A rehab budget is one of the most important documents in a fix-and-flip loan file. It tells the lender exactly what you plan to repair, how you plan to do it, and whether the numbers align with the final after-repair value (ARV). In many cases, the rehab budget determines whether your loan is approved, delayed, or denied.
Lenders use rehab budgets as a risk assessment tool. A detailed and realistic budget signals to the lender that the investor understands the scope of work and has the experience or team to execute the project. A vague or underpriced budget tells the opposite—and instantly creates underwriting issues.
A lender-ready rehab budget includes line-item detail for every major category of work. This includes demolition, framing, electrical, plumbing, HVAC, roofing, interior finishes, exterior improvements, and landscaping. Each category should show clear labor and material costs. Combined, these items must align with standard pricing for your market.
One of the biggest mistakes investors make is attempting to reduce the budget to make the deal “look better.” Underwriters know the true cost of labor and materials, and when the budget is too low, they assume the project will run over budget—placing the lender at risk. This often results in the loan being declined or the budget being sent back for revision.
Another key factor is ARV alignment. If your comps show fully renovated homes with high-quality finishes, your budget must include those finishes. A budget that underfunds materials or leaves out critical work weakens the ARV and reduces loan strength.
Contractor pricing must also be within a reasonable range. While lenders don’t need résumés or portfolios, they examine cost consistency. A full bathroom remodel for $1,500 or a complete kitchen update for $3,000 raises immediate concerns.
Finally, every professional rehab budget includes a contingency—typically 5–10% of total cost. This proves to the lender that you expect surprises and have planned for them. Projects without contingency almost always hit trouble.
When your budget is detailed, realistic, and aligned with ARV, lenders can approve the file quickly and confidently. Investors who master rehab budgets experience smoother underwriting, faster draws, and stronger project profitability
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