Case Study: A Houston Townhouse Under Contract $53,000 Above What the Numbers Support

By Steve Waller · October 31, 2026

The deal

A request came in through the website on an off-market townhouse in Houston's Memorial area: three bedrooms, two and a half baths, about 2,000 square feet, built in 1973 and held by one owner since the late 1980s. The investor had it under contract at $181,000, with $7,500 of earnest money already down and closing days away. The plan was a flip: about $40,000 of work and a resale near $310,000.

On those numbers the deal looks fine. A 75% advance on $310,000 is $232,500, which covers the price, the repairs and about $10,000 of closing costs with a little left over. The trouble is that both inputs were off.

The value

The complex was built in two phases. The newer 1976 units hold every sale above $300,000 in the last two years. This unit is in the original 1973 section, and 22 matched sales of that product over four years put a fully updated unit at about $275,000. The two most recent updated sales of the same floor plan closed at $275,000 and $279,000. Next door, the same plan already renovated listed at $255,000 in March and has sat 230 days, now asking $240,000.

The repairs

The written scope replaces drywall, every window, two tubs and the flooring. At $40,000 that's about $20 a square foot. Priced at market for a 1973 unit, with the HVAC replaced and a modest systems allowance, it comes to about $68,000, and anywhere from $52,000 to $95,000 depending on what's behind the walls. No interior photos came with the file, and a building that age needs an asbestos test before anyone pulls drywall.

The numbers, the ACP way

ARV times the advance rate, less repairs, less closing costs, less the purchase price, equals the cash due at closing. At $275,000 and $68,000:

• At 75%: the loan is about $206,000 and the investor brings about $53,000 to closing.
• At 70%: the loan is about $193,000 and the cash due is about $67,000.

Run it backward and the price the deal supports is about $128,000 at 75% and $115,000 at 70%. The contract sits about $53,000 above the higher number. The investor had the cash to close. The open question was whether the deal was worth closing.

Flip vs rent

As a flip at $181,000, the Deal Estimator, run with a six-month hold and 7% selling costs, shows a net loss of about $22,000. As a rental, the HOA alone is $425 a month, and the property tax goes up once the seller's homestead exemption comes off. Both come out of the rent before the loan payment does, so the hold needs a real rent figure behind it before it counts as an exit.

What should have happened first

The investor should have run the numbers before signing the contract and before getting into the hard money loan, not after. Two checks would have done it: sales of the same plan in the same section of the complex, which set the value, and a repair budget priced line by line. Both were available before the earnest money went hard. Ten minutes in the Deal Estimator at acp-lending.com with $275,000 and $68,000 would have shown the $53,000 cash due and the $128,000 ceiling.

What to do on yours

Price the after-repair value from sales of the same product, not the best sale in the neighborhood. Get the repair budget line by line before you commit, and walk away above the price where 70% to 75% of ARV covers price, repairs and closing. If you're already under contract above that number, the earnest money may be the cheapest thing you lose. Run your deal through the Deal Estimator, the DSCR Calculator or the Free Deal Check at acp-lending.com, or send it to me and I'll structure it with you before you sign anything.

The full report, and every earlier one, is available on ACP's website at acp-lending.com. Investors can sign up at acp-lending.com/investor-brief to receive new reports by email.

Market data is from public sources and is provided for information only. Nothing here is an offer of credit, a rate quote, or investment advice. Financing is subject to underwriting, lender approval, appraisal or valuation, title, insurance, property eligibility and program availability.

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