Exit Strategy Calculations Explained

Deal Run calculates feasibility and profit estimates for four exit strategies on every deal. Each strategy uses different math, different assumptions, and appeals to a different type of buyer. Understanding these calculations helps you price your deals correctly, market to the right buyer pool, and present numbers that sophisticated investors will trust.

All four strategies use the same ARV and repair estimates from your comp analysis and repair breakdown. The difference is in how those numbers flow through each strategy's profit formula.

1. Wholesale / Assignment

This is the most common exit strategy for wholesalers. You assign your purchase contract to an end buyer for an assignment fee. You never take title to the property. Your profit is the difference between your contract price and what the buyer pays.

The formula

Marketing Price = (ARV x Discount %) - Repairs

The discount percentage is the key variable. It determines how much room your buyer has for profit after they purchase the property, complete repairs, and sell at the ARV.

• 70% discount (standard): Marketing Price = ARV x 0.70 - Repairs. This is the industry standard "70% rule." A $240,000 ARV property with $40,000 in repairs would have a marketing price of $240,000 x 0.70 - $40,000 = $128,000.
• 75% discount (aggressive): Leaves less room for the buyer but may work in hot markets with fast appreciation and low holding costs. Marketing Price = $240,000 x 0.75 - $40,000 = $140,000.
• 80% discount (stretch): Only works for light cosmetic rehabs in rapidly appreciating markets where flippers can get in and out quickly. Marketing Price = $240,000 x 0.80 - $40,000 = $152,000.

Your assignment fee is the difference between your contract price (what you agreed to pay the seller) and the marketing price (what the buyer pays you). If your contract price is $115,000 and you market at $128,000, your assignment fee is $13,000.

Deal Run displays the assignment fee calculation on the MAO calculator page. The interactive slider lets you move between discount percentages and immediately see how it affects the marketing price, buyer profit, and your assignment fee.

Buyer's profit breakdown (flip buyer)

A buyer evaluating your wholesale deal at a $128,000 marketing price on a $240,000 ARV property with $40,000 in repairs would calculate their profit as follows:

That is a 29% return on the $128,000 investment, which is attractive to most flip buyers. Deal Run shows this breakdown to you so you can verify the deal works from your buyer's perspective before you market it.

2. Fix and Flip

The fix-and-flip calculation models the full acquisition, renovation, and resale cycle. This is relevant when you are marketing to flip buyers or when you are evaluating whether to flip the property yourself instead of assigning.

The formula

Profit = ARV - Purchase Price - Repairs - Closing Costs (buy + sell) - Holding Costs - Financing Costs

Deal Run breaks this into detailed line items.

Closing costs on purchase include title insurance (buyer's policy), escrow fees, recording fees, and any transfer taxes. Deal Run defaults to 2% of the purchase price, which is typical for most markets. In attorney-closing states this may be slightly higher.

Closing costs on sale include the real estate agent commission (typically 5-6%), title insurance (seller's policy), escrow fees, and transfer taxes. Deal Run defaults to 8% of the ARV (sale price), which covers agent commission plus title and closing fees.

Holding costs are the monthly expenses during the renovation and listing period. Deal Run defaults to a 6-month hold period, which accounts for 3-4 months of renovation and 2-3 months on the market. Monthly holding costs include:

• Property taxes (annual tax amount / 12)
• Insurance ($100-$200/month for a builder's risk or vacant dwelling policy)
• Utilities ($150-$300/month during renovation)
• Loan interest (if financed -- see financing section below)
• HOA dues (if applicable)

You can adjust the hold period from 3 to 12 months using the slider on the exit strategy page. Longer hold periods increase carrying costs and reduce profit. In a market where homes sell in 30 days, you might reduce to 4 months total (3 months renovation plus 1 month on market). In a slow market, 8 to 10 months may be more realistic.

Cash buyer vs financed buyer

Deal Run calculates two profit scenarios side by side: one for a cash buyer and one for a buyer using hard money financing.

Cash buyer: No loan interest, no origination points, no lender fees. The cash buyer's profit is simply ARV minus purchase price, repairs, closing costs, and non-financing holding costs. Cash buyers earn more per deal because they avoid $8,000 to $15,000 in financing costs on a typical flip.

Financed buyer (hard money): Deal Run defaults to common hard money terms: 12% annual interest rate, 2 origination points (2% of loan amount), and 80% LTV (loan-to-value, meaning the lender finances 80% of the purchase price and the buyer brings 20% plus all repair costs in cash). On a $128,000 purchase, the loan amount is $102,400. Origination points cost $2,048. Monthly interest is $1,024. Over a 6-month hold, total financing costs are approximately $8,192.

