Concept

Deal Analysis

What it is

Deal analysis is how you figure out whether a specific property is worth buying at a specific price. It’s the work that sits between finding a lead and writing an offer.

From the full course and the ARV masterclass, the skeleton:

  1. ARV — After Repair Value. What will this house sell for once renovated to the standard of the neighborhood? This comes from closed comps, not Zillow estimates, not active listings. Active listings are wishes. Closed sales are truth.
  2. Rehab estimate. What does it cost to get from today’s condition to that ARV? You get this from walking the house with your fliporithm and your jobs menu.
  3. Holding costs, closing costs, fees. Interest on the loan, points, utilities, insurance, real estate commissions — both sides. These are not optional.
  4. Target profit. What you need to walk away with for the project to be worth your bandwidth.
  5. Max allowable offer. ARV minus rehab minus all costs minus target profit. That’s your ceiling.

That’s the structure. The Flippin’ Calculator does the math. The hard part is getting the inputs right.

Why it matters

From the beginner guide: “There are really only four steps when it comes to flipping a house. Step one is the deal — acquiring the property and getting the funding for it.” The deal is first because everything downstream inherits whatever margin you bought. A weak analysis upstream means no amount of great execution saves you later.

New investors confuse deal analysis with running a calculator. The calculator is easy. Getting accurate inputs is where people get hurt. Three traps Ross hits in the ARV masterclass and the 70% rule video:

Wrong ARV. Using active listings instead of closed sales. Using comps from one neighborhood when the house is on the wrong side of the tracks. “I actually see outer-towners do this a lot where they buy a house and they use comps from a certain neighborhood but it’s just on the outskirts of that neighborhood, which makes all the difference.”

Wrong rehab number. Pricing only what’s visible. Missing the stuff in the walls: old wiring, bad plumbing, a sewer line near failure, a roof at the end of its life.

Wrong exit. Pricing for a retail buyer on a house in a rental neighborhood. Pricing for a landlord when the market is owner-occupants.

Garbage in, garbage out. The spreadsheet tells you to buy a loser with confidence if the inputs are wrong.

How it shows up

Two passes. First pass is the quick filter: the 70 percent rule. ARV times 70% minus rehab equals max offer. Thirty seconds, back of the envelope, kills most leads. “These other pocket rules like that, they get you in the ballpark. They’re to make decisions quickly.”

Second pass is the real underwriting. Pull three closed comps within six months in the same neighborhood, same size class, same age range. Walk the property and price every trade with your scope builder. Check zoning, easements, flood zone. Run a sensitivity: what happens if ARV drops 5%? What if rehab runs 20% over? A deal that only works under best-case is not a deal.

For rentals, the math shifts. Cash flow, cap rate, and the 1 percent rule replace ARV as the primary filter. Run both sets of numbers on anything that could be flipped or held — exit strategy flexibility is itself a form of margin.

max allowable offer, 70 percent rule, arv, fliporithm, rehab budget, exit strategy, equity on arrival