Rehab Costs
Rehab costs are the total expenses to renovate a property to its target condition. For a flip, that means market-ready. For a BRRRR, that means rent-ready and refinance-ready. For a value-add rental, that means enough to justify higher rent and pass inspections.
Underestimating rehab costs is one of the two most common ways new investors lose money on fix-and-flip deals. The other is an inflated ARV. Together, they create a deal that looked profitable on paper and is not.
Three renovation tiers
Understanding which tier your project falls into is the first step to estimating costs.
| Tier | Scope | Typical cost range (1,200–1,600 sq ft) |
|---|---|---|
| Light | Paint, flooring, cleaning, minor repairs | $10,000–$25,000 |
| Medium | Light + kitchen and bath cosmetic updates, fixtures, landscaping | $25,000–$55,000 |
| Heavy | Medium + roof, HVAC, plumbing, electrical, structural | $55,000–$120,000+ |
Do not confuse "level of work" with "quality of finishes." A heavy rehab can use mid-range finishes. A light rehab can have high-end finishes. The tier describes scope (what systems are touched), not quality.
A scope-by-category breakdown
For a medium-rehab 1,450 sq ft property:
| Category | Scope | Estimated cost |
|---|---|---|
| Kitchen | Cabinets, counters, appliances, sink/faucet | $8,000–$15,000 |
| Bathrooms (2) | Vanity, toilet, tile, fixtures | $4,000–$8,000 |
| Flooring | LVP throughout (1,200 sq ft) | $4,800–$7,200 |
| Paint (interior) | Walls, trim, doors | $2,500–$4,000 |
| Exterior / paint | Siding touch-up, paint, trim | $2,000–$5,000 |
| Landscaping | Cleanup, mulch, seeding | $1,000–$3,000 |
| Doors and hardware | Entry door, interior hardware | $800–$2,000 |
| HVAC service | Inspection + filter + minor repairs | $300–$1,000 |
| Roof | Existing roof — inspection only | $300 |
| Electrical | Panel inspection, outlets, GFCIs | $500–$2,000 |
| Plumbing | Minor fixes, water heater check | $500–$1,500 |
| Permits / fees | Varies by jurisdiction | $500–$2,000 |
| Contingency (15%) | ~$5,000–$8,000 | |
| Total estimate | $30,200–$58,700 |
For this example, a working assumption of $45,000 is reasonable — with the expectation that actual bids will refine this significantly.
The contingency line is not optional
Every rehab project encounters surprises. Walls are opened and reveal old wiring. The subfloor has moisture damage. The HVAC works until it doesn't. Budget a 10–20% contingency on every project:
| Project size | Recommended contingency |
|---|---|
| Light rehab ($10K–$25K) | 15–20% |
| Medium rehab ($25K–$55K) | 15% |
| Heavy rehab ($55K+) | 10–15% |
First-time investors should lean toward 20%. Every experienced operator has a story about the contingency saving the deal.
How rehab costs affect your maximum offer
Using the 70% rule:
| Rehab cost estimate | ARV | MAO (70% rule) |
|---|---|---|
| $35,000 | $290,000 | (0.70 × $290,000) − $35,000 = $168,000 |
| $45,000 | $290,000 | (0.70 × $290,000) − $45,000 = $158,000 |
| $60,000 | $290,000 | (0.70 × $290,000) − $60,000 = $143,000 |
A $25,000 swing in rehab estimate changes the maximum offer by $25,000. This is why it is essential to walk the property with a contractor (or experienced investor) before making an offer, not after.
Common mistakes
1. Estimating from photos. Photos are curated. Sellers photograph the good angles. Walk the property and inspect every room, the attic, the crawlspace or basement, the roof (or get a report), and the electrical panel.
2. Not getting contractor bids. Square-footage-based estimates (e.g., "$20/sq ft for a medium rehab") are useful for initial screening only. Before making an offer, get at least two contractor bids with a written scope.
3. Forgetting soft costs. Permits, inspections, staging, utilities during renovation, financing fees, and holding costs are not in the construction line — but they are real costs that reduce profit.
4. Over-improving for the neighborhood. Granite countertops and custom tile are appropriate in some markets. In a $150,000 ARV neighborhood, mid-range finishes are sufficient — over-improving does not increase the appraisal proportionally.
5. Using one contractor's number. One low bid can kill a deal. Get two or three bids and use the average, not the lowest.
Frequently asked questions
Should I get a contractor estimate before making an offer? Ideally, yes. At minimum, walk the property yourself and estimate tier and scope before making an offer. Some investors make offers with an inspection contingency that allows them to adjust the price based on contractor bids during due diligence.
What is the difference between rehab costs and capital reserves? Rehab costs are the renovation expenses you plan and execute before renting or selling. Capital reserves are the ongoing budget you set aside for future unexpected repairs once the property is stabilized (roof, HVAC replacements, etc.). They are different line items for different time horizons.
How long does a typical rehab take? Light: 2–4 weeks. Medium: 4–10 weeks. Heavy: 3–6 months. Every week of delay adds holding costs. Build the expected timeline into your pro forma and add a buffer.
Can I do the work myself to save money? Yes — but model your time as a real cost. DIY saves materials markup and labor, but it adds your time and usually extends the project. If you have the skills and the market allows it, sweat equity can significantly improve returns. If it extends your hold by 2 months, factor that into your holding cost calculation.
Rehab cost estimates are illustrative and vary significantly by market, contractor, and project scope. Always obtain contractor bids before finalizing an offer. This is not investment advice.