On my recent rehab, I underestimated costs and went about 10% over budget. I’ve since started adding a buffer, but I’m curious — how much do you typically add to cover unexpected surprises on your flips?
On my recent rehab, I underestimated costs and went about 10% over budget. I’ve since started adding a buffer, but I’m curious — how much do you typically add to cover unexpected surprises on your flips?
Hey @Michael Santeusanio! Costly lesson to learn, but sounds like yours didn't break the bank. The amount of or Contingency Expense (or "buffer" as you call it) you use is dependent upon how risky you view the project. The higher the risk, the higher the contingency. They use this for both "hard" and "soft" costs.
In my experience with my developer clients, most use a minimum of 10% and go up to 20% for more risky (or higher cost) projects. If they feel a contingency over 20% is needed, they usually pass on the deal. Hope that helps.
On my recent rehab, I underestimated costs and went about 10% over budget. I’ve since started adding a buffer, but I’m curious — how much do you typically add to cover unexpected surprises on your flips?
Hey @Michael Santeusanio! Costly lesson to learn, but sounds like yours didn't break the bank. The amount of or Contingency Expense (or "buffer" as you call it) you use is dependent upon how risky you view the project. The higher the risk, the higher the contingency. They use this for both "hard" and "soft" costs.
In my experience with my developer clients, most use a minimum of 10% and go up to 20% for more risky (or higher cost) projects. If they feel a contingency over 20% is needed, they usually pass on the deal. Hope that helps.
Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
1y
5-10% should suffice. If it goes beyond 10% then I would look at your due diligence and the initial bid. I think the rehab size/age of property will dictate things too. Older can have more cans of worms
Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 935 votes
1y
@Michael Santeusanio Always smart to build in a buffer—unexpected issues pop up on nearly every rehab. I usually plan conservatively for 10–15% above my initial estimate to cover surprises, contractor delays, and hidden repairs. It keeps projects on track and prevents cash flow headaches.