How to identify properties that are easier to finance and resell

A practical guide for new real estate investors

Prepared by Funding Your REI

Fix-and-Flip Funding Readiness Guide

This guide is intended to help new real estate investors identify straightforward fix-and-flip opportunities that are more likely to qualify for investor financing.

1. Focus on Common Residential Properties

The easiest properties to finance and resell are generally:

• Non-owner-occupied investment properties
• Single-family homes
• Duplexes, triplexes, and four-unit properties
• Located in established residential neighborhoods
• Similar to other properties recently sold nearby
• Intended for resale to a typical homeowner or investor

Avoid starting with highly unusual or specialized properties.

2. Preferred Property Characteristics

For the strongest funding opportunity, look for properties with:

Property feature	Preferred guideline
Property type	Residential, 1–4 units
Living area	Approximately 2,800 square feet or less
Bedrooms	Five or fewer
Bathrooms	Three or fewer
Lot size	Approximately one-half acre or less
Occupancy	Vacant or non-owner occupied
Condition	Repairable within a defined budget
Location	Established area with comparable sales

Properties outside these guidelines may still qualify, but they often require stronger borrower qualifications, more money down, additional collateral, or a specialized lender.

3. Determine a Conservative After-Repair Value

The After-Repair Value, or ARV, is the expected market value after the renovation is complete.

The ARV should be supported by recently sold comparable properties—not by active listings, online estimates, or the seller’s opinion.

Good comparable sales should be:

• Recently sold, preferably within the past six months
• Located in the same neighborhood or competing area
• Similar in size, age, design, and construction
• Similar in bedroom and bathroom count
• Similar in garage, basement, lot, and overall features
• Renovated to a condition similar to the planned finished property

Use the most supportable ARV, not the highest possible number.

Example

If comparable renovated properties sold for:

• $220,000
• $225,000
• $238,000

A conservative preliminary ARV may be closer to $220,000–$225,000, unless the property will clearly compete with the higher sale.

Do not force the numbers: Do not increase the ARV simply to make a deal appear profitable.

4. Calculate the Maximum Purchase Price

A common initial screening formula is:

Maximum Purchase Price = ARV × 70% − Estimated Repairs Use this as a preliminary screen, not as the final profit calculation.

Example

Calculation	Amount
Conservative ARV	$250,000
70% of ARV	$175,000
Estimated repairs	− $45,000
Preliminary maximum purchase price	$130,000

This formula is a screening tool. It creates room for financing expenses, holding costs, selling expenses, unexpected repairs, and investor profit.

It does not replace a complete project budget.

5. Allow Room for Wholesale or Assignment Fees

When purchasing through a wholesaler, include the assignment fee in the total acquisition cost.

Cost	Amount
Property purchase price	$120,000
Assignment fee	$10,000
Total acquisition cost	$130,000

The lender will generally evaluate the total cost of acquiring the property, not just the amount paid directly to the seller.

6. Prepare a Detailed Scope of Work

A lender will want more than a general statement such as “the property needs about $40,000 in repairs.”

The rehab estimate should identify the work being completed and the estimated cost of each major item.

Include:

• Roof and gutters
• Foundation and structural repairs
• HVAC
• Electrical
• Plumbing and sewer
• Windows and exterior doors
• Kitchen
• Bathrooms
• Flooring
• Interior and exterior paint
• Siding, brick, or exterior repairs
• Appliances
• Landscaping
• Debris removal
• Permits and inspections
• Final cleaning
• Contractor overhead
• Contingency allowance

Recommended contingency

Renovation level	Suggested contingency
Light cosmetic renovation	5%–10%
Moderate renovation	Approximately 10%
Heavy renovation or older property	15% or more

Reality check: A project that only works when nothing goes wrong is not a strong deal.

7. Calculate the Real Project Profit

Do not calculate profit by subtracting only the purchase price and repairs from the ARV.

Projected Net Profit = Expected Sale Price − Total Project Costs

Total project costs may include:

• Purchase price
• Assignment fee
• Rehab costs
• Repair contingency
• Loan origination points
• Lender and broker fees
• Interest
• Appraisal
• Inspections
• Title and closing fees
• Property taxes
• Insurance
• Utilities
• Lawn care
• Property security
• Permits
• Real estate commissions
• Seller closing costs
• Buyer concessions
• Staging and photography
• Price reductions
• Unexpected holding time

The final profit should remain acceptable even if the renovation costs more or the property takes longer to sell than expected.

8. Confirm There Is a Clear Buyer Market

The strongest flip opportunities appeal to a broad group of buyers.

