What Makes a Deal Worth Pursuing?

Question

When you’re analyzing a potential investment, what makes you say “this one is worth pursuing”?

Is it the purchase price, projected ARV, rehab budget, location, or the exit strategy?

There are a lot of moving pieces in a deal, so I’m curious what experienced investors prioritize first.

What’s your biggest deal-check before moving forward?

Victor Ramirez · Answer

For flips, I work backwards from the exit: ARV first (from 3 solid sold comps, not list prices), then rehab line by line, then MAO = ARV × 70% − rehab. If the asking price is anywhere near MAO, it's worth pursuing. If it's 20%+ over, it's usually a pass unless the seller is motivated. Location and exit strategy decide whether the ARV is believable, and the math decides the offer. If you want to sanity-check numbers quickly, I put a free MAO calculator at getdealarchitect.com.

Alex S. · Answer

MAO only works if your ARV and repair numbers are honest, so I'd pressure-test those before the price. The 70% rule is a screening shortcut, not an underwriting answer - in tighter markets I run 75-80% and let actual holding, financing, and selling costs decide instead of a blanket multiplier. Worth pursuing usually means the seller's motivation is real, not just that the math pencils on paper.

Bennett Vinson · Answer

My first check is whether I can write the full scope with confidence after one walk. If I can't, the rehab number is a guess, and every other number in the deal depends on it.

What makes me pass fastest: foundation movement, active water intrusion, sewer line questions I can't answer without a scope camera, or an electrical panel I don't trust. Any one of those and the budget has no ceiling until it's investigated.

If the big systems are known and the scope is mostly cosmetic plus a roof or HVAC, I can price it tight and the deal comes down to basis and exit. If I'm writing "TBD" on a line item, I either get the inspection before committing or I walk.

Siahna Im · Answer

That’s a solid way to look at it. If you can’t confidently define the scope after the initial walk, it’s hard to trust the rehab number and that uncertainty can affect the entire deal.

I also agree that the major systems deserve attention before getting too far into the numbers. Knowing what you’re dealing with upfront makes it much easier to determine whether the deal actually works or if the unknowns are too costly to justify.

Siahna Im · Answer

I like the idea of working backward from the exit. It helps keep the purchase price grounded in what the market can realistically support instead of getting attached to the property first. Sold comps are especially important since list prices can paint a very different picture.

Do you find the 70% rule still works well in your market, or do you adjust that percentage depending on the neighborhood and current financing costs?

Victor Ramirez · Answer

Good question. Here in LA (I'm down in San Pedro) I treat 70% as the ceiling, not the target. With ARVs this high, the fixed costs like closing, holding, and selling are a smaller share of the deal, so on the right property I'll stretch to 75-80%. On lower-priced houses I stay at 70% or below, since those same costs eat a bigger slice. Really the percentage is just a stand-in for your actual costs and profit target, so once I know my real holding time, financing, and selling costs, I'd rather plug those in than use a flat multiplier.

Since you're lending on flips, here's an offer if it's useful: I'm happy to run a free ARV/MAO check on a couple of deals your borrowers bring you, just as a second set of eyes before you fund. Your borrowers are also welcome to use the free calculator I mentioned so they come to you with cleaner numbers. DM me

Curious about your side: as a lender, do you see borrowers get into trouble more from a bad ARV or from rehab overruns?

Siahna Im · Answer

Exactly. The 70% rule is a good starting point, but it can’t replace actually understanding the deal. Financing, holding time, selling costs, and the realistic ARV can change the picture pretty quickly.

I also agree that seller motivation matters. A deal can look great on paper, but if there’s no room to negotiate, the numbers may not work in the real world. What’s usually the biggest factor that gets a seller to actually move on price in your experience?

Bennett Vinson · Answer

Exactly. The walk sets the confidence level on the number. If I can't scope it after the first walk, that tells me something too, and I either price the unknowns hard or pass. On the lending side, what's the first thing that makes you nervous about a borrower's rehab budget?

Divin Kanyama · Answer

@Siahna Im The biggest deal-check is whether the investment still works under conservative assumptions. Purchase price matters, but only in relation to realistic income or ARV, the full rehab scope, carrying and transaction costs, financing, and the exit strategy.
From our perspective in the Puget Sound region, the purchase basis and execution plan deserve particular attention. Higher acquisition costs, permitting timelines, labor and material expenses, and significant differences between nearby submarkets can quickly compress the margin. Strong demand may support long-term value, but it should not be used to justify optimistic rents, resale prices, or renovation timelines.
A property is worth pursuing when the basis provides enough room for mistakes, the assumptions are supported by local market evidence, and there is more than one workable exit. Strong deals do not require everything to go perfectly.

What Makes a Deal Worth Pursuing?

What Makes a Deal Worth Pursuing?

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