How to Budget a Rental Property Rehab
Overruns are not bad luck. They are the predictable result of budgeting from a walkthrough instead of a written scope.
15–20%
Contingency — inside the budget, not bolted on after you have committed.
Scope before numbers
The reliable way to be wrong is to walk a property, form an impression, and attach a round number to it. The reliable way to be roughly right is boring: write down every room and every system, decide what happens to each one, and only then price it.
- 1Walk it room by room and write a line for each — floor, walls, ceiling, fixtures, doors. “Kitchen: replace cabinets, counters, sink, appliances; keep layout” is a scope. “Kitchen: $15k” is not.
- 2Then walk the systems — roof, HVAC, water heater, electrical panel, plumbing stack, windows, sewer lateral. These are the ones that do not announce themselves and cost the most.
- 3Price the scope from contractor quotes where you can, and from your own unit costs where you cannot.
- 4Add the contingency inside the total, then check the deal against your maximum offer.
Unit costs to price a scope against
| Item | Typical cost | Note |
|---|---|---|
| Interior paint, whole house | $2.50 – $4.00 / sq ft | $3,500–5,600 on 1,400 sq ft. Cheapest visible improvement there is. |
| LVP flooring, installed | $4 – $7 / sq ft | The rental-grade default: durable, replaceable in sections. |
| Kitchen, mid-grade | $12,000 – $20,000 | Stock cabinets, laminate or entry quartz, new appliances. Moving plumbing adds thousands. |
| Full bathroom | $6,000 – $12,000 | Doubles if you move the stack. |
| Roof, asphalt | $9,000 – $16,000 | Tear-off costs more than an overlay and is usually the right call. |
| HVAC system | $7,000 – $12,000 | More with new ductwork. |
| Water heater | $1,200 – $2,200 | Tankless costs more and rarely pays back on a rental. |
| Electrical panel upgrade | $2,000 – $4,000 | Often triggered by insurance rather than by choice. |
| Windows | $600 – $1,000 each | Rarely pays for itself in rent; sometimes required to lease. |
| Sewer lateral replacement | $4,000 – $12,000 | Invisible until you scope it. Scope it. |
The example budget, itemised
This is the $45,000 rehab from the BRRRR worked example — a 1,400 sq ft house bought at $150,000 and finished to a $270,000 ARV.
Scoped rehab budget
- Kitchen — cabinets, counters, appliances
- $14,000
- Bathroom — one full, no relocation
- $8,000
- Flooring — LVP throughout
- $6,500
- Interior paint
- $4,500
- Electrical panel and fixtures
- $2,500
- Exterior, landscaping, cleanout
- $2,500
- Permits and dumpsters
- $1,000
- Subtotal
- $39,000
- Contingency @ 15.4%
- $6,000
Budget: $45,000 — and the contingency is inside it.
Contingency outside the budget is not contingency
Where overruns actually come from
| Source | Typical size | How to reduce it |
|---|---|---|
| What is behind the walls | $3,000 – $15,000 | Knob-and-tube, galvanised supply, rot at the sill, undersized headers. Open one wall during diligence if the seller allows, and always scope the sewer. |
| Permit and inspection scope creep | $2,000 – $10,000 | Pulling a permit for a kitchen can trigger egress, smoke, GFCI or panel requirements. Ask the building department what your scope triggers before you buy. |
| Change orders | 10 – 20% of contract | Mostly self-inflicted. Freeze the scope before work starts; every mid-project upgrade costs more than it would have at the outset. |
| Timeline | $1,500 per month here | Holding costs run whether or not work happens. Order long-lead items — cabinets, windows, HVAC — before demolition, not after. |
The last row is the one people underestimate. On the example, six months of holding costs are $9,000; two extra months is another $3,000 and it buys nothing. A contractor who starts three weeks later but finishes on schedule is cheaper than one who starts tomorrow and drifts.
Rental-grade is a real standard, not a lesser one
Finish to what the neighbourhood ceiling supports and to what survives tenants: durable flooring rather than delicate, mid-grade fixtures that are still stocked in five years, neutral colours you can touch up from a standing paint order. Spending above that band does not raise the ARV and does raise your future CapEx, because bespoke items cost more to replace.
There is one exception worth the money: anything that reduces future failure. A full roof instead of an overlay, a new water heater at year eight rather than year twelve, a sewer line you already know is clear. Those are not finishes — they are reserve you have pre-paid, and they are the reason a well-rehabbed property can carry a lower CapEx assumption for a decade.
Once the budget is scoped, put the total into the calculator as day-one capital — it belongs in cash invested, where it correctly reduces your cash-on-cash return.
Frequently asked questions
How much should I budget to renovate a rental property?
Build it from a written scope rather than a per-square-foot rule. A cosmetic refresh on a 1,400 square foot house — paint, flooring, fixtures — commonly runs $15,000 to $25,000, while a full rehab including kitchen, a bathroom and systems typically lands between $40,000 and $70,000 depending on local labour rates.
How much contingency should a rehab budget have?
Fifteen to twenty percent of the scoped cost, and it belongs inside the budget you use to calculate your maximum offer. A contingency held outside the budget is just a higher purchase price with optimism attached.
What causes most rehab budget overruns?
Conditions found behind walls, permit requirements triggered by the work itself, self-inflicted change orders, and timeline slippage that keeps holding costs running. The first two are reduced by inspection and a call to the building department; the last two are reduced by freezing the scope before work starts.
Should I renovate to a higher standard to get more rent?
Only up to what the neighbourhood band supports. Rent premiums for finish level are real but capped by the submarket, and an appraisal will price the property against nearby sales regardless of what you spent. Durability usually beats luxury on a rental, because it lowers future capital expenditure.