Rehab Budget Guide for Fix and Flip Investors
Last updated: March 2026
A well-planned rehab budget is essential for fix and flip success. It determines your total project cost, affects your loan amount, and directly impacts profitability. This guide covers what belongs in a rehab budget, how to structure a scope of work, and how your budget connects to the lending process.
What Belongs in a Rehab Budget
- Kitchen renovation (cabinets, countertops, appliances, fixtures)
- Bathroom renovation (vanities, tile, fixtures, plumbing)
- Flooring (hardwood, tile, carpet, LVP)
- Paint and interior finishes
- Electrical upgrades and panel work
- Plumbing repairs and upgrades
- HVAC system (repair or replacement)
- Roofing (repair or replacement)
- Windows and doors
- Exterior and landscaping
- Demolition and debris removal
- Permits and inspections
- Contingency reserve (10-20%)
How to Structure a Scope of Work
A scope of work (SOW) should be organized by category with specific line items, quantities, and pricing. Each line item should describe the work to be completed, materials to be used, and the estimated cost.
Lenders review the SOW as part of their underwriting process. A detailed, well-organized scope demonstrates project planning competence and supports the loan request.
The SOW also serves as the basis for the draw schedule. As each category of work is completed, the borrower requests a draw based on the corresponding line items.
Hard Costs vs Soft Costs
Hard costs are direct construction expenses — materials, labor, and contractor fees for the physical renovation work. These make up the bulk of most rehab budgets.
Soft costs include permits, inspections, architectural or engineering fees, insurance during renovation, and other indirect project expenses. While smaller than hard costs, soft costs can add up and should not be overlooked.
Contingency Planning
Most experienced investors include a contingency of 10-20% of total rehab costs. This reserve covers unexpected conditions discovered during renovation — structural issues, code violations, material price increases, or scope changes.
Properties with unknown conditions or older construction typically warrant higher contingency percentages.
Getting Contractor Bids
- Get at least 2-3 bids from licensed, insured contractors
- Ensure bids break down costs by category and line item
- Verify contractors have experience with similar project scopes
- Check references and review previous work quality
Draw Planning and Sequencing
Draws should be planned to align with the natural flow of construction. Typically, demolition and structural work come first, followed by mechanical systems, then finishes. Each draw request should correspond to completed work that can be verified by inspection.
Example Rehab Budget
| Kitchen | $18,000 |
| Bathrooms | $12,000 |
| Flooring | $7,000 |
| Paint | $4,000 |
| Electrical | $6,000 |
| Plumbing | $5,000 |
| HVAC | $8,000 |
| Exterior | $5,000 |
| Permits | $2,000 |
| Contingency (15%) | $10,000 |
| Total | $77,000 |
Illustrative only. Actual costs depend on property condition, scope, and local market.
Frequently Asked Questions
How much contingency should I include in my rehab budget?
Most experienced investors and lenders recommend a contingency of 10-20% of total rehab costs. Higher contingency is advisable for older properties or extensive renovations where unexpected conditions are more likely.
What are the most common budget categories in a rehab?
Key categories include kitchen, bathrooms, flooring, paint and finishes, electrical, plumbing, HVAC, roofing, windows, exterior work, demolition, permits, and general conditions.
What is the difference between hard costs and soft costs?
Hard costs are direct construction expenses like materials and labor. Soft costs include permits, inspections, architectural fees, insurance, and other indirect project expenses.
How many contractor bids should I get?
Getting at least two to three bids from licensed contractors is recommended. This helps validate pricing and ensures your budget reflects current market rates.
How does my rehab budget affect my loan amount?
Lenders use your rehab budget as part of the total project cost calculation. A well-documented budget with realistic line items supports the loan request and demonstrates project viability.
When should I finalize my scope of work?
Your scope of work should be as complete as possible before submitting a loan application. Lenders need a detailed scope to underwrite the deal and determine the draw schedule.
What are common rehab budget mistakes?
Common mistakes include underestimating costs, failing to account for permits and inspections, not including contingency, relying on a single contractor bid, and overlooking holding costs during renovation.
How do draws align with the rehab budget?
Lender draws are typically structured around the scope of work line items. As work is completed in each category, borrowers request draws, and the lender verifies completion before releasing funds.
Related Resources
Browse by State
- Arizona
- California
- Colorado
- District of Columbia
- Delaware
- Florida
- Georgia
- Hawaii
- Iowa
- Idaho
- Illinois
- Indiana
- Kansas
- Kentucky
- Louisiana
- Massachusetts
- Maryland
- Missouri
- Mississippi
- New Mexico
- Ohio
- Oklahoma
- Pennsylvania
- Rhode Island
- South Carolina
- Texas
- Virginia
- Washington
- Wisconsin
- West Virginia
- Wyoming
Related Resources
Ready to Get Started?
Get terms for your next investment property.