How to Analyze a Fix-and-Flip Deal Before You Buy
Before you finance a flip, you need to know whether the deal actually pencils out. A fix-and-flip deal analysis that skips the math — or pads it too optimistically — is the single most common reason flips lose money instead of making it. Here’s the framework experienced investors use before they ever submit an offer.
Fix-and-Flip Deal Analysis: Start With the 70% Rule
The 70% rule is a widely used quick-screen formula for fix-and-flip deal analysis: don’t pay more than 70% of a property’s after-repair value (ARV), minus estimated repair costs.
Maximum Allowable Offer (MAO) = (ARV × 0.70) − Repair Costs
Example: if a property’s ARV is $400,000 and repairs will run $60,000, your maximum offer is (400,000 × 0.70) − 60,000 = $220,000. The 30% buffer covers your financing costs, holding costs, selling costs, and profit margin — the expenses a lot of first-time flippers forget to account for.
The 70% rule is a screening tool, not a guarantee of profitability. Markets, price points, and rehab scope all shift the right number for a specific deal — treat it as a starting filter, not the final word.
Get the ARV Right — or Nothing Else Matters
Every number in your deal analysis flows from ARV. Overestimate it and the entire deal is built on a bad assumption. Pull comparable sales (comps) that are:
- Sold within the last 3-6 months
- Within a comparable distance (typically under a mile in dense markets, wider in rural ones)
- Similar in square footage, bed/bath count, and finish quality — not the nicest flip on the block
If you can only find comps that support the ARV you want, that’s a signal to lower your ARV estimate, not raise your offer.
Budget the Rehab Like It Will Go Wrong
Experienced flippers build a contingency — typically 10-20% on top of the contractor’s scope-of-work estimate — for the repairs that only show up once walls are open: electrical, plumbing, foundation issues, or permit delays. A rehab budget with zero contingency isn’t a real budget.
Don’t Forget Holding Costs
The purchase price and rehab budget are only part of the cost of a flip. Every month the property sits before it sells, you’re paying:
- Interest on the loan (fix-and-flip loans are typically interest-only, but the interest still adds up)
- Property insurance and taxes
- Utilities and basic maintenance
- Selling costs at exit — agent commissions, closing costs, and any concessions
Underestimating your timeline is one of the fastest ways to turn a profitable flip into a break-even one. Build in extra weeks beyond your contractor’s estimate, especially for larger rehabs.
How Financing Terms Affect Your Numbers
Because fix-and-flip loans are typically short-term (6-18 months) and interest-only, your cost of capital is directly tied to how fast you can complete the renovation and sell. A loan structured around the property’s ARV — rather than your personal income — lets you leverage more of the deal, but it also means the deal’s math needs to hold up on its own merits, since qualification isn’t based on your W-2 or tax returns.
When you’re comparing financing options, look at loan-to-cost (LTC) and ARV-based leverage together, not just the interest rate in isolation — the amount of cash you need to bring to closing often matters more to your actual return than a fraction of a point on rate.
Run the Numbers Before You Fall in Love With the Property
The deals that lose money are rarely the ones where the investor did the math and it didn’t work — they’re the ones where the investor skipped the math because the property felt like a good opportunity. Run the 70% rule with our Fix & Flip Calculator, verify your ARV with real comps, pad your rehab budget, and account for every month of holding costs before you make an offer.
If the numbers work, FAAS Funding’s fix-and-flip loans are structured around your deal’s ARV rather than your personal income — see our fix-and-flip loan program details for current terms, or check your eligibility below.
Check Your Fix-and-Flip Eligibility →
This article is for general educational purposes and does not constitute financial or investment advice. Always run your own numbers and consult a qualified professional before committing to a real estate deal.