How do you analyze a fix and flip deal?

Establish the after repair value from real comparable sales, build an itemised rehab budget with a contingency, subtract financing, holding, buying and selling costs, then check what is left against the profit you require. In that order.

What makes a lender decline a fix and flip deal?

Most often an ARV that the comparable sales do not support, a rehab budget written to make the deal pencil, or no credible exit. Thin equity between the loan and the finished value leaves nothing to absorb a mistake.

What is a good profit margin on a flip?

Enough to survive being wrong. Many investors target around 15% of after repair value or a fixed dollar floor, whichever is greater. What matters is deciding the number before you see the asking price.

What should I have ready before calling a lender?

The executed contract, an itemised scope of work, three comparable sales supporting your ARV, your exit with a timeline, and proof of funds for your contribution and reserves. That is enough for written terms in 24 to 48 hours.

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How to underwrite a fix and flip before you call a lender

The full pre-application check, in the order a lender will run it. If a deal survives this, it will survive underwriting.

July 27, 2026 · 4 min read

A lender is going to run a specific sequence of checks on your deal. You can run the same sequence first, which is worth doing for a reason beyond preparation: roughly half the deals that get declined would have been caught by the borrower in twenty minutes if they had checked in the right order.

The order matters, because each step feeds the next and one bad input early corrupts everything downstream.

1. After repair value, from real comparables

Everything is built on this number, which is why it is the one most often inflated.

Three genuine comparable sales. Sold, not listed, because asking prices are opinions. Ideally the same street or subdivision, within six months, similar square footage, similar bed and bath count, and similar finish level to what you intend to deliver. Adjust honestly and in the direction that hurts.

The disciplines that keep this real:

Do not use a comparable from a better block. In lower-priced markets the value gradient can be street by street, and an appraiser will know it.
Do not adjust upward for a finish level you have not budgeted.
Do not use the one outlier sale that supports your number. If two comparables say $280,000 and one says $325,000, your ARV is not $325,000.

If your ARV is soft, every subsequent number in this post is wrong. The full method is in how to calculate ARV.

2. Scope of work, itemised, with a contingency

Not a per-square-foot figure. A budget by trade, priced by someone who will do the work: demolition, structural, roof, windows, mechanicals split into rough and finish, insulation and drywall, kitchen and baths with a defensible allowance, flooring, paint, trim, exterior, permits, and a contingency of ten to fifteen percent written on its own line.

The contingency is the line that gets deleted to make a deal pencil. Deleting it does not remove the risk, it removes the funding for it. See rehab cost per square foot for how to build this from local reality rather than from a national average.

3. The full cost stack

Subtract everything between the finished value and your pocket:

Buy-side closing: title, transfer taxes, recording, legal. Around 2% of purchase, and proportionally much heavier on small deals.
Financing: points at closing plus interest across the hold. See what a hard money loan actually costs.
Holding: taxes, insurance, utilities, every month. See holding costs on a flip.
Selling: commission plus seller-side closing, roughly 6% of ARV.

Use the hold you would defend, not the one you hope for. Add the listing and closing period after the work finishes, because the carry runs through all of it.

4. The profit, named in advance

Decide the number before you see the asking price. A percentage of ARV, a dollar floor, or the greater of the two. Then treat it as a cost rather than as a remainder.

Profit left as whatever survives will regularly be nothing, because every unplanned expense lands there first.

5. Your ceiling, and only then the asking price

What remains after all of the above is your maximum allowable offer. Now look at what the seller wants. If their floor is above your ceiling, it is somebody else's deal.

Doing it in this order is the entire discipline. Reversed, you will find yourself adjusting the ARV up and the rehab down until the number clears, and it will not feel like that is what you are doing.

6. The exit, stress-tested

Every bridge loan is temporary and the lender will ask what replaces it.

Selling. Does the margin survive selling costs and a market some months older than the one you underwrote? What happens if it sits ninety days past your schedule?

Refinancing. Will it appraise, will the rents support the payment, and do you qualify for the takeout loan today? If the plan is a DSCR refinance, check that lender's seasoning requirement before you buy rather than after the work is done. A property can appraise well and still cap the loan because the rent will not cover the payment.

"I will decide when it is finished" is not an exit.

7. Reserves

Interest, taxes and insurance run whether or not the project is moving. Reserves should cover the carry across the expected hold plus a real cushion.

This is the quietest reason otherwise sound files get declined, and the most common reason a good deal turns distressed. The borrower budgeted the rehab exactly and left nothing for the four months that follow a contractor walking off.

What a lender adds on top

Two things you cannot fully check yourself.

Equity between the loan and the finished value. Typically 65% to 75% of ARV. A deal needing more than that is being asked to work with no margin for error, and the margin exists to absorb the mistake somebody is definitely going to make.

Whether the story holds together. A scope of work that does not match the ARV you are claiming, a timeline that does not match the scope, or an exit that does not match the property are the tells. Each is individually survivable. Together they read as a deal assembled to win an approval rather than to finish a house.

The submission

If the deal survives all seven steps, you have everything a lender needs:

The address and executed purchase contract
The itemised scope of work with its contingency
Three comparable sales supporting the ARV
The exit, plainly stated, with a timeline
Proof of funds for your contribution and reserves
Prior projects, with addresses, if you have them

Run it through the deal calculators to check the arithmetic against a realistic carry, then send it over. Written terms inside 24 to 48 hours, and a straight answer either way.

Common questions

How do you analyze a fix and flip deal?: Establish the after repair value from real comparable sales, build an itemised rehab budget with a contingency, subtract financing, holding, buying and selling costs, then check what is left against the profit you require. In that order.
What makes a lender decline a fix and flip deal?: Most often an ARV that the comparable sales do not support, a rehab budget written to make the deal pencil, or no credible exit. Thin equity between the loan and the finished value leaves nothing to absorb a mistake.
What is a good profit margin on a flip?: Enough to survive being wrong. Many investors target around 15% of after repair value or a fixed dollar floor, whichever is greater. What matters is deciding the number before you see the asking price.
What should I have ready before calling a lender?: The executed contract, an itemised scope of work, three comparable sales supporting your ARV, your exit with a timeline, and proof of funds for your contribution and reserves. That is enough for written terms in 24 to 48 hours.

Have a deal like this

Run your numbers.

The calculators charge the costs this piece describes: points, interest over the hold, closing on both sides, carry, and the cost to sell. It takes about a minute.

Run your numbers Submit a deal