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.