What percent of ARV the rehab budget should be

People ask what percent of ARV a rehab budget should be, and whether 30 percent of ARV is too much rehab for a flip. On a report, that question is one input to the 0 to 10 deal score. The factor is named Rehab Scope. Its weight is 15 percent. It is not a pass or fail rule, and it is not a second repair budget. A factor score of 2 is still a score. The factor does not reject a deal, and it does not replace the dollars you still have to bid.

The deal score is the weighted total of five factors: price spread, ARV confidence, risk level, Rehab Scope, and exit flexibility. This page publishes only the Rehab Scope bands. When this factor's value is 6, its weight is 15 percent. The other four factors are still in the total. Do not read 6 as the deal score.

The percent is the selected tier divided by ARV

The percent is the selected tier's total divided by ARV, then multiplied by 100. The selected tier is cosmetic, moderate, or gut. A new report starts on moderate. Cosmetic and gut are on the report, and they stay out of this percent until you select one of them. Changing the selected tier changes this factor. It also changes the maximum allowable offer, because that offer subtracts the same selected total. Recalculating the report uses that same selected total for both numbers.

If ARV is 0 or less, the factor score is 5, no matter the rehab dollars. The percent is not computed in that case. A selected total of $0 on a positive ARV is a different case: the percent is 0, and 0 percent is inside the top band.

The bands, including the exact edges

When ARV is above 0, a smaller rehab relative to that ARV scores higher. The cuts are inclusive on the high side. The edge belongs to the higher score.

• 10 percent or less scores 9. Exactly 10 percent scores 9, not 8.
• Above 10 percent and up through 15 percent scores 8. Exactly 15 percent scores 8.
• Above 15 percent and up through 20 percent scores 7. Exactly 20 percent scores 7.
• Above 20 percent and up through 25 percent scores 6. Exactly 25 percent scores 6.
• Above 25 percent and up through 30 percent scores 5. Exactly 30 percent scores 5.
• Above 30 percent and up through 40 percent scores 4. Exactly 40 percent scores 4.
• Above 40 percent and up through 50 percent scores 3. Exactly 50 percent scores 3, not 2.
• Above 50 percent scores 2.

This factor never returns 10, and it never returns 1 or 0, on a positive ARV. The best score on the percent bands is 9. The lowest score on the percent bands is 2. The only other value is the zero-ARV case, which returns 5 before any percent is formed. There is no band that means the deal failed. A score of 2 remains an input with a weight of 15 percent.

These bands are not a spending cap. They do not say that a flip should stay under a favorite percent, and they do not install a second budget beside the selected total. Thirty percent of ARV sits at the top of the band that scores 5. It is inside the scale. That band does not reject the offer.

An invented $200,000 ARV

The dollars in this section are invented so the division can be checked by hand. They are not a closed sale, and this page has no city price table. The ARV is $200,000 in every row except the last. Only the selected rehab total changes.

• $50,000 is 25 percent. Exactly 25 percent scores 6, so the factor score is 6. The weight is 15 percent. The other four factors are still in the deal score.
• $20,000 is exactly 10 percent. Exactly 10 percent scores 9, so the factor score is 9.
• $18,000 is 9 percent. That is under 10 percent, so the factor score is 9, the same score as the 10 percent edge.
• $30,000 is exactly 15 percent. Exactly 15 percent scores 8, so the factor score is 8.
• $60,000 is exactly 30 percent. Exactly 30 percent scores 5, so the factor score is 5. Thirty percent of this invented ARV does not reject the flip.
• $100,000 is exactly 50 percent. Exactly 50 percent scores 3, so the factor score is 3.
• $110,000 is 55 percent. That is above 50 percent, so the factor score is 2.
• An ARV of $0, with any of those rehab totals, skips the percent. The factor score is 5.

Read each line as a factor value, not as the deal score. On the $50,000 row the factor's value is 6 and its weight is 15 percent. Price spread, ARV confidence, risk level, and exit flexibility still have to be scored before anyone can name the 0 to 10 total. The same warning applies to the factor score of 9, the factor score of 8, the factor score of 5, the factor score of 3, and the factor score of 2.

A selected rehab of $0 on this same $200,000 ARV is 0 percent. Zero percent is 10 percent or less, so the factor score is 9. That row is not the ARV of $0 case. The zero-ARV case returns 5 even when the selected rehab is also $0, because the percent is never formed when ARV is 0 or less.

Where the dollars in the percent come from

This page does not rebuild the room list. The selected total is a dollar figure you already chose, or a tier total the report already stored. The flip scope of work is where the room list lives. The rehab estimator is where a square-footage tier becomes a total you can select. Bring that selected total back here and divide it by ARV.

The offer those dollars are subtracted from is the MAO calculator. The same selected total is an input there. Switching from moderate to gut, or from moderate to cosmetic, moves the percent and moves the offer together, because both read the selected total and neither one reads the two tiers you left unselected. The profit worksheet on the fix and flip profit guide uses that offer after the subtraction. It does not rescore Rehab Scope.

If the selected total changes because the scope changed, recompute the percent from the new total. Do not keep a prior band because the ARV stayed put. A move from $50,000 to $60,000 on the invented $200,000 ARV is a move from 25 percent to exactly 30 percent, and the factor score goes from 6 to 5. A move from $100,000 to $110,000 is a move from exactly 50 percent to 55 percent, and the factor score goes from 3 to 2. The deal can still be scored. The factor got lower. The other four factors did not move unless their own inputs moved.

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