When a deal hits your inbox -- whether it's from a wholesaler, your agent, or your own marketing -- you need to be able to evaluate it quickly. Not every property deserves a full deep-dive analysis. Most don't. The skill that separates productive investors from busy investors is the ability to screen a deal in five minutes and determine whether it's worth pursuing further or should go straight to the "pass" pile.
Lenders review deals every day. When a borrower brings a flip opportunity, the team can tell within minutes whether the numbers are in the ballpark. Here's a framework that seasoned investors use.
Step 1: Estimate the After-Repair Value (ARV)
The ARV is the foundation of every flip analysis. It's the price you expect to sell the property for after renovation. Get this number wrong, and nothing else in your analysis matters -- you'll either overpay for the property or underestimate your profit.
For a quick ARV estimate, pull three to five comparable sales within a half-mile radius that closed in the last 90 days. "Comparable" means similar in size (within 200 square feet), similar bedroom and bathroom count, similar lot size, and -- critically -- similar finish level to what your renovated property will look like. In Richmond, you can pull comps quickly through the MLS (if you have agent access), Zillow's sold listings, or Redfin's sold data.
Quick adjustment rules: Add or subtract approximately $10,000-$15,000 for an extra bedroom. Add $5,000-$10,000 for a garage. Subtract $5,000-$10,000 if your property lacks a feature that comps have (like a basement or second bathroom). These are rough adjustments for the Richmond market -- they'll get you close enough for a screening analysis.
Take the average of your adjusted comps. That's your working ARV. For a five-minute analysis, this is sufficient. If the deal passes the screening, you'll do a more thorough comp analysis before making an offer.
Step 2: Apply the 70% Rule
The 70% rule is the most widely used quick-screening formula in fix-and-flip investing. It states:
Maximum Purchase Price = (ARV x 70%) - Rehab Costs
The 30% margin is designed to cover your holding costs, selling costs, and profit. Let's say your ARV estimate is $280,000 and you estimate $45,000 in rehab costs. The 70% rule says your maximum purchase price should be:
($280,000 x 0.70) - $45,000 = $196,000 - $45,000 = $151,000
If the property is listed or offered at $151,000 or below, it passes the initial screen. If it's at $175,000, the deal is tight and may not work. If it's at $200,000, it's a pass unless your ARV or rehab estimates are significantly off.
A note on the 70% rule: It's a screening tool, not a final analysis. In hot markets with strong buyer demand and fast resale timelines, some investors work at 72-75% of ARV and still make money because their holding costs are lower. In slower markets or on higher-risk projects, you might need 65% to maintain an adequate margin. The 70% rule gives you a starting point -- adjust based on your market knowledge and risk tolerance.
Step 3: Quick Rehab Cost Estimation
For a five-minute analysis, you don't need a line-item rehab budget. You need a ballpark number that's close enough to determine whether the deal is worth pursuing. Rehab costs can be estimated quickly using per-square-foot benchmarks for the Richmond market:
| Rehab Level | Scope | Cost per Sq Ft | 1,200 SF Example |
|---|---|---|---|
| Light Cosmetic | Paint, flooring, fixtures, landscaping | $15-$25 | $18,000-$30,000 |
| Full Cosmetic | Kitchen, baths, flooring, paint, fixtures, exterior | $25-$45 | $30,000-$54,000 |
| Moderate | Full cosmetic + HVAC, electrical panel, plumbing updates | $45-$65 | $54,000-$78,000 |
| Heavy / Structural | Foundation, roof, framing, full systems, layout changes | $65-$100+ | $78,000-$120,000+ |
For your five-minute analysis, categorize the property into one of these four levels based on the listing photos, description, and your general knowledge of the property's age and condition. Multiply the per-square-foot cost by the property's square footage. That's your working rehab estimate.
Always round up. If your quick estimate comes to $42,000, use $45,000 or $50,000 in your screening analysis. Rehab costs almost always come in higher than initial estimates, and you want your screening to be conservative enough that deals that pass are genuinely worth pursuing.
Step 4: Run the Full Numbers
If the deal passes the 70% rule screen, spend another two minutes running a more detailed profit estimate. Here's the quick calculation:
| Line Item | Example |
|---|---|
| After-Repair Value (ARV) | $280,000 |
| Purchase Price | -$145,000 |
| Rehab Costs | -$45,000 |
| Holding Costs (5 months x $2,000/mo) | -$10,000 |
| Purchase Closing Costs (~2%) | -$3,000 |
| Selling Costs (~8% of ARV) | -$22,400 |
| Estimated Profit | $54,600 |
In this example, the deal projects a $54,600 profit -- a strong return. But notice how sensitive the analysis is to each variable. If the ARV comes in $20,000 lower, your profit drops to $34,600. If rehab runs $10,000 over budget, you're at $44,600. If both happen, you're at $24,600 -- still profitable, but much thinner. This is why conservative estimates matter.
Use the Fix & Flip Calculator to run these numbers instantly on any deal you're evaluating.
Step 5: The Gut Check
Numbers are essential, but they're not everything. Before you move forward on a deal, ask yourself these questions:
Do I understand this market? If you're flipping in a neighborhood you've never been to, your ARV estimate is a guess. Drive the neighborhood. Look at the active listings. Understand who's buying renovated homes in this area and what they're paying.
Is this the right level of rehab for me? A light cosmetic flip is a great first project. A heavy structural renovation with permits and major systems work is not. Be honest about your experience, your team's capabilities, and your risk tolerance.
What's my exit strategy? What if the market turns and you can't sell for your target ARV? Could you rent the property and still cover your mortgage (the BRRRR strategy)? Having a Plan B is critical.
A five-minute analysis won't give you the final answer, but it will tell you if a deal has potential. Master this quick screening process, and you'll spend your valuable time on opportunities that can actually move your business forward.