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.
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See how it worksWhere this comes up: on the market
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
In your Room, this word explains itself where it appears.
Your Room defines rehab budget in the step you meet it in, beside the document or the date it belongs to. Free to set up, with an agent or on your own.
Organize my saleFree to set up. Pay once when you list: $89 or $189. 7-day refund.