How To Analyze A Fix-And-Flip Deal For $100K Profit

Hey everybody, Dr. Toby Potter here, The Unshakeable Investor. Hey, we're going to go through a property right now and show you exactly how you are to analyze the numbers, understand the scope of work, the rehab, and to know whether this deal works or doesn't work. And I'm going to do this old school just to show you what you should be doing, what you should be looking at. I want to share with you that there are 3 things that, uh, that makes or breaks every deal. And we need to understand how they play into a factor. Number one, number one is the ARV, okay? That is the after repair value. What's this property worth once it hits the market? Number two, our scope of work, our rehab. Okay. And then number 3, our purchase price. Where are we going to buy this thing? Now, these 2 we control. These 2 we can control what our scope of work is, the numbers, how much we're going to spend, if it works, if it doesn't work. And therefore, this creates where our max allowable offer is. Okay, once we have these numbers, now this ARV, we don't control this. The market controls this. You have no control over what the ARV is. Don't think your realtor can. Don't think your wholesaler can. The ARV is an absolute number that is a moving target day by day, week by week, month by month, year by year. Your scope of work, your purchase price is an absolute non-moving target. Once it's done, it's done. So since we can't control this one, it's a variable. We must control these two and be ultra conservative on this side to protect us on a downside here. So I want you to understand that first and foremost. So we've got a property. We've got a property out here in Maryland and we're going to take a look at this property. They have it valued at the $225,000 price, but we have it under contract at $140,000. Okay. Now we ran numbers on it and we came up with— so this is our contract price and we ran the estimated ARV at $440,000. Okay, ARV. So our next move was to be able to understand the scope of work, the rehab numbers. And so we have a few pictures here, and what I want you to understand is when we pull these pictures up, that you must, because of the age of this house, because of the location of this house, to get that $440,000 ARV, It's a full rehab. It's an absolute full rehab. So we're going to run through this and we're going to look at these photos. Go ahead and go to the next one, Nick. So the outside, we can see the roof looks good. The siding is old. We know it needs to be painted. The gutters are torn up and the windows are prehistoric. Those windows were back from the 1800s. So we already know that we We have to put windows in. So we have our windows. So, so on our rehab, I'm going to do this real quick. So under rehab, okay, number 1, windows. Okay, uh, number 2, siding. Um, go back, go back a photo. Where that porch was. Yeah. So that, that porch has got to go. That, that— I mean, we can leave the roofline. We want to put some columns in there. We really— but we got to get rid of that screening. That, that's just— that is 1940s, 1950s stuff. We're in 2026. Nobody wants this crap. Okay, so you're going to remove that. So front porch. All right, go next photo. From what I can tell, the roof looks pretty good. It looks like it's a slate roof, not a composite. Um, it is a pier and beam. I love that it's a pier and beam, and I'll explain that a little bit. Uh, go ahead. Oh, we have landscaping, so we know we have— you know, the yard looks terrible. Okay, and then we get into the interior. Now, as you can see, 1930s door there, so we're gonna replace all the doors. So we're at 5 now, doors. Um, now here's what I, here's what I challenge you with. I love real hardwood floors, I love it. You bring a sander in there, you restain it, you polish it, Ladies and gentlemen, that is a $100,000 value in itself. The stuff we have today, the laminate flooring, the thin wood, it doesn't stand a chance against this stuff that was in the early 1900s. So if this is in good shape, not rotted, I can see it's got some stains, that's fine. We're gonna bring a sander in there, sand that all down, back down to the wood and stain it, make it pop. But, so the floors, I'm okay with. So we're just gonna put minimal on the floors. But what we also have there is the paneling on the walls coming out. So we know we got sheetrock. Sheetrock. Okay, go next one. Oh, oh, it's on there. And the ceiling, look at that ceiling. Those are drop ceiling tiles, comes out. So ceiling tiles comes out. Okay. Okay, ceiling tiles comes out. Um, and this is— now this is, uh, coming off that porch into the family room, so that's good. We're going to open that porch up, redo that door, make it a really nice— we could even move that door to kind of center it a little bit to really have a nice double-pane door. Go ahead. Carpet in here coming out. We're gonna probably— if the family room— now more than likely there's hardwood under this carpet, so we're gonna cross our fingers that there is. This closet has got to be extended, so we're going to extend the closets, okay, because that's too small. But we got a wall there that we can bring that closet down another 6, 7 feet, 8 foot, and have the front come in, and then you got nice closet space. Go ahead. Same thing here, uh, looks like we got some ceiling damage, um, so we're going to look at that. Go ahead to the next one. Bathroom. Ladies and gentlemen, let me tell you, there's 3 things that you have to have to sell every house. 