Fix & Flip

Fix and Flip is the simplest residential real estate strategy on paper and the easiest one to lose money on in practice. Buy distressed, rehab fast, sell to a retail buyer, repeat. The math is one equation. The execution is twenty things that can each go wrong, any one of which can erase a 20% projected margin.

This is how an institutional operator underwrites a Fix & Flip — not the influencer version.

The math, stripped down

Maximum Allowable Offer (MAO) is the disciplined Fix & Flip formula. It anchors every other decision:

MAO = (ARV × 0.70) − rehab budget − holding costs − closing costs both sides − wholesale fee if any

The 0.70 multiplier (the “70% rule”) is the institutional buffer that absorbs the things that will go wrong: rehab overrun, days-on-market drift, comp slippage, and market-cycle risk. Operators who pay above the 70% line are running closer to break-even than their spreadsheet says.

The capital stack

• Acquisition: 80–90% hard money loan-to-cost (LTC), 10–20% operator equity. Hard money typically 9–13% interest-only with 1–3 points origination.
• Rehab: 100% of the rehab budget held in escrow by the lender and released in 3–5 draws as work completes.
• Carry reserve: 4–6 months of interest, insurance, and property tax sitting in cash. Always.
• Total operator cash: typically 25–35% of all-in project cost.

The timeline

• Weeks 1–4: close, mobilize, demo, permits filed.
• Weeks 5–16: rough trades (electric, plumbing, HVAC), framing changes, drywall, paint.
• Weeks 17–20: finishes — flooring, cabinets, counters, tile, fixtures.
• Weeks 21–24: stage, list, accept offer.
• Weeks 25–32: buyer due diligence, appraisal, close.

Every month past month 6 typically erases roughly $3,000–$5,000 in interest carry on a $400k loan. Timeline slippage is the largest source of unmodeled loss in Fix & Flip.

The five most common failure modes

• 1. ARV overshoot. Comps look strong but were renovated to a higher tier than the subject. Plan for the median comp tier the subject will actually deliver, not the top-end comp.
• 2. Rehab budget anchored to the optimistic estimate. Add a 10–15% contingency line, every time. Foundation and electric/plumbing rough surprises are the usual culprits.
• 3. Timeline anchored to vendor promises. Permit timelines, supplier delays, and inspection failures stretch the project by 30–60 days more often than they don't.
• 4. Hard-money carry erosion. A 3-month slip adds roughly $12,000–$20,000 of carry to a typical project. Underwrite at a 9-month hold even if you plan for 6.
• 5. Single-buyer exit dependency. A finish package that pleases one buyer profile and no others is fragile. Aim for a finish tier that clears at least three plausible buyer profiles in the comp pool.

When Fix & Flip is the right path

• Market median days-on-market is under 60 days.
• Comp set is dense — five or more renovated comps within 0.5 miles, last 90 days, within 10% of subject square footage.
• The subject's natural buyer pool is retail end-user (not investor).
• Operator has access to reliable contractors within an hour of the property — remote management on a 6-month flip is a project-management headache that erodes margin.

When to switch strategies

Several deals look like a Fix & Flip on first glance but are actually better as a different strategy. Common pivots:

• Lot allows an ADU under local code → see ADU strategy — often produces higher ROI than Fix & Flip on the same parcel.
• Subject is a small SFR on a lot zoned for multi-unit → see Multi-Unit Conversion.
• Market is moving slow (DOM 90+) → switch to BRRRR and earn cash flow during the slow period.

How DealIntel underwrites Fix & Flip

DealIntel runs Fix & Flip as one of six strategies on every deal — automatically, in parallel — with confidence-weighted ARV, full hard-money cost-of-capital math, a +30 day timeline stress test on carry, and a Kill List flag for comp thinness, market liquidity, and structural unknowns. The platform shows Fix & Flip side-by-side with BRRRR, ADU, Addition, Multi-Unit, and Ground-Up so the operator picks the strategy with the best risk-adjusted ROI for the specific property — not the strategy they came in defaulting to.

Related reading: ARV, hard money loans, comparable sales, how to calculate ARV.