How to Build a Renovation Budget During Due Diligence
By Leslie Donahue
Oct 15, 2026
The renovation number you plug into your underwriting sets your rent targets, your exit and your returns. So it needs to come from the property itself, not a per-unit guess carried over from the last deal.
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I've watched good deals get squeezed, and it's rarely because the business plan was wrong. It's because the renovation number got set before anyone walked the units, and the real scope showed up after closing. On a 150-unit program, being off by $3,000 a unit is a $450,000 problem.
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I've been estimating multifamily renovations for years, first running the multifamily department at a GC and now at Forefront. Here's how we build renovation budgets with acquisitions teams on the Front Range: what a good ROM (rough order of magnitude) should include, and what I look for when I walk a property.
What a ROM is, and what it isn't
A ROM is a budget-level number built from an actual site walk. It's close enough to underwrite with, but it's not a bid you sign.
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When I send a ROM, I want you to be able to price the deal, set your rent premiums and decide how deep to go on the renovation. I'll be honest, I'm a detail person, so mine usually come back more detailed than people expect. That's on purpose! Every line is based on what we actually saw in the units, common areas and building systems, plus current material and labor pricing.
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What it isn't: a contract price. It can't account for what's behind walls nobody opened, finishes nobody has picked yet, or permit requirements nobody has reviewed. A good contractor tells you exactly where those gaps are instead of burying them in a lump sum.
What a good ROM includes
Here's what I'd ask any contractor for, us included. The goal is a budget broken into pieces you can adjust, so you can see what's driving the number and change the scope without starting over.
What to ask for
Why it matters
Per-unit pricing by unit type
A 1-bed and a 3-bed don't cost the same. Pricing by floor plan lets you model rent premiums per unit type.
Two or three scope levels
Like-for-like refresh vs. full renovation vs. full renovation plus adds (in-unit laundry, layout changes). You pick the level that hits your rent targets.
Line items, not a lump sum
Flooring, cabinets, counters, fixtures, lighting, paint, appliances. If one line looks high, you can see it and ask about it.
Capital items priced separately
Roofs, exteriors, clubhouse, amenities, parking and site work, each on its own line so you can phase them.
Building systems flagged
Plumbing, electrical, HVAC and water heaters that need replacement, not just unit finishes.
Clear assumptions and exclusions
What finish level was priced, what wasn't inspected, and what could change the number.
A contingency line
A visible percentage for unknowns, so it isn't buried in every line item.
If a ROM comes back as one number per unit with no breakdown, push back. You can't defend it to your investment committee, and you have no way to tell whether it's padded.
Units
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Sample every unit type, plus the best and worst units on the rent roll. The model unit is almost always the best one on the property.
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Lift the flooring at a seam or transition. Failed vinyl plank, soft subfloor or old tile underneath changes the flooring line fast.
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Open cabinets and look under the sink. Water damage, rot and old shutoff valves show up here first.
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Check the electrical panel for its age, capacity and any signs of aluminum branch wiring in older buildings, especially if you plan to add in-unit laundry.
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Note the water heater and HVAC age in each unit, and whether the building has AC at all. Adding AC is a common value-add on older Front Range properties, and it has to be priced up front.
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Common areas and amenities
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Clubhouse, leasing office, fitness center and pool: what needs a refresh vs. a full repositioning.
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Corridors and stairwells: flooring, lighting, paint and handrails, which residents see every day.
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Accessibility: restrooms and routes that may need ADA updates once you pull permits.
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Exterior and site
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Roofs, siding, stucco, windows and decks. Hail and freeze-thaw cycles are hard on Front Range exteriors.
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Concrete flatwork, parking lots, drainage and fencing.
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Anything a new owner would want for a rebrand, like signage, paint colors and entry features.
What to look for on a site walk
Walk enough units to see every floor plan and every condition, then look past the finishes at what's underneath.
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On a recent walk, the vinyl plank in one unit looked fine from the doorway. Up close, the seams had separated and the planks were lifting, so I got down on the floor and pulled one up to see what was underneath. That one plank told us more about the flooring budget than a stack of listing photos ever could. Pretty finishes can hide a lot, so I always check.
Common budget misses on value-add deals
In my experience, overruns rarely come from prices going up. They come from scope nobody priced.
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Pricing from the model unit. Budget from the average unit and the worst ones, not the showpiece.
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Forgetting the systems behind the finishes. At Sienna, a 1950s community in Wheat Ridge, the plumbing, HVAC and electrical all had to be brought up to code before new finishes made sense. New cabinets don't help much if the plumbing behind them has to come out in the same visit.
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Designing before budgeting. I see this one all the time. Owners pay a designer, fall in love with the selections, and then find out they can't afford them. Price feasibility first, then design to the budget.
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No plan for occupied units. Renovating around residents takes phasing, protection and a lot of communication. It affects both cost and timeline, so it belongs in the budget from day one.
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Material pricing that expires. On one 77-unit program, we locked in vendor pricing for six months so the owner wasn't hit with surprise increases halfway through. Always ask how long a ROM's pricing holds, and whether key materials can be locked.
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Permits and code upgrades. Layout changes, added laundry and electrical upgrades can trigger permit and code requirements that weren't in the original scope.
From ROM to day-one program start
My favorite part of doing the ROM during diligence: when the team that walked the property is the team that builds it, the renovation can start right after closing.
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Site walk and ROM during diligence, priced by unit type and scope level.
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Scope decision after closing: you pick the scope level that fits your business plan.
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Design support and value engineering, pricing selections as they're made so the design stays inside the budget.
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Detailed bid with SKU-level specs and line-item pricing.
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Mock-up unit so you approve the finish level before the program rolls.
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Phased rounds sized to your vacancy and lease-up schedule.
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No rebid period, no second contractor learning the property from scratch, and no surprises when it's time to build. The budget you underwrote is the budget we build to.
And if something has to give, whether it's speed, quality or cost, I'll tell you up front. You can't max out all three, and I'd much rather have that conversation during diligence than after you close.