3 things. One, an amazing first impression when you walk in the front door. That living room, that kitchen needs to be open, needs to be profound, needs to be inviting. Number 2, a master bath. You have to have a master bath. This green tub, double-colored walls ain't happening. So we're gonna gut the kitchen. All right, number 9, we're gutting our bathroom. That's why I have a nick. Okay, we're gonna gut that bathroom, redo it, tile throughout. Nice shower. All the above. So we're going to really, really put some time and energy into the bathroom, make it pop, make it clean. Go ahead. Uh, complete redo. I mean, tile, walls, ceiling. It's just— this is gonna— so we already know that this house is a full gut-out. I think we have one more photo. Now back to the bathroom. Okay, so we got two pictures of the bathroom. So just in this review, this is just a real quick review that we manually went through. And I'm telling you, this is 100% a full gut-out. I'm going to budget at least $100 a square foot just off the top of my head. So we're at $140,000 to $160,000 in this rehab. Okay, so we have a contract at the $140,000. We have an ARV at $440,000. And we're looking at our rehab. Let me move this over here. Real quick. We're looking at our rehab and let's just say $145,000. Okay. Rehab. So if I'm in it, I'm in this property for $285,000 plus carrying costs. So let's, let's add in there. I don't, I don't do math as quick as you do. Let's just say we got another 8% carrying costs. So that would be $22,000. So we're just gonna say carrying costs of $22,000. Okay, and what does that mean? Carrying costs are your monthly payments, utilities, insurance, probably because you've got to have builder's risk insurance, stuff like that. So, and then your listing fees and all that to get it sold. So your carrying costs are things that most people forget about. They look at this number, they look at this number right here and say, well, I'm only in it for $285,000. It's worth $440,000. Money in the bank. They forget about their carrying costs. And I'm going to bump this up because I really like to err on the side of caution. I'm going to bump that up to $40,000. Okay. Just be— yeah, because it's a heavy rehab. I'm not going to turn and burn this one in 90 days. This has got to go down to the bones. Remember what I said about bones down to the tuber force. Also, what I mentioned earlier, it's a pier and beam, means it's a floating floor. It's not on a monolithic, a concrete slab. What I love about that, we can run all new plumbing, all new electrical, and it's easy, it's quick, it's simple, and I can level this thing up in a day. We didn't even talk about foundation. I'm going to add that in here. Number 10, foundation. Okay. I don't know that it needs it, but I'm going to assume that it does. I've got $140,000. I'm going to bump that to $165,000 now because of foundation. Okay, so that means now I'm at, I'm at $305,000. Is that right? Yeah, yeah, right. Yeah, $305,000. I'm at $305,000 on my all-in number. All in, okay, with my $40,000. So now I'm at $345,000 total. And if everything goes well, I still have about $100,000 of profit. Okay, that's simple. That's how you analyze the deal. Now, what I'm going to do is take this $165,000 I have my highlights. I'm going to run it through my program. It's going to line item. When I say windows, don't put $10,000 and siding $5,000 and front porch $65,000. Don't. No, no. Your contractors— this is where you're going to screw up. The minute you do these hypothetical rounded off numbers, your contractor is going to eat your lunch. You're going to have change order after change order after change order. Well, you only budgeted $6,500 for the porch, but by the time we got that ripped off, we had to re-support it with some cedar beams. We had to redo this, redo that. See, you're just setting yourself up to fail. Windows, $10,000. Well, I get a window company out there right now. See, 1, 2, 3, 4, 5, 6, 7, 8, 9. There's probably 21, 22 windows. I don't know that $10,000 is the right deal. So I'm gonna go through with my analyzer and tell it I need 22 new windows, and it's gonna tell me the exact price, and it's gonna say 22 windows, okay, at X price. And now you have an absolute budget that goes through landscaping. What does landscaping mean? So we're gonna fertilize the yard? No, we're gonna build some flower beds. We're gonna do a walkway, a sidewalk. You're not gonna walk in the mud to the house. Nobody wants to walk in the mud to the house. So you're going to be able to go in there and budget this thing out, line item it. Now I'm gonna take my scope of work, my budget, line itemed out, probably 3 pages long. I'm gonna walk this property with my contractor to ensure he can do the job in a timely manner at these numbers. And when that's done, see, I'm doing all this during my, go back to my slide, I'm doing all this during my due diligence time. My due diligence. Okay. I do all this confirmation during due diligence. I bought it at a good price. I did a rough number of my rehab. Now I need to make sure it's confirmed. If I get in the house and I realize that all my subflooring is rotted out, it's full of termites, the hardwood floors are chewed up and eat up, and I'm now at $265,000, I'm out. I'm gone. But if everything stays true, this is a deal I'm going to do. And that needs to be your new tagline. If everything stays true, this is a deal I'm going to do. Okay, this is Dr. Toby Potter. I appreciate you. Thank you. Talk to you soon.