Budget Buffers on Rehab Projects

[Michael Santeusanio]

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?

[Jaycee Greene]

Quote from @Michael Santeusanio:

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.