How to Underwrite a Fix & Flip in Texas (Step by Step)

Underwriting is where flips are won or lost. Not at the closing table, not during rehab — at the moment you decide what to offer. Get the underwriting wrong, and even perfect execution can't save the deal.

Here's the step-by-step process we use (and built Zephyr around).

Step 1: Pull Real Comps

This is where most investors already go wrong. They pull "comps" from Zillow or Redfin and call it a day. That's not underwriting — that's guessing.

Real comps means MLS data:

• Sold in the last 90 days (120 max in slow markets)
• Within 0.5 miles (1 mile in rural areas)
• Similar bed/bath count (±1 bedroom)
• Similar square footage (±20%)
• Similar age/construction (don't comp a 1960s ranch against a 2015 build)

In Texas, you also need to account for:

• Tax implications — Texas has no state income tax but property taxes are high (2.0–2.5% in many counties). This affects buyer purchasing power and your holding costs.
• HOA restrictions — Some Texas HOAs have strict renovation requirements that can blow your timeline and budget.

Step 2: Calculate Your ARV

Your After Repair Value isn't just the average of your comps. It's a judgment call informed by data:

1. Adjust for condition — Your finished product should match or slightly exceed comp condition
2. Adjust for lot size — Texas buyers care about lot size more than in most states
3. Adjust for features — Pool? Garage conversion? Updated kitchen? Adjust accordingly
4. Weight recent sales more heavily — A comp from 30 days ago matters more than one from 89 days ago

A good ARV is conservative. If your three best comps sold at $380K, $395K, and $410K, your ARV should be $385K–$390K, not $410K.

Step 3: Estimate Rehab Costs

This is where having a real scoping tool matters. Back-of-napkin estimates like "$30 per square foot" are how investors lose money.

Break your scope into categories:

• Kitchen — Cabinets, countertops, appliances, backsplash, flooring
• Bathrooms — Vanities, tile, fixtures, mirrors
• Flooring — Type, square footage, transitions
• Paint — Interior, exterior, trim
• Mechanical — HVAC, electrical, plumbing (the expensive surprises)
• Exterior — Roof, siding, landscaping, driveway
• Foundation — Get an inspection. Always.

In Texas specifically, budget for:

• HVAC — Summer heat means HVAC is non-negotiable. If the system is 15+ years old, budget for replacement ($5K–$8K).
• Foundation — Clay soil + Texas heat = foundation issues. $8K–$15K for pier work is common.
• Roof — Hail damage is pervasive. Insurance claims can offset costs but add timeline.

Step 4: Run Your Numbers

The formula is straightforward:

Maximum Allowable Offer = ARV – Rehab Costs – Holding Costs – Selling Costs – Desired Profit

For a Texas flip:

• Holding costs: Figure $2,500–$4,000/month (mortgage, insurance, property tax, utilities). Budget for 5–6 months.
• Selling costs: 7–8% of ARV (agent commissions, title fees, closing costs, seller concessions)
• Desired profit: Whatever your minimum is. We use $30K as a floor.

Example

Line Item	Amount
ARV	$385,000
Rehab	-$65,000
Holding (5 months)	-$17,500
Selling costs (8%)	-$30,800
Profit target	-$30,000
Max Offer	$241,700

If you can't buy it at or below $241,700, walk away. The next deal is coming.

Step 5: Stress Test

Before you make the offer, ask yourself:

• What if ARV is 5% lower? (Does the deal still work?)
• What if rehab costs 15% more? (They usually do)
• What if it takes 2 extra months to sell? (Add holding costs)

If the deal survives all three stress tests, it's a good deal. If it only works in the best-case scenario, it's a bad deal wearing a good disguise.

Do This in 5 Minutes

The process above sounds involved, but with the right tool it takes minutes, not hours. That's literally why we built Zephyr — to compress this workflow into a single platform where you pull comps, calculate ARV, scope the rehab, model financing, and see your numbers in one place.

No spreadsheets. No copying between tabs. No Zillow estimates. Just real data and real math.