Deal Analysis

Deal analysis is the systematic process of evaluating a real estate investment opportunity to determine whether it meets your financial criteria. It combines property valuation, cost estimation, market assessment, and financial modeling into a complete picture of expected returns and risks.

The Core Components of Deal Analysis

1. After Repair Value (ARV): What will the property be worth after renovation? This is determined by analyzing comparable sales. It is the starting point for all downstream calculations.

2. Purchase Price: What is the asking price, and what can you negotiate? The gap between purchase price and ARV — minus all costs — is your potential profit.

3. Rehab Costs: A detailed scope of work with itemized costs for every repair and upgrade. Include a 10–20% contingency for unexpected issues.

4. Financing Costs: Loan origination fees, interest payments during the hold period, and any other borrowing costs. Hard money loans at 10–14% interest add up quickly.

5. Holding Costs: Monthly expenses during the rehab and sale period — property taxes, insurance, utilities, loan interest, and HOA fees if applicable. Typically $1,500–$4,000/month depending on the property and loan.

6. Selling Costs: Real estate agent commissions (5–6% of sale price), title insurance, transfer taxes, and seller concessions. On a $250,000 sale, expect $15,000–$18,000 in selling costs.

7. Projected Profit: ARV minus all costs above equals your expected net profit. Most investors require a minimum profit threshold (e.g., $25,000 or 10% of ARV) to proceed.

A Complete Example

Property: 3BR/2BA ranch, 1,350 sq ft. Asking price: $125,000. ARV (based on 4 comps): $215,000. Rehab estimate: $38,000. Financing: Hard money at 12% interest, 2 points, 85% LTV on purchase. Projected hold: 5 months.

Purchase: $125,000. Down payment: $18,750 (15%). Loan amount: $106,250. Origination (2 points): $2,125. Monthly interest: $1,063. Total interest (5 months): $5,313. Rehab: $38,000. Holding costs (taxes, insurance, utilities — 5 months): $3,750. Selling costs (6% commission + $2,500 closing): $15,400.

Total costs: $125,000 + $2,125 + $5,313 + $38,000 + $3,750 + $15,400 = $189,588. Net profit: $215,000 – $189,588 = $25,412. ROI on cash invested ($18,750 + $2,125 + $3,750 = $24,625): 103%.

This deal works — but barely. If ARV comes in $10,000 lower or rehab runs $8,000 over budget, profit evaporates. A thorough deal analysis reveals these sensitivities.

How Vortonic Helps

Vortonic automates the entire deal analysis process. Enter a property address, and the platform generates an AI-powered ARV estimate, pulls comparable sales, and lets you input rehab costs and financing terms to produce a complete profit and loss projection. You can adjust any variable and instantly see how it affects the bottom line — enabling you to analyze dozens of deals per day and focus your time on the ones that meet your criteria.