A potential fix and flip can look promising at first glance, but the numbers still need to support the deal. Purchase price, seller equity, renovation costs, holding expenses, resale value, and the way the offer is structured can all affect whether the opportunity is worth pursuing.
In this real-world deal breakdown, Casey Gregersen walks through how he evaluates a newly listed fixer-upper, speaks with the agent, estimates the potential numbers, and puts together a Revive Method offer. The property comes with a larger rehab scope, but strong seller equity creates room to consider a structure that may not work with a traditional cash offer.
The first step is determining whether the property has enough equity and potential value to support a creative structure.
In this case, the property had been passed down through the family and was owned free and clear. With no existing loan balance, there was more equity available within the deal, which helped offset the heavier renovation scope.
A substantial rehab can make a deal difficult when the seller has limited equity. For example, if a property has an after-repair value of around $220,000, an existing loan of $110,000, and a significant renovation budget, there may not be enough room for the structure to work.
A free-and-clear property creates a different starting point. It does not automatically make the opportunity viable, but it can provide more flexibility when the numbers are being evaluated.
The numbers matter, but the seller’s circumstances also influence how an offer should be approached.
This property had only recently been listed after the family considered other options for some time. There was no clear indication of immediate financial pressure, which meant there was little reason to push for a quick creative agreement.
A better approach was to introduce another possible path while allowing the seller to see how the traditional listing performed. If the family received a cash offer that met their expectations, they could choose to accept it. If that did not happen, they would already understand the alternative structure available to them.
Understanding the seller’s position early also helps determine whether there is enough interest to justify further underwriting and due diligence.
After understanding the seller’s position, the next step is estimating what the property could reasonably sell for after renovation.
That estimate should reflect the likely condition of the finished property, the local market, and the improvements being considered. It provides the foundation for the rest of the underwriting and helps determine whether there is enough room in the deal to move forward.
ARV should reflect what the renovated home could realistically become, not simply what nearby properties have sold for.
For this property, part of the discussion centered on the existing layout. The home had two bedrooms and one bathroom, but there appeared to be enough interior space to create a second bathroom and improve the primary suite.
The kitchen was also unusually large for the size of the house, which created additional flexibility when thinking through the floor plan.
Those details matter because renovation decisions can influence the buyer pool, marketability, and eventual resale price.
One of Casey’s key underwriting principles is avoiding dependence on a single resale number.
Instead, the deal is modeled using several possible outcomes. A conservative scenario might assume the property sells for $180,000, while stronger scenarios could use $200,000 or $220,000.
Running several scenarios helps determine whether the deal can still make sense if the final sale price comes in below expectations. It also gives the seller a clearer view of how different outcomes could affect what they ultimately receive.
Renovation costs can be difficult to pin down during the early stages of a deal, especially when the property needs substantial work. The initial budget should account for the expected scope of the renovation while leaving enough room for costs that may change as the project becomes clearer.
At this stage, the estimate does not need to be a final contractor bid. It can be used to test whether the overall deal still appears workable before investing additional time and resources into detailed due diligence.
If the seller is interested in moving forward, a contractor can then assess the property and provide a more accurate estimate. This allows the preliminary underwriting to stay practical while giving the final decision a stronger cost basis.
Purchase price and rehab expenses are only part of a fix-and-flip calculation.
Holding costs can continue throughout the renovation and resale period. These may include financing expenses, taxes, insurance, utilities, maintenance, and other property-related costs. Casey factors the expected holding period into the deal from the beginning so these expenses are considered before the offer moves forward.
Closing and selling costs also need to be considered. Agent commissions and other transaction costs can reduce the amount left after the resale.
Accounting for these expenses early gives a more realistic picture of the deal and helps prevent the projected margin from looking stronger than it actually is.
Once the main costs and projected resale value have been considered, the next step is determining how the remaining value will be shared between the parties involved.
The profit share can vary based on the property, expected renovation and holding costs, and the projected resale value. Different profit-share scenarios can then be tested to see how the seller’s potential return changes under different outcomes.
This helps determine whether the arrangement leaves enough room for the project to remain workable while still giving the seller a meaningful reason to consider the structure.
Once the preliminary numbers appear workable, an LOI can be used to outline the proposed structure before moving into detailed contracts.
It gives both sides a clear view of the key terms, including the estimated costs, potential resale outcomes, and proposed profit share. At this stage, the goal is to confirm that the general structure makes sense before investing further time in detailed due diligence.
If the seller is comfortable with the proposal, the next steps can include a more detailed contractor assessment and preparation of the formal agreement.
Once both sides are ready to move forward, the deal needs to be documented clearly.
Depending on the transaction, this may involve the deed, title, addendums, listing agreements, and other documents that define ownership, payment terms, and profit-sharing obligations.
Because the exact requirements can vary by state and deal structure, attorney review can help ensure the final agreement reflects the terms both parties have accepted.
A repeatable process can help move a potential opportunity from the initial conversation to a preliminary offer without losing sight of the key numbers.
The basic workflow looks like this:
A property that does not work as a traditional cash flip may still deserve a closer look.
In this example, the renovation scope was significant, and the property had only recently been listed. At the same time, the seller had substantial equity because the property was owned free and clear. That combination created enough room to model another type of offer.
The larger takeaway is that underwriting should guide the structure. By looking at seller equity, realistic resale scenarios, renovation costs, holding expenses, and potential profit share together, investors can decide whether a deal deserves further due diligence before committing additional time or capital.
After-repair value helps estimate the property’s potential resale price and shows whether the projected costs still leave enough room for the deal.
Underwriting should consider renovation costs, holding expenses, closing costs, selling costs, and other transaction expenses that could affect the projected margin.
Testing several resale scenarios helps show how the deal may perform if the final sale price comes in lower or higher than expected.
An LOI outlines the proposed deal structure so both sides can review the key terms before moving into detailed contracts and due diligence.
More seller equity can create additional flexibility in the deal structure by leaving more room for renovation costs, expenses, and potential profit sharing.
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