How to Analyze a Fix & Flip Deal: The Numbers That Matter

Flipping houses can be one of the most rewarding—and risky—strategies in real estate investing. The difference between a profitable flip and a costly mistake comes down to one thing: the numbers. If you want to succeed in the fix & flip game, you need to know how to run the math properly before you ever swing a hammer.

In this post, we’ll walk you through the essential numbers to analyze when evaluating a potential flip, and how to avoid the most common financial pitfalls investors face.

1. Determine the After-Repair Value (ARV)

The After-Repair Value (ARV) is the estimated market value of the property after it has been renovated. This is the foundation of every fix & flip analysis because it tells you what the property could sell for when it’s finished.

How to Calculate ARV:

• Look at comparable sales (comps) in the neighborhood.

• Choose properties with similar size, layout, age, and location that were recently sold.

• Adjust for any differences in upgrades or features.

💡 Pro Tip: Use the lowest comp in your set to stay conservative and leave room for unexpected costs or market shifts.

2. Calculate Your Maximum Allowable Offer (MAO)

Once you know your ARV, you can figure out your Maximum Allowable Offer (MAO)—the most you can pay for the property and still hit your profit goals.

Basic MAO Formula:MAO = (ARV x 70%) – Estimated Repair Costs

The 70% rule is a common guideline used by investors to leave room for profit, holding costs, and selling expenses. You can adjust that percentage based on your local market or risk tolerance.

3. Estimate Repair and Renovation Costs

Getting an accurate repair estimate is critical. Underestimating rehab costs is one of the fastest ways to lose money on a flip.

Steps to Estimate Repairs:

• Walk the property with a contractor or experienced investor.

• Break costs down into major systems (roof, HVAC, electrical, plumbing), cosmetic upgrades (paint, flooring, kitchen/bath updates), and permits or code upgrades.

• Always build in a 10-20% contingency buffer for surprises.

💡 Pro Tip: If you're new, bring a contractor or experienced flipper with you. Estimating repairs takes practice and local knowledge.

4. Know Your Holding Costs

Holding costs are the expenses you’ll incur while the property is being renovated and before it sells. These include:

• Loan interest payments (especially if using hard money)

• Utilities

• Property taxes

• Insurance

• Maintenance or security

These costs can add up fast, especially if the project timeline gets delayed. Include them in your budget from the start.

5. Calculate Selling Costs

Once the property is ready to hit the market, you’ll also need to account for closing costs and agent commissionswhen it sells.

Typical selling costs:

• Realtor commissions (usually 5-6% of ARV)

• Title fees and closing costs (1-2% of ARV)

• Staging or marketing expenses

All of these should be factored into your profit calculation.

6. Determine Your Net Profit

Now it’s time to calculate the potential net profit on the deal:

Net Profit = ARV – (Purchase Price + Repairs + Holding Costs + Selling Costs)

You should aim for a minimum of $20,000 profit per flip or 10-15% of the ARV to ensure it's worth your time, risk, and capital.

If your profit margin is too slim, move on or renegotiate the price.

7. Plan for Financing

If you’re using a hard money loan, factor in:

• Points and fees (usually 1–3% of the loan)

• Interest rates (typically 12-14% with points, or 18-20% with no points)

• Loan term and repayment structure

Hard money can be a powerful tool for flippers—especially when working with a fast, flexible lender like QuickDraw Lending—but it must be factored into your total cost structure.

Conclusion

Fix & flip investing isn’t just about finding a “good deal”—it’s about running the numbers with discipline and accuracy. By knowing how to calculate ARV, MAO, repair costs, and all associated expenses, you’ll set yourself up for consistent, profitable flips.

At QuickDraw Lending, we work with investors every day to fund their fix & flip projects. If you're ready to analyze your next deal or need fast, reliable capital to close, we're here to help.