Lender · Sanford, NC · Member since 2024 · 347 posts · 116 votes
Here's something I've been thinking about when looking at investment properties.
At what point does a deal simply stop making sense?
For example, let's say you have:
Purchase price: $250K Rehab: $50K ARV: $400K
On paper, that might initially look attractive. But then you add financing costs, closing costs, holding costs, insurance, taxes, utilities, selling costs, and potentially unexpected rehab expenses. Then the deal looks very different. I'm curious how other investors approach this.
Do you have a minimum projected profit?
A minimum ROI?
A maximum purchase price based on ARV?
Or do you evaluate each property completely differently depending on the market and exit strategy?
Would love to hear how everyone is underwriting deals in 2026.
Lender · Playa del Carmen, México · Member since 2014 · 2k+ posts · 1k+ votes
1d
Quote from @Deborah Wodell:
Here's something I've been thinking about when looking at investment properties.
At what point does a deal simply stop making sense?
For example, let's say you have:
Purchase price: $250K Rehab: $50K ARV: $400K
On paper, that might initially look attractive. But then you add financing costs, closing costs, holding costs, insurance, taxes, utilities, selling costs, and potentially unexpected rehab expenses. Then the deal looks very different. I'm curious how other investors approach this.
Do you have a minimum projected profit?
A minimum ROI?
A maximum purchase price based on ARV?
Or do you evaluate each property completely differently depending on the market and exit strategy?
Would love to hear how everyone is underwriting deals in 2026.
The tried-and-true maximum allowable offer ("MAO") formula (70% of ARV minus Repairs) isn't perfect, but it does keep rehabbers out of trouble.
For some reason, investors get overexcited when the amounts get larger, rather than focusing on the percentages, which shouldn't change.
In this case MAO would be $230K (0.7 * 400K - 50K), not $250K.
And, that $20K can make the difference between "Whoo-hoo, we did it!" and "How do I get myself out of this mess!"
Specialist · I give advice - [email protected] - I focus on states where investing is profitable, reasonably safe & secure · Member since 2026 · 46 posts · 8 votes
1d
Quote from @Deborah Wodell:
Here's something I've been thinking about when looking at investment properties.
At what point does a deal simply stop making sense?
For example, let's say you have:
Purchase price: $250K Rehab: $50K ARV: $400K
On paper, that might initially look attractive. But then you add financing costs, closing costs, holding costs, insurance, taxes, utilities, selling costs, and potentially unexpected rehab expenses. Then the deal looks very different. I'm curious how other investors approach this.
Do you have a minimum projected profit?
A minimum ROI?
A maximum purchase price based on ARV?
Or do you evaluate each property completely differently depending on the market and exit strategy?
Would love to hear how everyone is underwriting deals in 2026.
Our approach is to assume prices are going down, they may not be but that is what we buy based on. So we buy below what the market would "say" the value is and then depending on the reason we bought the property, if it's going with a new investor we are working with, that may be enough to teach him the process, which is of more value to him than the one property itself, and make him happy enough. If it is purely for an investor we know, we always buy way below any fee they may pay us. If we buy for our own portfolio, it depends on the condition of the property and how much it wll take to get it ready to be a rental. Our spreadsheet figures that out for us.