One of the most critical skills in flipping real estate isn’t swinging a hammer. It’s running the numbers backwards from the exit.

Before you ever set foot on the property, before you make an offer, before you raise a dollar, you should already know your ideal resale price, your acceptable margin, and your maximum allowable offer (MAO).

And that starts with reverse-engineering your offer price based on exit comps.

In this guide, we’ll break down exactly how to do it, step-by-step.

Whether you’re a first-time flipper or managing a full pipeline, this framework will help you avoid low-margin deals, inflated repair budgets, and financial regret.

Why Reverse-Engineering Matters

Most failed flips don’t die because of bad renovations or missed market timing.

They fail because the purchase price was too high from the start.

Investors either get emotional about a deal, overestimate ARV (After Repair Value), underestimate rehab costs, or all three. Reverse-engineering forces you to work from facts instead of hopes, and to calculate your offer from what the market will actually support.

Done right, this approach lets you:

• Know exactly what you can offer (and where your ceiling is)

• Compare deals with a repeatable framework

• Spot overpriced wholesaler deals at a glance

• Walk away from bad opportunities with confidence

Step 1: Pull Accurate Exit Comps

The process starts with knowing what you can realistically sell the house for after renovations.

Not what Zillow says. Not what the seller hopes. Not what the neighbor thinks.

You need real comps, recent, renovated, and similar properties that reflect your exit strategy.

What makes a good comp?

• Sold within the last 90–180 days (market dependent)

• Within a 0.5–1 mile radius (or same neighborhood)

• Same school district

• Similar bed/bath count (±1 bed, ±1 bath max)

• Similar square footage (±15%)

• Renovated to a similar or higher finish level

• Similar lot size and style (ranch vs. two-story, etc.)

Where to find them:

• MLS (if you have access or agent support)

• PropStream

• Zillow (use filters, but verify manually)

• Redfin (check photos for condition)

• BatchLeads, Privy, or other investor-grade tools

Pro tip:

When in doubt, go conservative. Use the lowest of your top three comps as your ARV anchor, not the highest. You’re not here to justify an offer, you’re here to protect profit.

Step 2: Estimate Your Target Profit Margin

Before you think about repairs or financing, you need to define: What’s your minimum acceptable profit?

Most flippers aim for 10%–20% net profit after all costs. In dollar terms, many set a floor of $25,000–$50,000, depending on project size and market.

Let’s say you want a $40K net profit on a property with a projected ARV of $350,000.

Then you subtract that from your ARV to set a ceiling for all your costs combined.

Target Cost Cap = ARV – Desired Profit

$350,000 – $40,000 = $310,000

That means everything, purchase, rehab, holding, and closing, needs to stay under $310K.

Step 3: Break Down All Estimated Costs

Now that you have your cap, it’s time to subtract the costs that aren’t negotiable: rehab, holding, closing, and marketing.

You’ll need:

1. Rehab Budget

Use a trusted contractor, a rehab estimator tool, or a detailed line-item budget (you can build one with templates). Be realistic, and add a 10%–15% buffer for overages.

Example:

• Paint and flooring: $9,000

• Kitchen remodel: $12,000

• Bathroom updates: $8,000

• Roof repair: $6,000

• Landscaping and curb appeal: $3,000

• Miscellaneous/permits: $2,000

• Buffer (15%): $6,000

• Total rehab estimate: $46,000

2. Holding Costs

Don’t ignore the cost of time. Holding costs include:

• Monthly loan payments (interest-only if hard money): $1,200 x 6 = $7,200

• Property taxes: $2,500

• Insurance: $1,200

• Utilities: $1,000

• Lawn care/security: $600

• Total holding costs: ~$12,500

3. Transaction Costs

These are the costs of buying and selling:

• Buyer-side closing costs (title, attorney): $1,500

• Seller-side closing costs (transfer tax, title): $2,000

• Agent commissions (5%–6% of ARV): $21,000

• Staging, photography, misc: $1,500

• Total transaction costs: ~$26,000

Total Fixed Costs:

• Rehab: $46,000

• Holding: $12,500

• Transactions: $26,000

• Total: $84,500

Step 4: Reverse Into Your Maximum Allowable Offer (MAO)

Now we plug it all in.

