What do you need to know first?
Underwrite a business-purpose, non-owner-occupied flip backward from a defensible resale value. Subtract the purchase, rehab, carrying and transaction costs, then test a lower sale price and a longer hold. Hard Money Bot is a brand of Loan Daddy LLC, a mortgage broker arranging financing through wholesale lenders, not the party setting your final loan terms.
How do you select comps that match the finished property?
After-repair value, or ARV, estimates what the property could sell for after the planned improvements. Start with closed sales that a buyer would reasonably compare with your finished project. Match neighborhood boundaries, building type, usable space, bedroom count and condition before looking for the highest sale price.
Study each comp beyond the listing summary. A renovated house across a major road may serve a different buyer pool. An extra bathroom, legal addition or larger lot can explain a price difference that your cosmetic work cannot reproduce. Record why each sale belongs in the set and which differences require judgment.
Active listings reveal current competition, not completed transactions. Track price reductions and listing history to understand resistance. If the only supportive sale has a superior location or finish level, do not make it the foundation of your acquisition decision.
How do you use a conservative value range?
Build a supported value range instead of treating one estimate as certain. Your base case should reflect the finish package you can actually deliver. A downside case should reflect a less favorable sale without assuming that every market or property problem occurs simultaneously.
Keep your valuation evidence separate from the lender appraisal. An appraiser may choose different sales, reject unpermitted space or disagree with your adjustments. Financing feasibility and investment merit are separate tests: a loan option does not prove that your resale target is sound.
Write down the assumptions that matter most. These could include legal bedroom status, access, parking, foundation condition or a permit needed for the planned layout. Resolve the assumptions that could change the buyer pool before treating your value estimate as usable.
How do you build a scope that contractors can price?
A rehab allowance is not a scope of work. Break the project into measurable work packages with materials, labor and responsibility identified. Compare bids against identical work rather than choosing the lowest total from proposals that include different deliverables.
Inspect concealed-risk areas with qualified professionals when appropriate. Water damage, electrical deficiencies and structural repairs can change both the construction sequence and the resale story. Identify what remains unknown and how you will investigate it before committing the full budget.
- Site preparation, demolition, debris removal and site security
- Roof, foundation, drainage and exterior envelope repairs
- Plumbing, electrical and heating or cooling work
- Interior finishes, fixtures, cabinets and appliances
- Plans, permits, inspections and required specialist reports
- Cleanup, landscaping and final punch-list work
Keep a separate contingency for uncertain work rather than hiding it inside several trades. Size that reserve around the property condition and investigation gaps. A fully inspected cosmetic renovation has different uncertainty from a project with concealed structural damage. Contingency is cash protection, not extra room for elective upgrades.
How do you count the costs outside construction?
Create a carrying-cost schedule tied to the construction and disposition plan. Include financing charges under the actual loan documents, property taxes, insurance, utilities, association obligations and basic property maintenance. Vacant-property coverage and renovation coverage may differ from ordinary rental insurance.
Track acquisition expenses separately from sale expenses. Title services, settlement charges, legal review and recording costs can arise at acquisition. Brokerage compensation, buyer concessions, transfer charges and final repairs may reduce the sale proceeds. Request transaction-specific estimates instead of assuming that the headline resale price reaches your account.
Ask how renovation funds become available. If the wholesale lender reimburses completed work, you need cash before a draw releases. Your peak cash requirement may exceed the final equity contribution. Keep that liquidity calculation beside the profit estimate so a profitable-looking project does not run out of operating cash.
How do you calculate spread without calling it profit?
Hypothetical example only: a purchase costs $180,000, rehab costs $45,000, and acquisition closing plus carrying costs total $18,000. The modeled all-in cost is $243,000. Against a hypothetical ARV of $295,000, the gross spread is $52,000 before selling costs.
That gross spread is not take-home profit. Selling expenses, additional construction, extra carrying costs and applicable taxes can reduce the result. Confirm whether any financing expense already sits inside your carrying-cost line before adding it elsewhere; double counting can distort the decision as much as leaving a cost out.
Run a downside worksheet with a lower sale price, additional repairs and an extended hold. Change each input visibly so you can identify the weakest assumption. Evaluate the total cash exposed and your ability to carry the property, not only the remaining accounting spread.
How do you set walk-away conditions before negotiation?
Write your rejection criteria before you become attached to the contract. Walk away or renegotiate when value depends on unsupported comps, the contractor cannot define the scope, or essential permits remain unresolved. A seller deadline does not remove a construction defect or create a credible exit.
A rental backup requires its own underwriting. Verify market rent, operating expenses and refinance eligibility rather than assuming you can hold any unsold flip. If both the resale and rental plans require optimistic assumptions, the acquisition price may be the problem.
Present the broker with the address, contract, scope, budget, relevant experience and intended exit. Ask which assumptions the wholesale lender will independently verify. Financing conditions should inform your decision before closing, while responsibility for investment performance remains with you.
What else should investors know?
Should I use the highest nearby sale as my ARV?
Only if the property is genuinely comparable and the broader evidence supports it. A premium finish package, location advantage or unusual lot can make the highest sale a poor benchmark. Explain your adjustments and preserve a downside estimate instead of treating the strongest comp as certain.
Does the rehab budget include carrying costs?
Keep them separate so changes remain visible. Construction costs describe the work, while carrying costs describe ownership and financing during the hold. A contractor delay can increase the second category without changing the original scope. Your total project worksheet should include both categories without duplication.
Can financing approval replace my deal analysis?
No. A wholesale lender evaluates collateral and borrower eligibility under its own requirements. Your return also depends on execution, resale expenses and the amount of cash tied up. Review the investment independently even when a financing option appears workable.
When should I abandon a flip rather than reduce the scope?
Abandon or renegotiate when the reduced scope no longer supports the resale comparison, required repairs exceed your cash capacity, or unresolved legal conditions block the exit. Removing necessary work to preserve a spreadsheet margin can create a property buyers or future lenders will not accept.