How to Calculate Repair Costs in Real Estate Like a Pro (with examples)

Why Repair Costs Matter in Real Estate Investing

Understanding how to estimate repair costs is a game-changer for real estate investors. It’s not just about plugging numbers into a spreadsheet—it’s about knowing what needs to be fixed, how much it will cost, and how those repairs impact your bottom line.

Repair costs are the expenses tied to restoring or improving a property, whether you’re flipping houses or building a rental portfolio. Accurate estimates allow investors to avoid overpaying for deals and ensure profitable returns.

What Counts as Repair Costs?

Repair costs encompass all the spending necessary to restore a property to a livable, marketable condition—or better. Common examples include:

Kitchen upgrades: Cabinets, countertops, plumbing, and electrical work.
Bathroom remodels: Fixtures, tiling, and layout improvements.
Roof replacements: Especially critical for buyer confidence.
Exterior work: Landscaping, painting, siding, and masonry.

Interior Rehab Costs Investors Should Expect

Paint: A fresh coat instantly boosts appeal.
Flooring: High ROI when updated strategically.
Appliances: Often essential for flipping homes.
Drywall and Insulation: Comfort and compliance.
Framing: Modify layouts for better flow and value.
Doors and Trim: Small details, big impact.

Exterior Repairs to Budget For

Roof and Gutters: Key for structural integrity.
Windows and Siding: Vital for energy efficiency and curb appeal.
Garage and Driveway: Don’t neglect these first impressions.
Landscaping: Great curb appeal starts here.
Fencing and Pools: Added value if done right.

The 70% Rule: Your Rehab Deal Filter

The 70% rule is a tried-and-true formula that helps investors decide whether a rehab deal is worth the risk. Here’s how it works:

Pay no more than 70% of the After Repair Value (ARV) minus repair costs.

Example:

If a property’s ARV is $300,000 and repair costs are $50,000:

$300,000 × 0.70 = $210,000

$210,000 − $50,000 = $160,000 maximum purchase price.

This formula protects your profit margins and buffers unexpected expenses.

Tips to Nail Your Repair Cost Estimates

Shadow Experienced Investors
Partner with a seasoned pro on a deal. Learn their system, ask questions, and observe how they break down costs.
Document Everything
Use a standardized checklist and take detailed notes. Every project sharpens your estimating skills.
Create a Repeatable System
Develop templates, cost guides, and vendor lists. With each rehab, refine your process to improve speed and accuracy.

FAQ: Repair Cost Calculations for Investors

Q: What’s the most overlooked rehab cost?

A: Many investors forget about permits, dumpster rentals, and holding costs, which can add up quickly.

Q: How do I estimate repair costs if I’m new to investing?

A: Start with local contractor bids, use rehab calculators, and lean on mentors until you gain experience.

Q: Should I always include appliance costs in my rehab budget?

A: Yes—especially for flips. Updated appliances improve resale value and buyer perception.