First Time Investors: a QUICK rehab-cost gut check, open conversation

Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes

6mo

@Steven Wesolowski That's a solid plan of attack when it comes to flipping a property. We recently sold our first flip and it was massive education. We were profitable because of the sweat equity and finishes I put into the deal. Our next flip will be different.

The biggest thing I learned was something I already knew. Determine your MAO and stick to your guns. The seasonality and political turmoil in our country didn't help, but we simply overpaid to began with. We lost half of our profit on the buy side before swinging a hammer or loading up dumpsters.

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Bo SmithPro Member

Hinton, WV · Member since 2026 · 1k+ posts · 373 votes

6mo

Steven, you nailed the contingency piece. Most first-time flippers don't add a real contingency line -- they think they will. They budget 0k for rehab and decide that's their number. Then the inspector calls and flags electrical work, plumbing issues, or structural stuff, and suddenly they're at 2k. The difference between planning for it and being surprised by it is the difference between a deal that works and one that doesn't.

The other critical piece folks miss is separating cosmetic from structural. You can over-improve a kitchen and it costs you 5-10k in extra margin. But if you under-budget the roof, HVAC, or plumbing, you end up with a property that won't pass inspection or that buyers won't finance. Those are non-negotiable, and they're where estimates blow up fastest in 2026 with labor costs and material tariffs.

Getting 2-3 contractor bids on the same scope is essential. But I'd add one more step: walk the property with your GC and ask specifically what they'd replace vs repair. That conversation alone will save you from under-budgeting the "deferred maintenance" category. Every property has deferred maintenance. The GC who can articulate what needs to happen is worth the conversation time.

Holding costs are the one area I'd push back on your checklist -- they need to be even more aggressive in 2026. If your project is scheduled for 10 weeks and you're carrying a property on hard money at ,500/month, you should budget for 14 weeks of carrying. Tariffs and labor delays have added 20-30% to timelines.

For first-timers in San Antonio, what price range are you targeting for your first flip?

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Jonathan KlemmBusiness Member

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Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes

6mo

Great info here @Steven Wesolowski - I'd say you could probably go 20%-30% on the contingency.

Also, the more you renovate aka gut to the studs the less surprises. Either way the best way to scale is do the exact same type of rehab every time in similar locations.

That is where I messed up here in Chicago. I took on different property types (condos, multi-family) in different locations, with varying levels of renovation. Nothing was repeatable except the unpredictability. Which helps my resilience but not my scalability.

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Bruce WoodruffPro Member

Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes

6mo

Good list! I would only add that a prospective buyer should call the City (first thing) and ask for Permit Status.....are there any Open Permits? Is there obviously new work (like a remodeled kitchen or room addition) for which there is no Permit?

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J CastroBusiness Member

Lender · Florida · Member since 2025 · 684 posts · 246 votes

6mo

Hey @Steven Wesolowski, great breakdown. From a lender’s perspective, I can tell you that rehab numbers are one of the biggest reasons deals either get approved or declined on the financing side.

When lenders review a fix & flip loan, they're not just looking at the ARV and purchase price—they're also stress-testing the rehab budget and scope of work. If the rehab numbers don’t make sense for the property, that’s usually where the red flags appear.

A few additional things lenders typically look for when underwriting rehab projects:

1. Realistic Rehab Budget
Many first-time investors underestimate costs. If a budget looks too light for the scope, lenders will often question whether the deal can be completed successfully.

2. Clear Scope of Work
The more detailed the SOW (Statement of Work) is, the smoother the process. It also helps structure draw schedules so funds are released as work is completed.

3. Contractor Experience
Licensed and insured contractors with verifiable experience can make a big difference in how smoothly a project progresses.

4. Contingency Reserves
Your point about 10–20% contingency is huge. Older homes especially can surprise you once walls open up.

5. Exit Strategy
Lenders always want to see that the ARV supports the total project cost (purchase + rehab + holding costs). Even a great rehab plan won’t work if the margin is too tight.

Your checklist is solid—especially separating must-fix items from cosmetic upgrades and matching finishes to the neighborhood. That’s exactly how experienced flippers protect their margins.

From what we see financing deals every day, the investors who succeed long-term are the ones who treat rehab budgeting like underwriting a business project—not guessing.

Great insights for anyone preparing for their first flip.

JCREIG Capital Funding

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Bruce WoodruffPro Member

Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes

6mo

Quote from @Steven Wesolowski:

Rehab numbers kill deals faster than comps. Investing is speculative and risky.

You will never know until you take the plunge into your first project, whether you are doing it on the side yourself, or leveraging with the help of a trusted general contractor.

Here’s my QUICK rehab-cost gut check before you ever swing a hammer in San Antonio:

- Separate MUST-FIX vs NICE-TO-HAVE (keep the scope tight).
- Cost per sqft is just a STARTING POINT, not a bid.
- Walk the 'big-ticket' systems: ROOF / FOUNDATION / HVAC.
- Never skip PLUMBING + ELECTRICAL (panel, lines, fixtures, outlets).
- Count KITCHENS + BATHS and use unit costs to sanity-check totals.
- Check CITY PERMITS + CODE items early (they’re budget busters).
- Get 2–3 CONTRACTOR BIDS on the same scope-of-work.
- Add a 10–20% CONTINGENCY (older homes deserve it)
- Include HOLDING COSTS: financing, utilities, trash, insurance, lawn
- Match FINISH LEVEL to the neighborhood + your ARV (don't over-improve)
- Hunt HIDDEN ISSUES: water intrusion, termites, mold
- Take measurements + photos, then build a repeatable 'Statement of Work' template

Thoughts?

When you say match finished the neighborhood, I would suggest going just ever so slightly higher. For example if all the houses in the neighborhood have granite countertops, go for quartz. If they all have vinyl plank flooring go for engineered wood. Just to stand out!

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Dominic Magallanez

Investor · San Antonio, TX · Member since 2026 · 43 posts · 10 votes

6mo

Solid plan!

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First Time Investors: a QUICK rehab-cost gut check, open conversation

First Time Investors: a QUICK rehab-cost gut check, open conversation

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