How to analyze a fix & flip deal.

A good flip is made when you buy, not when you sell. Getting the numbers right before you make an offer is the single most important skill in this business — and it's mostly arithmetic. Here's how to run a deal so you know your profit before you commit a dollar.

Start with ARV

Everything keys off the after-repair value (ARV) — what the home will sell for once it's fully renovated. Pull 3–5 recent sold comps that are as close as possible in location, size, style, and condition (sold, not listed, ideally within the last 6 months and a half-mile). Be honest and conservative; a too-high ARV is how flips lose money. More on this in ARV, LTV & draws explained.

The 70% rule (your quick screen)

A fast way to sanity-check a deal:

Maximum offer = (ARV × 70%) − repair costs.

The 30% you're holding back covers your financing, holding costs, selling costs, and your profit. It's a screen, not a guarantee — on higher-value homes you might work off 75%, on thinner deals you'll want more cushion — but if a deal fails the 70% rule badly, walk.

Budget the rehab honestly

Underbudgeting rehab is the most common way new investors get hurt, especially in the Baltimore area's older housing stock. Walk the property with a contractor, get a real scope of work, and then add a contingency of 10–20% for the surprises you can't see behind the walls. A budget with no contingency is a wish, not a plan.

Don't forget the costs beginners miss

The purchase price and rehab are the obvious costs. These are the ones that quietly eat profit:

• Financing: interest and points on your loan — see rates & points.
• Holding costs: taxes, insurance, and utilities for every month you own it. Time is money — literally.
• Buying closing costs: title, transfer/recordation taxes (Maryland's aren't small), and lender fees.
• Selling costs: agent commissions, transfer taxes again, and any concessions — often 6–8% of the sale price.

A worked example

1. ARV: $300,000 (from solid comps)
2. Purchase: $160,000
3. Rehab (with contingency): $60,000
4. Holding + closing (buy): ~$12,000
5. Financing (a few months of interest + points): ~$14,000
6. Selling costs (~7% of $300k): ~$21,000
7. Total costs: ~$267,000 → Projected profit: ~$33,000

Now you can decide with your eyes open: is that margin worth the risk and effort? If comps slip or rehab runs over, is there still room? That's the whole point of running the numbers first.

Know your exit before you buy

Are you flipping (selling) or holding (renting)? It changes how you finance and what margin you need. New to this? Start with financing your first fix & flip, and when you're ready, how to get a hard money loan.