Building a Property Rehab Budget
Underwriting a property flip requires a detailed construction budget. Renovation errors can quickly eliminate profit margins.
rehab estimates typically combine square-footage base rates with specific project additions:
1. Base Interior Rehab: Cost to paint, install flooring, trim, drywall repairs, and light fixtures, calculated by square footage and finish grade (Economy, Mid-Range, or High-End).
2. Kitchen & Bath Upgrades: Major wet area renovations requiring plumbing, cabinetry, and tile work.
3. Mechanicals & Envelope: Structural systems like roofs, siding, HVAC, electrical panels, and plumbing mainlines.
4. Contingency Buffer: A reserve fund (typically 10% to 20% of the subtotal) to cover unexpected repairs (mold, structural issues) found during demolition.
$$\text{Total Rehab Budget} = \text{Subtotal Costs} \times \left(1 + \frac{\text{Contingency \%}}{100}\right)$$