The Rehab Budget That Survives Underwriting
How to build a line-item rehab budget that holds up in lender review, avoids missed costs, and sets you up for smooth draws.
Your rehab budget does more work than you might think. It supports your ARV, sets your loan amount, and becomes the draw schedule that funds your project. A vague budget slows down approval and causes problems at every draw. A clear one gets you funded faster and paid faster.
Here is how to build a budget that holds up when a lender's construction team reviews it.
Break it down by line item
A single number like "$55,000 for full rehab" tells us nothing. We need to see what you are doing and what each piece costs. Organize the budget by trade or by area of the house, with a cost for each line.
| Category | Example line items |
|---|---|
| Exterior | Roof, siding, gutters, windows, paint, landscaping |
| Systems | HVAC, electrical panel and wiring, plumbing, water heater |
| Interior | Drywall, flooring, trim, doors, interior paint |
| Kitchen and baths | Cabinets, counters, tile, fixtures, appliances |
| Soft costs | Permits, plans or engineering, dumpsters, utilities during construction |
| Contingency | A reserve for surprises |
If your contractor gave you a bid, attach it. A budget backed by a signed bid carries more weight than one built from your own estimates.
Include the costs people forget
These are the items we see missed most often:
- Permits and inspections. Cost and time both matter here. Some jurisdictions take weeks to issue a permit.
- Hidden conditions. Sewer lines, foundation repairs, rotten subfloor, and outdated wiring show up once walls are open. Get a sewer scope and an inspection before you close when you can.
- Utilities and carrying costs. Power, water, insurance, and interest during the project are real costs, even if they are not in the rehab line items.
- Contingency. Plan for something to go wrong. We require a contingency line equal to 5% of the rehab budget, and many experienced investors carry more on older homes.
Match the scope to the ARV
Your finishes should match the comps you are using for ARV. If the comps have laminate counters and builder-grade flooring, a high-end kitchen will not raise your sale price enough to pay for itself. If the comps have quartz and tile showers, cutting corners will make your house the one that sits.
We compare your scope against your comps. When the two do not line up, we ask questions, and those questions add time.
Add a realistic timeline
A budget should come with a schedule. How long will demo, rough-ins, and finishes take? When will you need your first draw? A realistic timeline helps us plan draws around your cash flow and helps you avoid paying interest on a project that drags.
How we review your budget
At PK, our construction team reviews every budget, not just the loan file. We look at:
- Whether each line item is priced in line with local labor and material costs
- Whether the scope matches the property's condition and the ARV comps
- Whether anything major is missing
- How the budget will translate into draw stages
Budgets that come in with a signed contractor bid and clear line items usually clear our review in one pass. If something looks light or missing, we will tell you up front. It is better to adjust the budget before closing than to find a gap halfway through the project.
Your budget becomes your draw schedule
Once approved, the budget becomes the roadmap for draws. Each draw request is checked against those line items. A detailed budget means clear milestones, faster inspections, and fewer disputes about what is complete. Our guide to construction draws walks through exactly how that process works.
Send us your scope
If you are working on a budget for your next project, send it over. Our team will review it and tell you how it lines up before you commit.