How to Analyze a Fix and Flip Deal (The Institutional Workflow)
Most fix and flip deals lose money before the first contractor swings a hammer. They lose it at the underwriting table — in optimistic ARV assumptions, undersized rehab budgets, and timeline math that does not survive contact with reality.
This is the workflow we use at DealIntel to evaluate a deal the way an institutional capital allocator would. It is the same six-step process the platform runs automatically, written out so an operator can apply it to a deal in front of them today.
Step 1 — ARV from a confidence-weighted comp set
ARV is the most important number on the page and the one operators get most wrong. The fix is methodology, not effort. Pull 5 sold comps that meet four filters: within 0.5 miles of subject, sold in the last 90 days, within ±10% of subject square footage, and in renovated condition. Compute price per square foot for each. Take the median — not the mean — and multiply by subject sqft. That is your base ARV.
The median absorbs single-outlier comps that the mean does not. One $620/sqft hedge fund flip in a $480/sqft median market should not drag your ARV up by 4%. Median makes the outlier invisible.
See the full method in our how to calculate ARV post, or run it on a deal in the free ARV calculator.
Step 2 — Apply a confidence haircut
You will rarely get five clean comps. When you have three comps instead of five, or the comp spread is wider than 8%, or one of your comps is 12 months old instead of 3 — your confidence in the base ARV drops. Reflect that in the number.
- 5+ tight comps, low spread: underwrite at 100% of base ARV.
- 3–4 comps or 8–12% spread: underwrite at 95%.
- 2 comps or 12%+ spread: underwrite at 90%, or walk.
On a $500k ARV, a 5% haircut is $25k of margin you stop pretending you have. That is the difference between a flip that pencils and a flip that breaks even.
Step 3 — Build the rehab budget bottom-up
The single most expensive mistake in fix and flip underwriting is budgeting rehab from a per-square-foot rule of thumb. "$50/sqft cosmetic, $100/sqft heavy" is how operators get into deals that eat them. Real budgets are built from line items: kitchen cabinet replacement quoted, roof inspected and quoted, HVAC age verified, electrical panel checked for capacity, plumbing scoped for cast iron.
Walk the property with a contractor. Build a line-item budget. Add a 15% contingency on top — not because you cannot budget, but because demolition reveals problems that no walkthrough catches. The 15% is not padding. It is the cost of not having x-ray vision.
Step 4 — Compute MAO with the 70% rule
The 70% rule gives you the Maximum Allowable Offer — the price at which a fix and flip deal still pencils with normal execution. The formula:
- MAO = (ARV × 0.70) − rehab budget − holding costs − closing costs (buy and sell)
The 30% wedge between ARV and (MAO + rehab) is what absorbs execution risk — rehab overruns, comp slippage during your hold, timeline extensions, market-cycle drift. Operators paying above MAO are not "more aggressive" — they are running closer to break-even than their spreadsheet shows. Run your number in the free MAO calculator.
Step 5 — Stress test the timeline
Every flip has a planned hold period. Every flip also has a real hold period. The two are not the same. A 4-month plan rarely finishes in 4 months; 6 is more typical, 7 is common, 9 is the cost of one major surprise.
Re-run the deal at planned hold + 3 months. If profit goes negative on a 3-month overrun — meaning your carrying cost (interest, taxes, insurance, utilities, HOA) eats the margin — the deal is too thin to survive normal execution. Walk it, or restructure the financing.
Step 6 — Pre-mortem the deal
Before you sign, write down the three most likely ways this deal loses money. Be specific. "Market downturn" is not specific. "Cast iron drain stack discovered behind kitchen wall, +$18k and +6 weeks" is specific. If you cannot answer the pre-mortem with specifics, you do not yet understand the deal well enough to buy it.
Operators with a 90%+ win rate are not lucky. They are ruthless about the pre-mortem and walk from anything that fails it. That is the difference between flipping and gambling.
The kill list overlay
Steps 1–6 produce an institutional underwrite. DealIntel layers a 25-point kill list on top — structural, market, financing, legal, and exit risk — and any high-severity flag triggers a Pass verdict before strategy and pricing are even considered. The kill list is not a replacement for the workflow above. It is a safety net for the deals that look good on paper and break in execution.
Related reading
- How to calculate ARV for a fix and flip
- 10 deal killers every fix and flip investor should walk away from
- The true cost of a hard money loan
- ARV definition
- The 70% rule definition
- Free ARV calculator
- Free MAO calculator
Keep reading
- Fix & Flip Red Flags Checklist (25 Things to Inspect Before You Sign)A pre-offer red flags checklist for fix and flip operators — structural, mechanical, legal, market, and financing red flags that should trigger a renegotiation or a walk. Built from the 25-point Kill List DealIntel runs on every property.
- 10 Reasons Fix and Flips Lose Money (Ranked by How Often We See Them)Most failed flips do not fail for exotic reasons. They fail for the same ten reasons, in roughly the same order, every cycle. Here is the ranked list — and the institutional discipline that prevents each one.
- Why ARV Fails (And the Methodology That Survives Bad Comps)Most ARV failures are not market failures — they are methodology failures. Here are the six ways ARV systematically overshoots, why the mean is the wrong central tendency, and the institutional method that survives bad comp sets.
Matt Abadi is the founder of DealIntel. He leads the development of the platform's six-strategy underwriting engine, 25-point Kill List, and Monte-Carlo financial model — the institutional analysis stack DealIntel applies to every fix and flip deal. DealIntel was founded in 2025 with the central thesis that knowing when not to invest is the most valuable number on the page.