Value (ARV), renovation costs, financing and holding expenses, potential selling costs, and the return you need to justify the project.
The goal isn’t simply to get the property under contract. It’s to acquire it at a price that gives the deal room to work.
Start With the Numbers, Not the Asking Price
A seller’s asking price tells you what they hope to receive. It doesn’t tell you what the property is worth to you as an investor.
Before determining your offer, build the deal from the expected exit backward.
At minimum, consider:
After Repair Value (ARV)
Renovation costs
Financing costs
Holding costs
Acquisition and selling costs
Contingency
Target profit
Once you understand those numbers, you can determine the maximum price you’re comfortable paying.
This helps prevent one of the easiest mistakes to make in real estate investing: falling in love with the deal before the numbers support it.
Determine a Realistic ARV
Your After Repair Value is an estimate of what the property could be worth once renovations are complete.
ARV should be based primarily on relevant comparable sales, not the highest-priced property you can find nearby.
Look for recently sold properties that are similar in:
Location
Square footage
Property type
Bedroom and bathroom count
Lot size
Age and condition
Quality of renovation
The closer the comparable properties are to the finished product to create, the more useful they are.
Be conservative.
If your offer only makes sense using an aggressive ARV, you may be building too much optimism into the deal before you’ve even purchased it.
Estimate Renovation Costs Before You Offer
Next, determine what it will realistically cost to bring the property to your intended resale condition.
Your budget might include:
Kitchen
Bathrooms
Flooring
Paint
Roofing
HVAC
Electrical
Plumbing
Windows and doors
Exterior work
Landscaping
Permits
Labor
Whenever possible, walk the property with a contractor before making your final offer.
And don’t forget contingency.
Hidden problems are common in renovation projects. A budget with no room for surprises can turn a good acquisition into a difficult project quickly.
Account for the Costs Outside the Renovation
Purchase price and rehab are only part of the investment.
Your analysis should also account for expenses such as:
Financing
If you’re using a fix and flip loan, consider interest, origination fees, closing costs, and other financing expenses.
Holding Costs
While you own the property, you may be responsible for:
Property taxes
Insurance
Utilities
Maintenance
HOA expenses
Loan interest
Selling Costs
At exit, you may also have:
Real estate commissions
Closing expenses
Seller concessions
Staging
Photography
Other marketing costs
Leaving these expenses out can make your projected profit look significantly better than it really is.
Determine Your Maximum Offer
Once you’ve estimated the complete project economics, determine the highest purchase price you’re willing to accept.
Some investors use the 70% rule as a quick screening method.
The traditional formula is:
Maximum Offer = (ARV x 70%) - Renovation Costs
For example:
ARV: $400,000
70% of ARV: $280,000
Renovation budget: $70,000
Using the rule:
$280,000 - $70,000 = $210,000
The investor’s maximum offer under the 70% rule would be approximately $210,000
The approximate percentage can vary based on market, project complexity, financing costs, expected timeline, selling expenses, and required return.
A more complete deal analysis is more useful than relying on a single rule.
Don’t Forget Your Targeted Return
Your offer should leave enough room for the return you’re trying to achieve.
Ask yourself:
If everything goes according to plan, is the expected return worth the time and capital required?
Then ask the more important question:
What happens if everything doesn’t go according to plan?
Run scenarios where:
Renovation costs increase
The project takes longer
ARV comes in lower
The buyer requests concessions
A deal that remains viable when assumptions move slightly against you is generally stronger than one requiring everything to go perfectly.
Understand the Seller’s Position
Numbers determine what you can pay.
Understanding the seller may help determine how you structure the offer.
Look for clues such as:
How long the property has been listed
Previous price reductions
Whether the property is vacant
Whether it has fallen out of contract
Property condition
Seller timeline
A seller who prioritizes certainty or speed may evaluate an investor offer differently than someone focused entirely on obtaining the highest possible price.
That doesn’t mean assuming a seller is desperate. It means understanding what matters to the other side of the transaction.
Price isn’t the Only Part of an Offer
A strong real estate offer isn’t necessarily the highest offer.
Depending on the situation, sellers may also care about:
Closing timeline
Financing certainty
Inspection terms
Earnest money
Contingencies
Flexibility around possession
Overall likelihood of closing
Investors should work with appropriate real estate and legal professionals when structuring contractural terms.
The goal is to make the offer attractive without taking unnecessary risks simply to win the property.
Know When to Negotiate
If the seller counters above your target price, return to your underwriting.
Don’t increase your offer simply because you’re already emotionally invested in the property.
Instead, ask:
Does the deal still meet my criteria at the new price?
If yes, continuing the negotiation may make sense.
If not, be willing to walk away.
The discipline to lose a deal can be just as important as the ability to find a new one.
Avoid Trying to “Make the Numbers Work”
One of the most dangerous phrases in fix and flip investing is:
“We’ll make it work.”
If the purchase price is too high, investors sometimes compensate by:
Increasing projected ARV
Reducing the renovation budget
Assuming a faster sale
Cutting contingency
Underestimating holding costs
The spreadsheet improves, but the property has changed.
Your assumptions should determine your offer. Your desired offer shouldn’t determine your assumptions.
Consider Financing Before You Submit the Offer
If you plan to use financing, don’t wait until after you’re under contract to understand your options.
Before making an offer, it helps to know:
Your likely leverage
Required cash contribution
Whether renovation costs can be financed
Expected financing costs
Approximate closing timeline
What documentation your lender will need
This allows you to make an offer based on realistic capital requirements rather than assumptions
It can also help you avoid agreeing to a closing timeline your financing can’t support.
Have a Walk-Away Number
Before negotiations begin, determine your maximum acceptable purchase price.
Write it down.
If negotiations move above that number and nothing else about the deal has improved, walk away.
This removes emotion from the decision.
There will always be another property.
Protecting your capital is more important than winning a negotiation.
The Bottom Line
Making an offer on a fix and flip property starts long before you send a purchase agreement.
It starts with disciplined underwriting.
Understand the property’s potential value. Estimate the renovation realistically. Account for financing, holding and selling costs. Determine your required return. Stress-test your assumptions.
Then establish the price that makes sense for you.
A successful fix and flip isn’t created when you sell the property.
A large part of the outcome is determined by the deal you agree to when you buy it.
Frequently Asked Questions
How much should you offer on a fix and flip property?
Your offer should be based on the property’s projected ARV, renovation budget, financing, and holding expenses, selling costs, contingency, and required return. The listing price alone shouldn’t determine what you’re willing to pay.
What is the 70% rule for house flipping?
The 70% rule is a common screening guideline that suggests multiplying ARV by 70% and subtracting estimating renovation costs to estimate a maximum purchase price. It is a rule of thumb rather than a substitute for complete deal underwriting.
Should you offer below asking price on a fixer upper?
It depends on the property and the market. Rather than choosing an arbitrary discount from asking price, investors should calculate the price supported by the project’s economics and use that analysis to guide the offer.
Should I get financing before making an offer on a flip?
Understanding your financing options before submitting an offer can help you estimate required cash, financing costs, and a realistic closing timeline. This is particularly important when the seller expects a quick close.
When should you walk away from a fix and flip negotiation?
Consider walking away when the purchase price or other terms cause the deal to fall outside your predetermined investment criteria. Changing your assumptions simply to justify a higher price can increase your risk.