Built an AI Deal Analysis Tool for Fun

[Chris Magistrado]

I built something to make deal analysis easier, and I’m pretty proud of it. It’s still rough and has plenty of room for improvement, but I can upload photos of a distressed property, tax records, comps, lender rates, and local rehab costs.

From there, it analyzes the photos to identify repairs, explains why they're needed, estimates costs for each item, calculates the total rehab budget, determines ARV based on comps, and provides an expected return—basically automating a lot of what spreadsheets already do.

It’s not meant to replace an analyst, and of course, everything still needs to be verified. It won’t catch everything in photos yet, and comps can be off, but as a way to speed up deal reviews and analyze more properties in less time, it’s been pretty useful. It can even learn from past deals to help refine the analysis over time.

I built this mostly to better understand the components of a good deal. Now that it’s up and running, I’m wondering—are there other tools out there that do something similar?

[Jeff S.]

Sounds interesting, @Chris Magistrado. Of course, anyone or anything can make predictions, but the proof is in the pudding. I'd be curious how accurate your tool is with a comparison to real-world deals after they are sold. That is, how well did your deal analyzer estimates match the actual rehab costs, holding costs, ARV, and profit? A detailed before-and-after P&L comparison would be useful here to show accuracy and weaknesses.

I have a relatively sophisticated rehab spreadsheet I’ve been enhancing for years, and I know it’s reasonably accurate. It only knows what it’s told, however. Automating what spreadsheets already do is not useful since spreadsheets are already automated. I don’t think that’s what you meant. The top three expenses in a flip are the rehab costs, lender fees, and sales commissions. These typically account for about 80 to 85% of all expenses in a flip.

If you know the lenders' terms and the loan duration, lender fees, the second greatest expense, are easy to calculate. Agent sales fees, number three, which are normally a percentage of the ARV, are similarly trivial. You don't need AI for those. This leaves rehab costs, number one, and ARV, which is where the skill comes in.

Estimating today's ARV is fairly straightforward. A tool to accurately predict the ARV in 6 months or in a year, as well as the project's rehab costs, would be extremely valuable. I'm curious how well your tool could do that.

Will it tell you to go back and take a few more photos to get a better idea of the rehab costs? Since it will evaluate photos, bonus points if it could look at the MLS and recommend the best finishes and paint colors to maximize the ARV. Or the best MLS photos to take, how many, as well as staging styles. More bonus points if it could look back at the borrower's track record and predict how they will do on a particular type of rehab? I can ask for the world, can't I?

Everyone and their brother is now offering AI tools to evaluate loan documents and bank statements. Something to accurately evaluate a flip would be a welcome addition.

I’m curious to follow your progress, Chris. Sounds great.