How to Find Your Max Offer Price in Seconds
TLDRYour max allowable offer is a formula: after repair value minus rehab, all other costs, and the profit you want. The two largest levers are the rehab number and target rate of return. The remaining inputs use the settings in the source calculator.
Table of Contents
- The Offer Formula
- The Two Levers That Matter
- Default Settings That Almost Never Move
- Paying Yourself Like a Lender
- Same Math for Flips and Rentals
- FAQ
The Offer Formula
As a flipper, you need to quote a price fast. The math is the same every time, so the job is just turning the crank.
Here is the full equation:
Total costs (acquisition + rehab + interest + points + other costs) + target profit = ARV - cost to sell
You are backing out the acquisition price. You know ARV, you know rehab, you know the cost to sell, and you know the profit you want. The calculator solves for acquisition.
Example. ARV is $350,000. Rehab is $60,000. The calculator spits out an offer price around $190,000 and also tells you:
| Output | What It Means |
|---|---|
| Total cash needed | How much you need to close and finish the deal |
| Profit | The lump sum you put in your pocket |
| Annualized return | Your profit as a percent of cash in, annualized |
Annualized return is the number I target. On a flip I want 15 to 20 percent on the money that is in the deal, whether it is my cash or borrowed cash. At 20 percent the offer comes out around $179,000. At 15 percent it comes out around $190,000. Same ARV, same rehab, different acquisition price based on how hungry I am.
Your offer price is not a feeling. It is the output of a formula. Build the formula once and stop guessing.
The Two Levers That Matter
Most of the inputs in the calculator are defaults I never touch. Two levers move my offer price on almost every deal: rehab cost, and target rate of return.
Rehab cost. This is where an estimate miss comes straight out of profit. Ross uses a separate rehab calculator that breaks the house into line items so the number is not a guess. Bad scope, bad number, bad offer.
Target rate of return. This is the dial. At 20 percent, the calculator produced the lower and more conservative offer of about $179,000. At 15 percent, it allowed the higher offer of about $190,000. Ross said a lower-risk cosmetic project might justify the lower return target. A gut job or second-story addition should demand more return for more risk.
Pro TipRunning the deal at 15% and 20% shows how much purchase-price room the return target creates. In this example, the 20% target was the more conservative end of the range.
Default Settings That Almost Never Move
The rest of the calculator lives on defaults. Change them if your situation is different. Most of the time, do not.
| Input | My Default | Why |
|---|---|---|
| Interest rate | 12% in Ross’s source | His working [[hard money |
| Points up front | 3-4 points in Ross’s source | His working fee assumption; use the actual quote |
| Hold time | Project assumption | Use the duration supported by the actual plan |
| Other costs during hold | 2% | [[closing costs |
| Cost to sell | 7% | Commissions plus closing on the back end |
The interest rate and actual hold time both affect financing cost. Put the real proposed loan terms and project duration into the underwriting rather than using a generated example as a default.
If you are paying cash, you might think these drop to zero. The calculator lets you set them to zero, and you will see your offer price go up. I do not recommend that. See the next section.
Paying Yourself Like a Lender
If you have cash and do not borrow, you have two choices. You can lower the interest input to zero and offer more. Or you can treat your cash like a hard money lender and include the source’s 12 percent assumption on paper.
Ross always charges his own cash an interest cost on paper, not as a literal payment to himself.
The purpose is to avoid treating owned cash as free capital. Imputing the same financing cost keeps the acquisition hurdle comparable with a borrowed-money deal. It does not create extra cash profit; it is an underwriting choice that prices the use of your capital.
Key ConceptTreat your cash as lender capital in the calculator if you want the deal to clear the same return hurdle it would face with borrowed money. This transcript does not add a wholesale fee, contractor markup, or other role-based profit to that calculation.
Same Math for Flips and Rentals
This formula works for rentals too. The exit is just different.
When you flip a house, you sell it to the market. You get paid in cash from the buyer.
When you keep a house as a rental, Ross describes the refinance as selling it to the bank. The lender appraises the stabilized property and offers terms based on its program and underwriting.
The amount returned in a refinance depends on the appraised value, lender program, existing debt, costs, property income, and borrower qualification. In Ross’s example, a stabilized-property loan is 80% LTV; he says the cash-out alternative may price worse and land around 70% to 75%. Those are the example terms he encountered, not universal program limits or a promise of full cash recovery.
Common MistakeBuying without planning the exit financing. Ross prefers the borrowed-purchase path because of the refinance terms in his example. Compare the real short-term borrowing cost, seasoning rules, appraisal risk, rate, fees, and LTV against the actual cash-out quote before choosing it.
Same formula. Same levers. Just a different exit on the back end.
FAQ
What rate of return should I target on my first flip?
Ross’s target range is 15% to 20% on the money in the deal. He says an initial offer might use the top of that range: at 20% the example offer is lower and the margin is fatter; at 15% he pays more, which he reserves for a lower-risk house.
Do I need a fancy calculator or can I do this on a napkin?
The formula can be solved manually, but Ross built the calculator because repeating the backwards math is slow and error-prone. The source does not say he makes walkthrough offers from a phone.
What if my ARV is wrong?
Then the output inherits the bad input. This lesson assumes you have already formed the ARV; use the separate ARV Framework to build the comp set before treating the calculated offer as usable.
How do I know my rehab number is realistic?
Ross points to his separate rehab calculator and walkthrough lesson for that input. This source uses $60,000 as the example but does not teach the line-item estimating method itself.
Can this work if I am using private money or a commercial loan instead of hard money?
Yes. Change the interest rate and points inputs to match your lender. Everything else is the same. The formula does not care who is funding.