Recommended Step 1
Read the foundational guide first
This playbook assumes you understand the core concepts explained in How to Analyze a Commercial Property.
What this playbook helps you complete
- Profit is protected at acquisition by using a conservative ARV and a complete all-in project budget.
- Rehab cost, schedule, financing, carrying expense, selling cost, and contingency must be modeled separately.
- The common 70% rule is only a screening shortcut and should not replace a property-specific analysis.
- A viable project needs liquidity for overruns, delayed draws, extended holding time, and a fallback exit.
Estimate after-repair value from supportable evidence
- Use recent sold comparables with similar location, size, age, layout, condition, and buyer pool.
- Adjust for meaningful differences rather than choosing only the highest sales.
- Review current listings and pending sales as market signals, not substitutes for closed evidence.
- Use a conservative ARV range when the market is changing or the finished product is unusual.
Build the complete project cost
- Purchase price and acquisition closing costs.
- Hard construction costs by trade and scope.
- Permits, design, engineering, inspections, and utility work.
- Financing points, interest, draw fees, extension fees, and appraisal costs.
- Taxes, insurance, utilities, security, lawn care, and other holding expenses.
- Broker commission, seller closing costs, concessions, staging, and marketing.
- Contingency for hidden conditions, price changes, and scope gaps.
All-in project cost
All-in cost = Purchase + acquisition costs + rehab + financing + holding + selling costs + contingency.
Determine a maximum supportable purchase price
Start with conservative ARV, then subtract every project cost and the minimum profit required for the time, capital, execution burden, and downside risk. The remaining amount is the maximum supportable acquisition basis—not the seller’s asking price.
Decision formula
Maximum purchase price = Conservative ARV − rehab − financing − holding − selling costs − contingency − target profit.
Convert the scope into a controlled rehab budget
- Create a line-item scope with quantities, labor, materials, allowances, and responsibility by trade.
- Separate essential structural and systems work from cosmetic upgrades.
- Obtain contractor pricing and confirm exclusions before closing.
- Use milestones, inspections, lien releases, change-order controls, and draw documentation.
- Match the finish level to the target buyer and neighborhood ceiling.
Model time as a project cost
Every month of delay can increase interest, taxes, insurance, utilities, security, and opportunity cost. The schedule should include permitting, material lead time, contractor sequencing, inspections, punch-list work, listing preparation, marketing, and closing time.
Measure net profit and return on capital
- Track gross spread, net profit, cash invested, ROI, and annualized return.
- Do not treat loan proceeds as profit or ignore the timing of capital contributions.
- Compare projected profit with the downside case, not only the best case.
Core profit metrics
Net project profit = Net sale proceeds − total project cost. ROI = Net project profit ÷ total cash invested.
Stress-test the project before closing
- ARV is 5% to 10% below the base case.
- Rehab cost is 10% to 20% above budget.
- Completion or sale takes three to six months longer.
- Financing extension fees or additional interest become necessary.
- The property must be rented, refinanced, or sold to an investor instead of a retail buyer.
Step 3 · Test the actual transaction
Evaluate the strategy with Acqyrly
Enter the actual assumptions, compare scenarios, and review the metrics supporting a proceed, renegotiate, restructure, or decline decision.