Four deals. Four decisions.
Each case is hypothetical. Review the evidence, decide what you would do, then reveal the reasoning. Missing information is a reason to investigate—not permission to guess.
Rental: coverage or cash back?
A $1,500 rental has $1,201 PITIA and $395 in additional vacancy, management, maintenance and replacement allowances. A refinance would return most of the initial cash. What is your decision?
Reveal Nate’s conservative reasoning
Pass or renegotiate under Nate’s cash-flow standard: $1,500 − $1,201 − $395 = −$96/month. Taxes and insurance are already in PITIA, so do not deduct them again. The loan approval and cash return do not make the modeled loss positive. Investigate whether a smaller loan or supported changes can meet the expense-adjusted 1.30 target and provide positive cash flow.
Flip: preserve the downside margin
Finished value is hypothetically $180,000. Repairs are $30,000, repair contingency $3,000, other fixed costs $25,000 and target profit $25,000. The seller wants $90,000. What if resale is 10% lower?
Reveal Nate’s conservative reasoning
At $162,000 downside resale, the ceiling is $162,000 − $83,000 = $79,000, assuming all listed costs are fixed and no costs are missing. $90,000 is $11,000 above that ceiling, so the downside profit would be $14,000 rather than the $25,000 target. Verify costs and comps; negotiate or pass if the target cannot be met.
Wholesale: buyer economics first
The end buyer says $79,000 is the maximum total acquisition cost including any fee, supported by the buyer’s downside analysis. Seller contract is $70,000; your proposed fee is $15,000. Proceed?
Reveal Nate’s conservative reasoning
The combined $85,000 exceeds the buyer ceiling by $6,000. The apparent maximum fee is $9,000 before any costs not already included. Confirm the buyer’s underwriting, ability to close, contract terms, disclosures and applicable local requirements before proceeding.
Land: a cheap parcel with unknown access
A $25,000 lot appears cheaper than a serviced $35,000 lot. Preliminary site and utilities are estimated at $18,000, legal access is unverified, and both are assumed suitable for one home. Buy?
Reveal Nate’s conservative reasoning
Investigate before committing. The first lot would be $43,000 before other costs, but the estimate and comparable use need confirmation. Obtain access, utility, zoning and buildability evidence. If the risk and supported exit do not meet your requirements, negotiate or pass.