Make sure the rehab jobs they're doing aren't just lipstick and that issues are being properly addressed.  

Is this home just need lipstick?

Don't calculate appreciation at all in your formula, ONLY cash flow IMO.I see a couple of guys who own 60+ properties I the couple of small towns I grew up in, and they are NOTHING special, they just simply bought every house they could for 25-55K spent $10K in lipstick reno, and rent them all out for 600-850/mo.Now the downside here, is that the mental bandwidth you'll need to communicate with this level of sophistication of tenant will be heavy. 

On buy and holds, an investor will spend much less and just usually place the lipstick items, with a flip, they usually want to dial in the home perfect for easy and quick re-sell and at top dollar at exit.

Also, if your looking for a credit for lipstick and mascara, then you probably will not get it.Good Luck!

I think there's a happy median between lip stick on a pig and a full gut job.

The estimated repairs will always go over...Especially if you are doing major renovations...Lipstick jobs usually stay pretty accurate...Try and plan some contingency fund for that.  

I use 10% for both, especially in a sec 8 scenario in which repairs can be compelled, and I agree with @Mark Ainley as to it depends on whether there was a gut rehab or "lipstick" job or in between.  

Minna, we're doing our first MAJOR rehab (we had only done "lipstick" projects before).

I have personally done flips from 'lipstick on a pig' to tear the roof off and add a second floor.