In today’s market, the margin for error is razor thin. Gone are the days when rising values would bail out a sloppy buy. If you’re a new investor—or still building your confidence in deal analysis—it’s absolutely critical to learn how to run the numbers the right way before making an offer.
And the ONLY way to get good at this? Practice. Fortunately, we’ve got a ton of opportunities this month to do exactly that: see real houses, crunch real numbers, and learn real-world strategies that work.
Let's Start With the Basic Formulas to Master
You only need a few key numbers and formulas to get started. These help answer the biggest questions every investor faces:
How much should I offer?
Will this property cash flow?
Will a lender approve my financing?
Let’s dive into the three essential formulas every investor should know:
👉 Max Allowable Offer (MAO)?
Also known as the 70% Rule, this is the go-to formula for most fix-and-flip investors: MAO = (ARV × 70%) – Estimated Repairs
Always build in at least a $2,000 cushion to account for the unknowns.
That 70%? It’s flexible based on the market:
In a cooling market with high rates, think 65% or even less.
In a hot market like 2021–2022, you might go up to 75–85%.
So for example if we look at all the comps and determine that the after repair value is $270,000 and to bring the house up to the condition it needs to be in to sell for that much we will need to spend $60,000. The most we could spend on this house to purchase it would be $129,000.
MAO = (ARV × 70%) – Estimated Repairs
MAO = ($270,000 x 70%) – 60,000
MAO = $189,000 – 60,000
MAO = $129,000
👉 Cash Flow Formula
Used by buy-and-hold investors to measure profitability: Cash Flow = Total Monthly Income – Total Monthly Expenses
This is your monthly paycheck from the property—after covering the mortgage, taxes, insurance, maintenance, vacancies, and everything else.
💡 Cash Flow Example:
Let’s say your rental property brings in $1,800/month in rent. That’s your total income.
Now here are your monthly expenses:
Mortgage: $800
Taxes: $100
Insurance: $100
Property Management: $180 (10% of rent)
Vacancy Allowance: $90 (5%)
Reserves for Repairs: $100
Maintenance, Landscaping, Snow Removal: 0 in our example
Total Expenses = $1,370
Cash Flow = $1,800 – $1,370 = $430/month
That $430 is the monthly income you’d pocket after all expenses—including the ones people often forget, like vacancy and reserves.
👉 Debt Service Coverage Ratio (DSCR)
🧰 Tools That Make Deal Analysis Easier
Lenders love this one—it tells them if the property will cover the loan payments: DSCR = Net Operating Income (NOI) ÷ Debt Service
A DSCR of 1.0 means you’re breaking even.
A DSCR under 1.0 means you’re losing money.
Most lenders want to see 1.2 or higher for a buffer.
💡 Using the same example: Your monthly rent is $1,800, which totals $21,600 annually. Your operating expenses (everything except the mortgage) are $570/month ($100 taxes + $100 insurance + $180 management + $90 vacancy + $100 reserves), or $6,840/year. That gives you a Net Operating Income (NOI) of $14,760/year.
Your annual debt service (mortgage) is $800/month × 12 = $9,600.
DSCR = $14,760 ÷ $9,600 = 1.54
That’s a strong DSCR—showing this property generates plenty of income to cover the loan. Most lenders look for a DSCR of 1.2 or higher.
📖 Want to go deeper? Andrew Syrios breaks down 11 must-know formulas for investors in this BiggerPockets article: Read it here
We also believe in using the right tools to make better decisions.
A lot of experienced investors build their own deal analyzers in Excel—it’s a great way to learn the ins and outs. But if you’re not ready to start from scratch (or just want to save time), here are three excellent platforms with ready-to-go tools:
REI BlackBook
PropStream
BiggerPockets’ Rehab Calculators
Each brings something unique to the table. Many investors use a mix depending on the deal.
📈 REI BlackBook: Built-In Repair Estimator + Deal Analyzer
REI BlackBook is more than just a Customer Relationship Manager (CRM) —it’s packed with tools for evaluating deals:
Repair List Tool – Tabs for interior, exterior, utilities, plumbing. Input quantities and costs, and it does the math.
Comps Tool – Pull sold and rental comps from right inside the platform.
Max Allowable Offer Calculator – Based on your repair costs and comps.
Analyzer Tab – Input everything: price, repairs, financing, holding costs, income, exit strategy. It does the full ROI and profit breakdown.
🎥 Watch how it works:
🚀 Try it for yourself:
Get a demo: www.MAREI.org/bbdemo
Start a free trial: www.MAREI.org/reibb
Affiliate Disclosure: We may earn a referral fee when you sign up. We only recommend what we use and trust.
🌎 PropStream: Data Powerhouse + Rehab Estimator
PropStream is a favorite for finding leads and running quick numbers:
Nationwide Comps Tool – MLS and public data.
Rehab Estimator – Enter square footage, location, and job types. Get ballpark repair costs fast.
Lead Source Integration – Use with vacant, tax delinquent, or pre-foreclosure lists.
While it’s not a CRM, PropStream is awesome for front-end deal analysis it also is used to build lists, skip trace, and do outbound marketing to motivated sellers.
🎥 Watch the rehab estimator in action:
🚀 Start your 7-day free trial: www.MAREI.org/propstream
Affiliate Disclosure: We may earn a small commission if you join through our link.
📅 BiggerPockets Rehab Calculators & Templates
If you love spreadsheets, BiggerPockets has great free tools:
Rehab Estimator Calculator – Plug in materials/labor or flat-rate costs.
Templates – Based on J Scott’s proven system.
Simple Estimate Forms – Great for walk-throughs and first-pass numbers.
📄 Explore tools: BiggerPockets Rehab Tools
🧾 Downloadable templates and checklists:
🚪 Ready to Practice and Learn How to Analyze a Deal?
Join us for hands-on learning this month!
🔹 June 10th: Deal Evaluation 3 Ways at our MAREI Monthly Meeting. Our panel breaks down one case study using different approaches. Want to follow along? Download the deal at marei.org/the-marei-case-study-house-for-the-june-2025-meeting
🔹 June 14th: Desktop Underwriting Master Class with Vena Jones-Cox. Learn to analyze from your laptop like a pro—wholesale, flip, rental, or creative deal.
🔹 June 21st: Rehab Field Trip in Independence. Walk the house. Spot the repairs. Decide what’s essential, what’s optional, and what’s a deal-breaker.
📆 RSVP at: www.MAREI.org/Calendar
If you want to succeed in real estate investing, learning how to evaluate a deal properly is non-negotiable. Use the tools. Show up to the trainings. And connect with others in the MAREI community who are doing the same.
Let’s Learn. Let’s Connect. Let’s Do!
Kim Tucker
MAREI Co-Founder and Investor see her website at www.kcmoHomeBuyer.com