Look for:

• Multiple recent sales in the area
• Renovated properties selling consistently
• Reasonable days on market
• Demand within the expected resale price range
• Nearby homes supporting the proposed ARV
• A finished property that can qualify for ordinary residential financing
• A property that will not become the most expensive home in the neighborhood

Avoid renovations that require the future buyer to pay substantially more than surrounding properties.

9. Match the Renovation to the Neighborhood

Do not over-improve the property.

Renovations should generally match what successful nearby sellers are offering.

• Do not install luxury finishes in an entry-level neighborhood unless comparable sales support them.
• Do not add expensive square footage that will not produce an equal increase in value.
• Do not count unpermitted bedrooms or converted garages in the ARV.
• Do not assume every dollar spent on repairs will add a dollar of value.

The goal is a clean, functional, attractive property that meets local buyer expectations.

10. Verify the Legal and Physical Condition

Before closing, confirm:

• Clear ownership and marketable title
• Existing liens and judgments
• Property taxes
• Legal access
• Zoning and permitted use
• Utility availability
• Flood-zone status
• Permit requirements
• Code violations
• Environmental concerns
• Foundation and structural condition
• Sewer or septic condition
• Whether additions and conversions were permitted

Unresolved legal, title, or structural issues can delay funding and create major cost overruns.

11. Have a Clear Timeline

Create a realistic project schedule covering:

1. Closing
2. Permit approval
3. Contractor start date
4. Major repair completion
5. Final inspection
6. Listing date
7. Expected contract period
8. Expected closing date

Do not assume the property will be renovated and sold immediately.

Include time for:

• Material delays
• Contractor scheduling
• Inspections
• Appraisal issues
• Buyer financing
• Property marketing
• Closing delays

12. Maintain a Backup Exit Strategy

The primary exit may be to renovate and sell, but every investor should consider a backup.

Possible backup exits include:

• Keeping the property as a rental
• Refinancing into a long-term rental loan
• Selling to another investor
• Reducing the scope of renovation
• Selling the property as-is after completing essential repairs

A backup rental exit should be supported by actual market rent, taxes, insurance, and operating expenses.

Properties That May Be More Difficult to Fund

New investors should be cautious with:

• Owner-occupied properties
• Properties with more than four units
• Very large homes
• Large rural acreage
• Mixed-use properties
• Commercial properties
• Manufactured homes without land
• Unusual construction
• Properties with no nearby comparable sales
• Severe foundation or structural damage
• Fire-damaged properties
• Environmental contamination
• Unpermitted additions
• Major zoning violations
• Properties requiring lengthy entitlement or rezoning
• Properties in extremely slow resale markets
• Projects based on an unsupported ARV

These deals may still be financeable, but they are generally not the easiest place for a new flipper to begin.

Information to Provide Your Funding Broker

To receive a meaningful preliminary review, provide:

• Property address
• Purchase price
• Assignment fee, if applicable
• Current property condition
• Estimated repair budget
• Detailed scope of work
• After-Repair Value
• Comparable sales
• Property photographs
• Expected renovation timeline
• Expected resale timeline
• Credit score
• Available cash
• Real estate experience
• Contractor information
• Purchase contract
• Entity documents, if purchasing through an LLC

Providing complete and accurate information allows a broker to identify realistic financing options more quickly.

Basic Deal Screening Checklist

A strong preliminary opportunity will generally answer yes to the following:

☐  Is it a non-owner-occupied residential property?	☐  Does it contain one to four units?
☐  Is it a common property type for the area?	☐  Are there several reliable comparable sales?
☐  Is the ARV conservatively supported?	☐  Is the total acquisition cost within a reasonable percentage of ARV?
☐  Is there a detailed repair budget?	☐  Is there a repair contingency?
☐  Does the full budget include financing, holding, and selling costs?	☐  Is there enough projected profit after all costs?
☐  Is the renovation appropriate for the neighborhood?	☐  Is there a broad buyer pool?
☐  Is the title expected to be clear?	☐  Can the project be completed within a realistic timeline?
☐  Does the investor have enough cash for required funds and unexpected expenses?	☐  Is there a backup exit strategy?

Final Rule for New Flippers

Strong opportunity: A common residential property in an established neighborhood, purchased at a meaningful discount, supported by reliable comparable sales, renovated under a detailed budget, and resold at a price that leaves sufficient room for financing costs, holding expenses, selling costs, unexpected repairs, and investor profit.

The purchase price should be based on the numbers—not on excitement, pressure from the seller, or fear of losing the deal.

FUNDING YOUR REI Fix-and-Flip, DSCR, Rental and Commercial Funding Brokerage FundingYourREI.com   •   417-382-9450

Educational information only. Loan terms and eligibility vary by lender, borrower, property, and transaction. This guide is not a commitment to lend, appraisal, legal advice, or guarantee of profit.