How to Analyze a Real Estate Deal Like a Pro 🏠💰
One of the most important skills in real estate investing is deal analysis. Whether you’re flipping a house or holding it as a rental, you need to run the numbers with precision before making an offer.
This guide breaks down how to analyze a real estate deal like a pro — with formulas, real-world tips, and tools you can start using today.
🪙 Step 1: Gather the Right Data
Before running numbers, collect these essentials:
Asking price / expected purchase price
Comparable sales (comps)
Estimated rehab budget
Property taxes, insurance, utilities
Potential rent (if BRRRR or rental)
Use tools like:
Zillow + Redfin for comps
Rentometer for rents
Google Sheets or DealCheck for analysis
📈 Step 2: Determine the ARV (After Repair Value)
ARV is what the property will be worth after renovation.
How to Calculate ARV:
Find 3–5 similar properties that sold within 6 months
Adjust for square footage, beds/baths, condition
Aim for the average of adjusted comps
Pro Tip: Pending sales are often more accurate than closed comps in fast markets.
🧱 Step 3: Estimate the Rehab Cost
Walk the property with a contractor or experienced investor. Break it down by:
Exterior: roof, windows, siding, landscaping
Interior: kitchen, baths, flooring, paint
Major systems: HVAC, electric, plumbing
Add a 10–15% contingency. Track it all in a spreadsheet or cost calculator.
📅 Step 4: Calculate Your MAO (Maximum Allowable Offer)
For flips, use the 70% Rule:
MAO = ARV x 0.70 - Rehab - Closing CostsThis gives you room for profit, surprises, and holding costs.
For rentals/BRRRR, focus on:
Cash-on-cash return
Monthly cash flow
Loan-to-value and DSCR for refinance
🏦 Step 5: Run the Rental Numbers (if BRRRR or Buy-and-Hold)
Use this formula:
Monthly Cash Flow = Rent - PITI - Maintenance - Vacancy - ManagementPITI = Principal, Interest, Taxes, Insurance
Aim for $200–500/month cash flow minimum
Also calculate:
Cash-on-Cash Return: Net Annual Cash Flow ÷ Total Cash Invested
DSCR: Net Operating Income ÷ Annual Debt Service (must be >1.1x for most lenders)
✅ Final Thoughts
Great investors don’t guess — they run the numbers. Every deal is different, but the math never lies.
Learn your formulas. Verify your assumptions. And always have someone double-check your analysis before going all in.