Fix and Flip Budgeting: How to Build a Scope of Work That Protects Your Profit

# Fix and Flip Budgeting: How to Build a Scope of Work That Protects Your Profit

The #1 killer of fix and flip deals isn't market timing, financing, or deal flow — it's inaccurate budgeting. Here's how to build a scope of work that actually holds up.

What Is a Scope of Work?

A scope of work (SOW) is a detailed document outlining every renovation task, material specification, and associated cost for your flip project. It serves multiple purposes:

• Communicates your vision to contractors
• Gets apples-to-apples bids from multiple contractors
• Forms the basis of your draw schedule with your lender
• Protects your profit margin by forcing upfront clarity

Category-by-Category Cost Guide

Roof - Shingle replacement (1,500 sq ft house): $6,000–$12,000 - Add $1,500–$3,000 for decking replacement if needed

HVAC - New gas furnace + AC (2-ton): $5,000–$8,000 installed - Add $1,500–$3,000 for ductwork repair/replacement

Electrical - Panel upgrade to 200A: $2,500–$4,500 - Whole-house rewire: $8,000–$18,000 - Outlet/switch updates only: $1,500–$3,000

Plumbing - Full replumb (copper or PEX): $6,000–$15,000 - Repair/replace fixtures only: $1,500–$4,000 - Sewer scope + lining if needed: $3,000–$8,000

Kitchen - Budget remodel (new cabinets, counters, appliances): $10,000–$18,000 - Mid-grade remodel: $18,000–$30,000 - High-end (to support higher ARV): $30,000–$50,000+

Bathrooms - Full gut and reno (per bath): $6,000–$15,000 - Cosmetic update (tile, vanity, fixtures): $2,500–$5,000

Flooring - LVP throughout (1,200 sf): $4,800–$7,200 installed - Carpet in bedrooms (600 sf): $1,500–$2,500

Paint (Interior + Exterior) - Interior (1,500 sf house): $2,500–$4,500 - Exterior: $2,500–$5,000

Windows - Double-hung replacement (per window): $350–$650 installed

Always Add a Contingency

No matter how carefully you plan, something unexpected will happen. Standard contingency: - New investors: 20–25% - Experienced investors: 10–15%

Getting Contractor Bids

• Always get at least 3 bids per trade
• Require itemized bids — not lump sums
• Check references and license/insurance before signing anything
• Use lien waivers with every payment

How Lenders Use Your SOW

Your hard money lender will review your SOW to: 1. Approve the total rehab budget for draw funding 2. Validate your ARV against the planned improvements 3. Identify red flags (unrealistically low estimates)

A well-prepared SOW speeds up loan approval. An incomplete or unrealistic one can delay or kill a deal.

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