THE CORE SKILL
THE NUMBERS COME
IN AN ORDER.
Deal analysis is not a spreadsheet. It is a sequence, and the sequence matters more than the formula, because each step is an input to the next one.
No dollar figures appear on this page. Your market has its own, and a number from someone else's market is worse than no number at all.
Step one: after-repair value
Everything starts here. After-repair value is what the property sells for, renovated to the standard the neighborhood supports, in a normal marketing period. Not what it could fetch for a perfect buyer. Not what the seller believes. What it sells for.
Build it from sold comparables, and be strict about what qualifies:
- Sold, not listed. A list price is an opinion. A sold price is a completed negotiation.
- Recent. The tighter the window the better. Old sales describe an older market.
- Close. Start tight and expand only if you must, and never across a boundary that the market treats as real — a school attendance line, a river, a highway, the edge of a subdivision.
- Similar. Same property type, comparable square footage, similar bed and bath count, similar lot, similar age and style.
- Similar condition. Compare a renovated house to renovated houses. This is the error that inflates ARV most often.
Then adjust for the differences that remain, and be conservative in both directions. Look at the photos of every comp. A sale price without the photographs is a number without context.
Step two: the repair number
Estimate repairs against the standard your comparables were renovated to. Not to make the house nice. To make it competitive with the specific houses a buyer will be choosing between.
Walk with a written list and price the same categories every time, in the same order: roof, structure and foundation, HVAC, electrical, plumbing, windows and doors, kitchen, bathrooms, flooring by area, paint inside and out, trim and doors, exterior and siding, landscaping, and anything code-related or permit-related. Consistency in the list is what turns guesses into estimates over time.
Then add a contingency for what you cannot see. Older housing stock in parts of Columbia and West Columbia carries the usual surprises — knob and tube remnants, galvanized supply lines, subfloor damage under a slow leak, a roof with more layers than anyone admitted. You are not estimating a house. You are estimating a house plus the things behind its walls.
This page is part of a larger body of work — start with the deal calculators and learning resources.
Step three: the offer math
Maximum allowable offer is arithmetic once the first two numbers exist. The structure, written as terms rather than figures:
MAO = ARV − repairs − closing costs in − holding costs − closing costs out − your required profit
Ben Lovro
For a wholesale, subtract your assignment fee as well, because your buyer is running this same calculation and their number has to still work after paying you.
Each of those terms is knowable for your market. Closing costs in and out come from your closing attorney. Holding costs come from your financing, taxes, insurance and utilities multiplied by a realistic timeline. Required profit is a decision you make in advance, in writing, so that it cannot quietly shrink at the moment you want a deal to work.
The shortcut heuristics exist because this itemization is tedious. Use them to screen. Use the itemized version to decide.
The order matters more than the formula
- ARV first, from sold comps, before you know anything about the seller's price.
- Repairs second, to the comp standard, with contingency.
- Costs third — in, holding, out, and financing if borrowed.
- Profit fourth, set as a policy rather than negotiated with yourself.
- Offer last. The offer is the output. It is never the input.
Reversing this is the most common failure in the business, and it does not feel like a failure while it is happening. You hear the seller's number first, you decide you want the deal, and then you build an analysis that arrives there. Every assumption bends slightly. The ARV gets a little optimistic. The repair number loses its contingency. The timeline shortens. Nothing you did was a lie and the deal is still wrong.
How to check your own work
Three tests, all cheap.
Run it backwards. Take your offer, add repairs and all costs and profit, and see what ARV it implies. Then ask whether you would genuinely bet that the house sells for that number in a normal marketing period. Stated that way, optimism is easier to notice.
Stress the timeline. Recompute with the hold fifty percent longer. If the deal collapses, it was a deal that required everything to go right.
Show someone. Put your ARV and repair number in front of a person who buys in that zip code and let them correct you. Free, fast, and the fastest way to get accurate. Then go read /common-mistakes/ and check yourself against the list.
Frequently asked
Questions people actually ask
What is ARV?
After-repair value. What the property sells for once renovated to the standard the neighborhood supports, in a normal marketing period. Built from recent sold comparables of similar type, size and condition, not from list prices or from an online estimate.
How many comparable sales do I need?
Enough to see a pattern rather than a single data point, and all of them close in geography, recency and condition. Quality matters far more than count. Three tight comps beat ten loose ones.
Are online value estimates usable?
As a starting orientation only. Automated estimates cannot see condition, and condition is the entire variable in this business. Never underwrite from one.
What is MAO?
Maximum allowable offer. After-repair value minus repairs, minus closing costs on both ends, minus holding costs, minus your required profit — and minus your assignment fee if you are wholesaling. It is the output of the analysis, not a starting point.
How do I set required profit?
Decide it in advance as a policy, in writing, before you look at any particular deal. The purpose of writing it down is to make it hard to reduce in the moment you want a marginal deal to work.
What if the seller's price is above my MAO?
Then your offer is your offer, and you say so plainly and leave the door open. Sellers call back weeks or months later more often than beginners expect. Changing your number to win the deal today is how a good pipeline produces bad outcomes.
Make your next move
A year from now, what will you be glad you started today?
You don't need another promise that everything will be easy. You need something useful to learn — and a next step you're willing to take.