Reverse Engineering a Fix and Flip

Work backward from your profit target to determine your maximum offer. The formula that prevents overpaying.

By Sean Bailey Published June 6, 2026

The Fix and Flip Formula

Most investors start with a property and work forward: "What's it worth after repairs? What profit is left?"

Smart investors work backward: "I need $50K profit. After rehab, holding costs, and selling costs, what's my max offer?"

Backward Formula:

            Max Offer = ARV − Rehab Costs − Holding Costs − Selling Costs − Profit Target − Contingency
          

Property Location: Jacksonville, single-family home

After-Repair Value: $350,000 (verified by comps)

Maximum Offer: $184,500

If you offer $220,000, you've already lost $35,500. This is how investors overpay.

Get contractor quotes. Don't estimate. Most first-time flippers underestimate by 20-30%.

Property taxes, insurance, utilities, HOA. In Florida, roughly $2,000/month. Typical flip is 5-7 months.

Agent commission (5-6%), title insurance, closing costs. Total: ~6-7% of sale price.

Buffer for unexpected costs (permits, structural issues, market shifts). 5-10% of rehab budget.

Skipping contingency: "Perfect estimate, no buffer needed." Then something goes wrong.
Underestimating holding costs: Banks charge interest. Taxes don't stop. 6 months adds up fast.
Overpaying for emotional reasons: "This is the deal!" Logic-based offers work better.
Unrealistic ARV: If comps don't support it, the formula fails.
Forgetting loan costs: Origination fees, appraisals, underwriting. Add 1-2% of loan amount.

Market conditions matter. In strong seller's markets, you might target $30-35K profit on a $350K flip. In buyer's markets, $50-75K is realistic.

Adjust your profit target based on local market conditions, not your emotional attachment to a property.

Once you reverse-engineer your numbers, Sean can get you financing quickly.

Email Sean