How are you analyzing Fix and Flips in 2025 (Mines Not Working)

[Jamie Parker]

Hello Everyone,

I hope that everyone is off to the races to start in off the year. I have come to the realization that my calculations are not as solid at I once thought. Since 2021-2022 and the surge in prices in basically all markets across the country, how are fix and flippers evaluating properties. Particularly Nashville. The properties I am targeting are thought of for infill development first, but when those numbers don't work rehab second. I am finding that my offers are not in the ballpark of what sellers are expecting. Being on the nose is an anomaly, but it seems that my estimations are really far off.

What I was using was 70% ARV - repairs with a repair estimate . Wholesaled a deal in September that didn't hit that number. I understand that the price is what someone is willing to pay. 8 Years ago these numbers worked, but today, I have reason to believe these numbers do not work anymore.

Links to 2 properties in Nashville and 1 in Memphis using the same approximations. Was told that the offer wasn't close, or we were not in the same stadium. If what I am facing is Seller's expectation of market condition, i understand. IF my numbers are truely "too low" I just looking gain confidence in how I am analyzing properties and estimating repairs.  

1710 10TH AVE N, 37208: https://docs.google.com/spreadsheets/d/1B0CoSbGxQFbRBVzXBERw...

6121 Southampton Dr 38119: https://docs.google.com/spreadsheets/d/1a3WBEcgv2SMggu5P2HrK...

2014 Salem Mason Dr, 27208: https://docs.google.com/spreadsheets/d/1Jzr5TN9PYhuiFuD2THLb...

Spoke with a seller yesterday, before I go with these numbers I thought it best to ask for some guidance. 

Any advice will be greatly appreciated. 

[Doug Smith]

Yes, I'm a lender, but we have an arm that's been investing for close to 20 years now. We've never used percentage-based criteria, like the 70% Rule, for purchases. Simply put, we start off with the As Repaired/Completed Value (ARV), then subtract from that number a reasonable profit, the rehab cost (scope of work), which we've gotten good at, a contingency reserve for any "unexpecteds", our cost of capital/carrying costs (interest and costs of the leverage used), and our costs/fees on the buy and sell sides of a flip. That gives us our "strike price", which is the highest amount we're willing to go to purchase a property. I've found that those percentage-based rules have mathematical flaws in them. MInd you, we've gotten really good at our scopes of work and we have one of our GCs go through the property with us to give us our scopes of work. We've also advised this method to our investor clients that borrow from us. I will die on the hill that the 70% Rule is flawed. We avoid lending to folks that don't really have their math/numbers together. I hope that helps you.

On another note, just because your offer isn't close, as you said in your narrative, doesn't mean you're wrong with your offer price. There are a lot of idiots out there overpaying for deals right now...well...that always seems to be the case. If you get your system and modeling down and follow what I mentioned above with respect to coming up with your strike price/offer price, you shouldn't look back if someone overpays for the property. It's just a math problem and if you've done the work up front you shouldn't second-guess yourself. There are many, many investors that don't do their math up front.