Estimating Rehab Costs Before You Make an Offer on a Flip

On a flip, the rehab number sets everything else: your offer, your profit, and how much a lender will fund. Miss it by 15% and a good deal can turn into a loss. The fix is a repeatable process you run on every property.

Walk it with a checklist

Go through the house with a flashlight, a camera and a list. Start with the big-ticket items:

• Roof. Age, missing shingles, soft spots, stains on the ceiling below.
• Foundation. Cracks, sloping floors, sticking doors.
• Mechanicals. Electrical panel, wiring type, HVAC age, water heater, supply and drain lines.
• Envelope. Windows, siding, gutters, drainage around the house.

Then the finish items: kitchen, baths, floors, walls, ceilings, doors, trim, landscaping. Cosmetic houses often hide system problems. Assume something is behind the walls.

Price it line by line

Don't write "kitchen: $30,000." Break each area into tasks and price each one: demo, cabinets, counters, plumbing, electrical, appliances, flooring, paint. Line items catch things lump sums miss. They also become your scope of work, which a rehab lender will want and which often drives your draws.

Keep a running price sheet from your past jobs and local suppliers. Your own data beats online averages.

Get bids and add contingency

Have two or three contractors walk the property and ask for itemized bids. Compare line by line. Where bids differ a lot, find out why. One contractor may have spotted something you missed.

Then add a contingency on top. Many investors use 10% to 20% of the rehab budget, more for older homes or anything structural. Skipping contingency is the most common and most avoidable mistake.

Turn the estimate into your offer

Start at the after-repair value (ARV) and subtract:

Max offer = ARV − rehab with contingency − holding costs − buy and sell closing costs − financing costs − your target profit

Example, round numbers only:

• ARV: $350,000
• Rehab plus 15% contingency: $69,000
• Holding costs for 6 months: $15,000
• Closing and selling costs: $28,000
• Points and lender fees: $6,000
• Target profit: $45,000

Max offer: about $187,000. If the seller wants $215,000, the numbers say walk away or negotiate, no matter how much you like the house.

What this means for you

Your rehab estimate is not a guess to refine later. It's the number that decides whether you buy. Walk the property with a system, price it line by line, verify with bids, add contingency, and let the math set your offer.

For rehab deals, RSC Private Lending typically asks for the scope of work along with property details, the purchase agreement, proof of funds and borrower information. RSC Fix & Flip loans can cover up to 100% of the rehab budget, within the program's total-cost and 75% of ARV limits.

Have a flip under review? Send the scope and numbers to RSC Private Lending for a term sheet in 24 hours. Subject to underwriting.