What is Rehab Budget?
A rehab budget is the line-item plan of construction costs for a flip or BRRRR — typically broken down by trade (demo, framing, plumbing, electrical, drywall, paint, flooring, kitchen, baths) and contingency. Rehabs without a written budget consistently run 20-40% over informal estimates.
A defensible rehab budget starts with a written scope of work for each room and each trade. "Update kitchen" is not a scope; "remove existing cabinets, install IKEA AKURUM cabinets in 12x12 layout, install quartz countertops (Carrara look-alike), install stainless undermount sink, install GE Profile appliance package, install LED under-cabinet lighting" is a scope.
Budget categories should include: demo and disposal, structural (if applicable), roof (if applicable), HVAC (if applicable), plumbing rough and finish, electrical rough and finish, drywall, paint (interior and exterior), flooring, kitchen (cabinets, countertops, appliances), bathrooms (vanities, tubs/showers, toilets, tile), trim and doors, light fixtures, hardware, exterior (landscaping, painting, etc.), permits, and contingency (10-15% of total).
The biggest budget killers are scope changes mid-project. Once a wall is opened, "while we're in there" decisions add up fast. Lock the scope at contract signing; if changes are needed, use formal change orders with dollar amounts before work proceeds.
A typical 1,200 sqft cosmetic-only rehab in 2026: $28-40/sqft = $33,600-48,000. Includes paint inside/out, new flooring, kitchen ($8-12k), single bath ($6-10k), light fixtures, hardware, landscaping. Excludes any structural, electrical, plumbing, HVAC.
Concepts that connect.
After Repair Value (ARV) is the projected market value of a property after all planned renovations are complete, based on recently-sold comparable properties in similar condition within a half-mile radius. It is the single most important number in any flip or BRRRR underwrite.
The 70% rule is a flipper's underwriting heuristic: total all-in cost (purchase + rehab + carry + closing) should not exceed 70% of the property's After Repair Value. The remaining 30% covers profit, slippage, and the cost of being wrong.
Flipping is the strategy of buying a distressed property, renovating it to retail standard, and reselling at full market value within 4-9 months. Profit comes from the spread between all-in cost (purchase + rehab + carry + closing) and net sale proceeds.
Maximum Allowable Offer (MAO) is the highest price a wholesaler or flipper can pay for a property and still hit their required profit margin. Derived from the 70% rule: MAO = (ARV × 0.70) − repair costs − assignment fee.
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