First-pass rehab is for filtering, not pricing
A first-pass rehab estimate is a triage tool. The job is to figure out, in two to three minutes per property, whether the deal survives a worst-reasonable rehab assumption. Anything that doesn't pass at the first pass gets dropped from the list; anything that does gets escalated to a contractor walk where actual numbers come in.
This means the first-pass framework should be intentionally conservative on cost. Overestimating by 15 to 20 percent kills some deals that would have penciled with better numbers — that's acceptable. Underestimating by 15 to 20 percent wastes a contractor walk on a deal that's actually a loss — that's expensive in time and reputation.
A first-pass rehab estimate doesn't need contractor-level precision — it needs to filter the list.
Three line items capture most of the real variance
Cosmetic baseline covers paint, flooring, light fixtures, basic kitchen and bath refresh, minor drywall. For most single-family residential properties this lands at $20 to $40 per square foot, depending on market labor cost. A 1,400 sq ft house at $30 baseline is a $42K cosmetic-only rehab — useful as a floor estimate even when nothing else is known.
Mechanical age covers HVAC, water heater, roof, and electrical panel. These are pass/fail per system: either the system is within useful life or it isn't. A property that needs all four replaced adds roughly $25K to $40K above the cosmetic baseline. Structural reserve — foundation, framing, major plumbing — when present, typically adds $30K to $100K and pushes the deal out of cosmetic-rehab math entirely.
- Cosmetic baseline: $20 to $40 per sqft (paint, flooring, fixtures, light kitchen/bath)