The difference matters. On the example deal above, a cash buyer nets approximately $37,440 while a financed buyer nets approximately $29,248. Deal Run shows both numbers so you can evaluate the deal from both perspectives, since some of your buyers will be cash and others will use hard money.

3. Buy and Hold (Rental)

The rental analysis calculates monthly cash flow and annual returns for a buyer who plans to renovate the property and rent it out long-term. This exit strategy is relevant when you are marketing to landlord-investors or when rental comps suggest strong cash flow potential.

The formula

Monthly Cash Flow = Gross Rent - PITI - Vacancy - Maintenance - Management

Deal Run populates the gross rent from your ARR (After Repair Rent) analysis, which uses the same MLS-first search approach as the ARV comps but for rental listings. See Rental Analysis (ARR) for details on how rental comps are found.

The deductions are:

• PITI (Principal, Interest, Taxes, Insurance): Calculated from the purchase price, assumed down payment (25% for investment property conventional loans), interest rate (7-8% current market), property tax amount, and insurance estimate. Deal Run calculates this as a monthly total.
• Vacancy (8%): An allowance for months when the property is vacant between tenants. At 8%, you are assuming roughly one month of vacancy per year, which is realistic for well-located properties in markets with strong rental demand.
• Maintenance (5%): An ongoing reserve for repairs, appliance replacement, and general upkeep. Five percent of gross rent is conservative for a newly renovated property. Older properties or those with deferred maintenance may warrant 8-10%.
• Property management (10%): The cost of hiring a property manager to handle tenant placement, rent collection, maintenance coordination, and lease enforcement. Even if your buyer plans to self-manage, including this cost gives a true picture of the investment's returns independent of the owner's time.

Deal Run also calculates the cap rate (Net Operating Income / Purchase Price after repairs) and cash-on-cash return (Annual Cash Flow / Total Cash Invested), which are the two metrics rental investors use most frequently to compare investment opportunities. See Rental Analysis (ARR) for detailed explanations of these metrics.

4. Creative / Subject-To

The subject-to analysis models a scenario where the buyer takes over the seller's existing mortgage rather than obtaining new financing. This strategy works when the seller's existing loan has a below-market interest rate, significant remaining balance, and the seller is motivated to transfer the property quickly.

What Deal Run calculates

Using the property detail data, Deal Run pulls the existing mortgage information: outstanding balance, interest rate, monthly payment (if available), and origination date. It then models the buyer's cash flow and equity position under a subject-to acquisition.

• Cash to close: The difference between the purchase price and the existing mortgage balance, plus closing costs. If the mortgage balance is $150,000 and the agreed purchase price is $160,000, the buyer needs $10,000 plus closing costs in cash.
• Monthly payment comparison: The existing mortgage payment (often at a 3-4% rate from 2020-2021 originations) versus what a new loan at current rates (7-8%) would cost. A $150,000 mortgage at 3.5% has a P&I payment of $674/month. The same balance at 7.5% would cost $1,049/month. That $375/month difference is the primary financial advantage of subject-to.
• Cash flow under existing terms: Gross rent minus the existing mortgage payment, taxes, insurance, vacancy, maintenance, and management. Because the existing payment is often hundreds of dollars lower than a new loan, cash flow is significantly higher.
• Equity position: The difference between the estimated market value (ARV after any repairs) and the existing mortgage balance. This represents the buyer's immediate equity, which grows over time as the mortgage is paid down and the property appreciates.

This strategy only appears in the exit strategy section when Deal Run has enough mortgage data from the property records to model it. If the property is owned free and clear or the mortgage data is not available, the subject-to section will show a note explaining that insufficient mortgage data is available.

The interactive slider

On the MAO calculator page, Deal Run provides an interactive slider that lets you adjust the ARV discount percentage continuously from 60% to 85%. As you drag the slider, every downstream number updates in real time: the MAO price, the implied assignment fee, the buyer's estimated profit, the buyer's ROI, and the holding cost total.

The slider has color-coded zones to help you quickly see where your deal falls:

• Green zone (60-70%): Conservative pricing. Strong buyer profit margins. Deals at this level sell quickly to experienced investors who recognize the margin.
• Yellow zone (70-78%): Standard pricing. Adequate buyer profit for most markets. This is where most wholesale deals are priced.
• Red zone (78-85%): Aggressive pricing. Thin buyer margins. Deals at this level may sit on your marketing list unless the market is very hot, repairs are minimal, or the property has unique upside (lot value, addition potential, zoning change).

Use the slider to find the sweet spot where your assignment fee is acceptable and your buyer's profit is attractive enough to generate offers within the first week of marketing.