Rehab budget
The planned cost to renovate a property. Includes materials, labor, permits, and contingency. Underestimating it is the most common way a flip goes wrong.
Every term like this one lights up in the step you're on.
Free to set up. No credit card.Part 1 of 4
Why a seller cares
The rehab budget is the second-biggest number in a flipper's offer, after the resale value, and flippers pad it because they have been burned. That padding is part of the discount you are being offered.
Part 2 of 4
A simple example
A flipper estimates $50,000 to renovate your home and carries a 15% contingency. Their offer treats the job as $57,500.
| The budget line | What it does to the offer |
|---|---|
| Materials and labor, $50,000 | Subtracted from the ARV |
| Contingency, $7,500 | Subtracted too |
| A budget that was too low | Not your problem after closing; it is theirs |
The rehab budget comes out of your price, contingency included.
Part 3 of 4
What people get wrong
That the flipper's estimate is what the work costs a homeowner. It includes their contractor's margin and their own cushion.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
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