Start with your ARV:

$350,000

Profit target: $40,000  – Total costs: $84,500 = Maximum Allowable Offer: $225,500

That’s the ceiling.

Anything above $225,500 puts your profit at risk.

Step 5: Adjust for Risk and Competition

You now have your baseline MAO.

But this is where experience comes in, adjusting based on deal variables.

Factors to adjust downward:

• Sketchy neighborhood or declining market

• Uncertainty in ARV (few comps, weird floor plan)

• High renovation complexity

• Title or permitting risk

• Long projected timeline (seasonality)

Factors to adjust upward (cautiously):

• Highly competitive area with fast DOM

• Seller financing or discounted financing

• Extra lot or development potential

• You’re building a brand and need a “first win”

• JV or investor partner is covering part of the risk

Make these adjustments on paper. Don’t trust your gut alone.

If you need to justify stretching, document why and what your downside mitigation plan is.

Step 6: Present the Offer With Confidence

Once you have your MAO, don’t lowball aimlessly. Present your offer clearly, logically, and with justification.

For example:

“We’re seeing renovated comps in the $345K–$355K range. With today’s construction costs and holding expenses, that puts our max purchase at $225K to maintain a 12% margin.”

This shows you’ve done your homework. Sellers, especially wholesalers or agents, respect buyers who talk in real numbers, not guesses.

Example: Full Reverse-Engineered Deal Breakdown

Let’s walk through an example flip with real numbers.

Property:
3 bed / 2 bath, 1,600 sq ft
Neighborhood ARV: $375,000 (based on 3 solid comps)
Desired profit: $50,000
Target flip time: 5 months

Step 1: Total Costs Estimate

• Rehab: $52,000

• Holding: $10,000

• Closing: $24,000

• Total costs: $86,000

Step 2: Reverse Calculation

ARV: $375,000 – Profit: $50,000 – Costs: $86,000 = MAO: $239,000

That’s your offer ceiling.

If the seller wants $260K? It’s a pass, unless you cut $21K from the rehab or get better comps. Numbers don’t lie.

How to Use This Process on Wholesaler Deals

A lot of wholesaler deals will show you their “suggested ARV,” “estimated rehab,” and “asking price.”

Don’t trust it blindly.

Use your reverse-engineered offer to test if their price holds up.

Wholesaler says:

• ARV: $320,000

• Rehab: $35,000

• Asking: $235,000

You want a $40K profit.

Do the math:

$320K – $40K – $35K = $245K MAO (not bad)

But what if the ARV is actually $305K and rehab is $45K?

Then MAO becomes:

$305K – $40K – $45K = $220K (now the deal doesn’t work)

Your framework saves you from overpaying, even if their deal looks close.

Key Tools for Reverse Engineering Offers

To make this process easier and repeatable, use tools like:

• PropStream / BatchLeads: To pull comps and estimate ARV

• Rehab calculators: Free spreadsheets or software like FlipperForc

• Google Sheets: For your own template with built-in MAO formula

• Zillow / Redfin: Manual comp review and photo comparisons

• Privy: Comp analysis based on MLS (in some markets)

• DealCheck.io: Great for mobile MAO calculations on the fly

Pro Tips for Success

• Always round your MAO down

• Don’t fudge numbers to “make it work”

• Create a template so you’re not starting from scratch each time

• Save every comp you use so you can justify your price

• Re-run your numbers if rehab costs change or market shifts

• Compare the MAO with the seller's ask before walking the property

Common Mistakes to Avoid

1. Using retail comps for flip ARV
Only use comps with a similar level of renovations. Retail sales of fully updated homes are your only benchmark.

2. Ignoring closing costs and commissions
Always factor in both buying and selling costs; they eat 6–10% of your ARV.

3. Underestimating timelines
Every extra month means more holding cost. Pad your timeline.

4. Relying on gut over numbers
If your gut says yes and the numbers say no, it’s still a no.

5. Making offers before reverse-engineering
Always calculate backwards before writing a single number on an LOI or PSA.

Numbers First, Emotions Last

Reverse-engineering your offer price based on exit comps is what separates pros from hobbyists. It’s a defense mechanism against overpaying, a sanity check in a hype-filled market, and your best chance at consistent profits.

Build the habit of letting the numbers guide every offer.

And remember: no deal is better than a bad deal.