Strategy · Short-hold residential

Fix & Flip

How institutional operators underwrite a fix and flip — capital stack, timeline, profit math, the five most common failure modes, and how DealIntel evaluates Fix & Flip alongside five alternative strategies on every deal.

At a glance

Timeline

4–9 months

Capital intensity

Medium — 25–35% equity, balance hard money

Return profile

15–25% gross profit margin on ARV

Best for

Hot to warm markets (under 60 days median DOM), retail-buyer-friendly product

Fix and Flip is the simplest residential real estate strategy on paper and the easiest one to lose money on in practice. Buy distressed, rehab fast, sell to a retail buyer, repeat. The math is one equation. The execution is twenty things that can each go wrong, any one of which can erase a 20% projected margin.

This is how an institutional operator underwrites a Fix & Flip — not the influencer version.

The math, stripped down

Maximum Allowable Offer (MAO) is the disciplined Fix & Flip formula. It anchors every other decision:

MAO = (ARV × 0.70) − rehab budget − holding costs − closing costs both sides − wholesale fee if any

The 0.70 multiplier (the “70% rule”) is the institutional buffer that absorbs the things that will go wrong: rehab overrun, days-on-market drift, comp slippage, and market-cycle risk. Operators who pay above the 70% line are running closer to break-even than their spreadsheet says.

The capital stack

Acquisition: 80–90% hard money loan-to-cost (LTC), 10–20% operator equity. Hard money typically 9–13% interest-only with 1–3 points origination.
Rehab: 100% of the rehab budget held in escrow by the lender and released in 3–5 draws as work completes.
Carry reserve: 4–6 months of interest, insurance, and property tax sitting in cash. Always.
Total operator cash: typically 25–35% of all-in project cost.

The timeline

Weeks 1–4: close, mobilize, demo, permits filed.
Weeks 5–16: rough trades (electric, plumbing, HVAC), framing changes, drywall, paint.
Weeks 17–20: finishes — flooring, cabinets, counters, tile, fixtures.
Weeks 21–24: stage, list, accept offer.
Weeks 25–32: buyer due diligence, appraisal, close.

Every month past month 6 typically erases roughly $3,000–$5,000 in interest carry on a $400k loan. Timeline slippage is the largest source of unmodeled loss in Fix & Flip.

The five most common failure modes

1. ARV overshoot. Comps look strong but were renovated to a higher tier than the subject. Plan for the median comp tier the subject will actually deliver, not the top-end comp.
2. Rehab budget anchored to the optimistic estimate. Add a 10–15% contingency line, every time. Foundation and electric/plumbing rough surprises are the usual culprits.
3. Timeline anchored to vendor promises. Permit timelines, supplier delays, and inspection failures stretch the project by 30–60 days more often than they don't.
4. Hard-money carry erosion. A 3-month slip adds roughly $12,000–$20,000 of carry to a typical project. Underwrite at a 9-month hold even if you plan for 6.
5. Single-buyer exit dependency. A finish package that pleases one buyer profile and no others is fragile. Aim for a finish tier that clears at least three plausible buyer profiles in the comp pool.

When Fix & Flip is the right path

Market median days-on-market is under 60 days.
Comp set is dense — five or more renovated comps within 0.5 miles, last 90 days, within 10% of subject square footage.
The subject's natural buyer pool is retail end-user (not investor).
Operator has access to reliable contractors within an hour of the property — remote management on a 6-month flip is a project-management headache that erodes margin.

When to switch strategies

Several deals look like a Fix & Flip on first glance but are actually better as a different strategy. Common pivots:

Lot allows an ADU under local code → see ADU strategy — often produces higher ROI than Fix & Flip on the same parcel.
Subject is a small SFR on a lot zoned for multi-unit → see Multi-Unit Conversion.
Market is moving slow (DOM 90+) → switch to BRRRR and earn cash flow during the slow period.

How DealIntel underwrites Fix & Flip

DealIntel runs Fix & Flip as one of six strategies on every deal — automatically, in parallel — with confidence-weighted ARV, full hard-money cost-of-capital math, a +30 day timeline stress test on carry, and a Kill List flag for comp thinness, market liquidity, and structural unknowns. The platform shows Fix & Flip side-by-side with BRRRR, ADU, Addition, Multi-Unit, and Ground-Up so the operator picks the strategy with the best risk-adjusted ROI for the specific property — not the strategy they came in defaulting to.

Related reading: ARV, hard money loans, comparable sales, how to calculate ARV.

Kill flags for this strategy

Long days-on-market (90+ median DOM)
Thin or non-parity comp set
Hard-money carry exceeding 30% of projected profit
Foundation or structural unknowns

Any high-severity flag on a deal triggers a review or a Pass verdict before the strategy is recommended.

Frequently asked questions

What is the 70% rule in fix and flip?

The 70% rule is a discipline that caps the maximum allowable offer at 70% of After Repair Value (ARV) minus rehab budget, holding costs, and closing costs on both sides. The 30% buffer absorbs rehab overruns, timeline slippage, comp slippage, and market-cycle risk. Operators who pay above the 70% line are running closer to break-even than their spreadsheet says.

How long does a typical fix and flip take?

A disciplined fix and flip runs 4 to 9 months from close to sale: 1 month for mobilization and demo, 3 months for rehab, 1 month for staging and listing, and 2 months for buyer due diligence and close. Institutional underwriters budget for 9 months even if the plan is 6 — every extra month adds roughly $3,000–$5,000 in hard-money carry on a $400k loan.

What is Maximum Allowable Offer (MAO)?

MAO = (ARV × 0.70) − rehab budget − holding costs − closing costs both sides − wholesale fee if any. It is the disciplined Fix & Flip formula that anchors every other decision. Going above MAO erodes the safety buffer that absorbs unmodeled costs.

How much capital does a fix and flip require?

Typical operator cash equity is 25–35% of total project cost. The remainder is 80–90% hard money loan-to-cost (LTC) for acquisition, 100% of the rehab budget held in escrow by the lender, and a 4–6 month carry reserve in cash. On a $400k all-in project, expect to commit $100k–$140k of your own capital.

When does fix and flip lose to other strategies?

Fix & Flip loses to ADU when the lot supports an accessory unit under local code — the ADU often produces higher ROI per dollar. It loses to Multi-Unit Conversion on small SFRs zoned R2+. And it loses to BRRRR in markets with 90+ day median days-on-market — better to lease and earn cash flow than carry hard money through a slow exit. DealIntel evaluates all six strategies in parallel to surface the best path per property.