The formula saved me on a deal I was ready to lose money on. I had a property I liked. Good bones, decent neighborhood, motivated seller. I ran the numbers before I made an offer, and the formula said no. I walked away.
The buyer who followed me in paid full ask. Five months later, they’d discovered $41,000 in foundation damage and sold it at a loss.
That formula was Max Offer = ARV × 70% − Estimated Repairs. Most agents who flip houses skip it, or fudge it, or decide they’ll make it back on the back end.
They don’t. Here’s the step-by-step, with the actual numbers.
Step 1: Run the 70% Rule Before You Drive to the Property
I mean this literally. Before you get in the car.
The formula: Max Offer = ARV × 70% − Estimated Repairs.
ARV is after-repair value. Not what the house is worth today. What it’s worth after a full rehab, based on comparable sales in the last 90 days, within a half-mile radius, with similar square footage and condition.
The 70% margin exists to absorb holding costs (expect 1–2% of purchase price per month you own the property), hard money financing (typically 10–14% annually plus 2–4 origination points), closing costs on both the buy and sell side (plan for 3–5% combined), and your actual profit.
If the seller won’t accept a price that clears your formula, there’s no deal. I don’t negotiate against my own math.
If a reputable hard money lender won’t fund your deal at your max offer number, that’s your answer. They’ve underwritten thousands of flips. They know foundation problems you’ll miss on a walkthrough.
Don’t visit properties that can’t clear the formula on paper. You will fall in love with them in person. That’s how you overpay.
Step 2: Get Three Contractor Bids During the Option Period — Not After
Texas option periods typically run 5–10 days. I schedule contractors the same day we go under contract.
Three licensed contractors through the property within the first 48 hours. I ask each one for a written, line-item bid: foundation, roof, HVAC, electrical, plumbing, and cosmetics broken out separately. Then I compare all three.
Why three? Contractor bids on the same property in Texas regularly vary by 40–60%. I’ve seen bids on identical scopes come in at $29,000 and $67,000. Same house. Same work. Same week.
If my formula assumed $40,000 in repairs and the median bid comes back at $61,000, I renegotiate the purchase price or I walk. I cannot renegotiate after the option period expires. That window closes and the deal you agreed to is the deal you own.
Agents who use the option period to “think about it” blow most first flips. By the time they start getting bids, they’re already past the deadline and emotionally committed. They talk themselves into trusting the low estimate.
Step 3: Line Up Hard Money 60 Days Before You Need It
I call hard money lenders before I have a property under contract. Not when I’m desperate. At least 60 days out.
Lenders want to know you before they fund you. They want to see your deal criteria, your renovation experience, and your financial position. You want to understand their draw schedule (most release funds in draws as work completes, not upfront), their LTV ceiling (most won’t exceed 70–75% of ARV), and their prepayment penalties before you’re under pressure.
Typical hard money in Texas: 10–13% interest, 2–3 origination points, 6–12 month term. I budget 3 points and 12 months. If I sell in four months, I’m ahead of schedule. If the rehab runs long, I’m still covered.
What kills deals at this step? Trying to find a lender after you’re already under contract. You’ll take whoever can move fast. That’s how you end up at 15% and four points because you had no other option.
Step 4: Calculate What Your License Actually Saves You
This is where being an agent changes the math. Most agent-investors don’t run this number, and they should.
When you purchase a flip as an agent representing yourself, you can collect the buyer’s agent commission. On a $240,000 purchase, that’s roughly $6,000–$7,200 back in your pocket. When you list the rehab yourself, you keep the listing commission on the sale.
On a $320,000 sold flip, those two commission streams can total $16,000–$22,000. A civilian investor just handed that money to two other people.
I use that commission recovery as a buffer in my formula. If the 70% calculation gives me a max offer of $158,000, the recovered commission can make $165,000 viable. That’s sometimes the difference between getting the deal and watching someone else take it.
Can your current broker actually let you do this? Some brokers prohibit agents from representing themselves on investment transactions. Others don’t have the paperwork set up for it. Find out before you write the offer — not at the closing table.
Step 5: Price the Listing at ARV. Not at What Feels Comfortable.
I’ve watched agents spend four months rehabbing a property, then list it $18,000 under ARV “to move it faster.” That’s gifting equity to the next buyer.
The 70% rule already built your profit into the formula. Pricing low doesn’t buy you a safety margin. It cuts your own check.
My practice: I price at ARV, based on the most recent comps that match condition and location. I get listing photos scheduled before the final punch-out items are finished. I want to be live on MLS within 24 hours of completion.
Every extra week I own a rehab costs real money. On a $200,000 purchase, holding costs run $2,000–$4,000 per month. Pricing $18,000 low to sell “faster” makes no sense when you still sit on the market for another four weeks.
Step 6: Disclose Before Anyone Asks
This is the step that protects your career. It’s also the one most agents assume they can skip on “simple” deals.
When you’re acting as a principal in a Texas real estate transaction, TREC requires you to disclose your license status to all parties. There are specific forms for this. I use them on every deal, without exception, without being asked first.
I’ve watched agents lose their licenses over flip deals. Every one of them decided this particular deal was too routine to bother with the paperwork. There’s no deal routine enough to skip disclosure.
Your broker needs to know about your investment activity before you start. At StepStone Realty (blacksheepbroker.com), we don’t just allow agents to flip — we’ve built deal calculators, contract templates, and broker systems specifically around this work. We do these deals ourselves. But wherever you’re licensed, make sure your broker knows what you’re doing and is actually equipped to support it.
Find out what your broker actually permits: blacksheepbroker.com/#join-signup-form
StepStone Realty: sponsorship at a brokerage that has closed these deals.
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