The Simple Math Behind Every Profitable Real Estate Deal
One of the biggest questions new real estate investors ask is, "How do I know if it's a good deal?"
The truth is, successful investors don't rely on gut feelings or emotions. They rely on numbers.
If you buy the right property at the right price, you create options. You can wholesale it, flip it, or keep it as a rental. But if you overpay, even a great-looking property can become a bad investment.
In this lesson, I'll walk you through the simple formula I use to quickly evaluate deals, estimate repairs, and make offers with confidence. You don't need to be a contractor or have years of experience—you just need a system that helps you make smart decisions.
Quick Takeaways
Start with the Maximum Allowable Offer Formula
One of the easiest ways to evaluate a potential flip is by using this formula:
After Repair Value × 70% − Estimated Repairs = Maximum Allowable Offer (MAO)
The After Repair Value (ARV) is what the property should be worth after it's fully renovated.
The 30% margin isn't random. It helps cover:
- Financing costs
- Closing costs
- Holding expenses
- Unexpected repairs
- Your profit
Using this formula gives you a quick starting point before you spend hours analyzing a deal.
As I tell my students:
"Start with the after repair value. Multiply it by 70%, subtract your repairs, and you've got a good place to begin."
Keep Repair Estimates Simple
One mistake many new investors make is trying to estimate every repair before making an offer.
Instead, I like to group repairs into three simple categories.
Light Rehab
Minor cosmetic work such as paint, flooring, and basic updates.
Estimated cost: $10,000–15,000
Medium Rehab
New countertops, flooring, paint, lighting, and kitchen or bathroom updates.
Estimated cost: Around $25,000
Heavy Rehab
Major systems like roofing, HVAC, plumbing, electrical, or structural work.
A good starting estimate is around $80 per square foot.
Remember, repairs almost always cost more than expected.
I'd rather overestimate and be pleasantly surprised than underestimate and lose money.
Don't Let Perfection Stop You
Many investors spend weeks trying to calculate every detail before making an offer.
The problem?
Someone else buys the property first.
You don't need perfect numbers to make an initial offer.
You need reasonable numbers.
Once your offer is accepted, you can inspect the property, verify repair costs, and complete your due diligence.
The faster you can evaluate deals, the more opportunities you'll create.
Every Deal Should Leave Room for Profit
Let's look at a simple example.
If a property's ARV is $250,000 and it needs $40,000 in repairs:
$250,000 × 70% = $175,000
$175,000 − $40,000 = $135,000
That means your maximum allowable offer is approximately $135,000.
If the seller wants $190,000, it may not be a profitable deal—and that's okay.
Not every property deserves an offer.
Walking away from bad deals protects your capital and gives you more opportunities to pursue good ones.
Stay Flexible as Markets Change
The 70% rule is an excellent starting point, but no formula fits every market perfectly.
In highly competitive neighborhoods where homes sell quickly, experienced investors may go slightly higher if the numbers still support their profit goals.
The key is understanding why you're adjusting your offer—not simply paying more because everyone else is.
Always let the numbers guide your decisions.
Final Thoughts
The best real estate investors aren't the ones who analyze the most deals.
They're the ones who consistently make good offers.
Having a simple system allows you to move quickly, protect your downside, and avoid emotional decisions.
Start with the numbers.
Estimate repairs conservatively.
Leave room for profit.
And remember, every successful portfolio begins with one smart deal.
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About Johnoson Crutchfield
Johnoson Crutchfield is a real estate investor, coach, and host of the Grab the Map podcast. He helps aspiring and active investors move beyond analysis paralysis and take the consistent actions required to close real estate deals.
Drawing from years of hands-on experience, Johnoson teaches practical, real-world strategies focused on finding opportunities, building relationships, securing funding, and making offers. His approach emphasizes weekly execution over endless education, helping investors create momentum through simple, repeatable actions.
As the leader of the Wealth and Real Estate community, Johnoson shares lessons from real transactions and real conversations with lenders, sellers, and investors. He is a strong advocate for local banking relationships, seller financing, and private lending as powerful tools for growing a real estate business.
Through coaching, content, and community, Johnoson has helped investors gain clarity, build confidence, and take meaningful steps toward closing their first—or next—deal.
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