How Much a Rehab Contingency Lowers Your Maximum Offer

A rehab contingency is a percentage added to your repair budget, and in the 70% rule every dollar of it comes straight off your maximum offer. This guide runs one fixed scope of work through four contingency percentages and shows how far the maximum offer moves, so you can see what the choice costs before you make it.

The two formulas involved

Both live in the site's calculators, so you can check each step.

• Rehab total = itemized subtotal × (1 + contingency %). In lib/rehab-cost.js the contingency is the subtotal times the contingency percentage, and the total is the subtotal plus the contingency. The rehab cost estimator prints each of those steps.
• Maximum offer = ARV × rule % − repair costs. In lib/seventy-percent-rule.js the rule percentage is an input, not a constant, and the code comment calls it "a market-dependent rule of thumb, not a law." The 70% rule calculator uses the repair total as one of its inputs. For the background on each, see The 70% Rule for House Flippers, Explained and How to Calculate After-Repair Value (ARV) from Comps.

Because repair costs are subtracted with a coefficient of one, the link between them is dollar for dollar: $1 of added contingency lowers the maximum offer by $1. The rule percentage and the ARV do not change when you change the contingency.

What a contingency is for

The BiggerPockets article on rehab contingencies describes the problem this way: "Once you open up a wall, there's always a potential for problems." It lists galvanized plumbing, knob and tube wiring, and "termite damage or rot that was missed because it was behind a wall or under a floorboard." Its author writes: "We put in a 20% contingency for 'unexpected expenses,' which could range from a furnace failing to a delay in getting the project started. You may put in less or more, but I would always add a contingency to any budget."

The same article reports that "one study from KPMG found that only one-third of building contractors' projects came within 10% of their budget." That is the article's reporting of the study, and this guide has not checked the study itself.

The 20% figure is one investor's choice, not a standard. The percentage you use is your own assumption and the sections below treat it that way.

Worked example

These are illustrative assumptions, not market figures. Substitute your own.

Input	Value
After-repair value (ARV)	$250,000
Rule percentage	70%
Itemized rehab subtotal	$48,000

The rule holds back 30% of ARV, so ARV × 70% = $175,000. Now vary only the contingency:

Contingency	Contingency $	Rehab total	Maximum offer
0%	$0	$48,000	$127,000
10%	$4,800	$52,800	$122,200
15%	$7,200	$55,200	$119,800
20%	$9,600	$57,600	$117,400

Going from no contingency to 20% lowers the maximum offer by $9,600, from $127,000 to $117,400. Each step is the contingency dollars and nothing else: $127,000 − $4,800 = $122,200, and so on.

What the table shows

• The contingency is paid for by the offer, not by the rule. The $175,000 stays fixed. The repair line grows, so the price you could pay for the house shrinks.
• The effect scales with the subtotal. A 20% contingency on a $48,000 scope is $9,600. On a $96,000 scope the same percentage is $19,200, and the maximum offer falls by that amount.
• Leaving it at 0% does not remove the cost. If the work runs over, the overrun is paid out of the part of ARV the rule holds back. The code comment in lib/seventy-percent-rule.js describes that part as the share "the rule holds back for closing/holding/financing costs and profit." A contingency moves that risk into the offer price instead.

Limits

This guide compares offers, not outcomes. It does not say what contingency a particular house needs, and the right figure depends on the property's age, the scope and the contractor, none of which the formulas know. The 70% rule is itself a rule of thumb whose percentage varies by market. Holding costs, financing and selling costs are separate lines, covered in The Hidden Costs Flippers Forget in Holding Time and the flip profit calculator.

Run your own numbers

Enter your line items and a contingency percentage in the rehab cost estimator, then carry the total into the 70% rule calculator. Change only the contingency to see your own version of the table above. For how to build the line items, see How to Estimate Rehab Costs for a Flip.

Frequently asked questions

How does rehab contingency affect the 70% rule?

It raises the repair costs the rule subtracts, so the maximum offer falls by the same dollar amount. In the example, a 20% contingency on a $48,000 subtotal lowers the maximum offer by $9,600.

What contingency percentage should I use?

That is your assumption to set. The BiggerPockets article's author uses 20% and says "you may put in less or more"; the calculator takes whatever percentage you enter.

Does contingency change the ARV or the rule percentage?

No. In the formulas only the repair-cost term changes; ARV and the rule percentage are separate inputs.

Is the contingency money always spent?

The formulas do not say. They treat the contingency as part of the budget you plan for, so it lowers the maximum offer whether or not the project later uses it.

Informational only, not professional or financial advice. All figures in the example are illustrative assumptions, and repair costs and the rule percentage vary by market and property.

Last reviewed: October 2026.