Do you add a 10-15% rehab buffer? We stopped. Tell me why I'm wrong

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Do you add a 10-15% rehab buffer? We stopped. Tell me why I'm wrong

Vladimirs Veiss
Real Estate Consultant · Riga, Latvia · Member since 2026 · 47 posts · 8 votes

Hi everyone, and happy Tuesday!

Here's a take I'm ready to defend, and happy to be corrected on: we don't add a contingency buffer anymore.

Instead, we price everything down to the last screw. And where we can't be sure what's behind a wall, we split the job into blocks. After each block is opened up, we see the real picture and price the next one, so nobody pays for a guess.

The part I think matters most: opening a wall isn't the job, having a solution ready is. On a hotel we renovated in the Alps, before anything came down we checked whether a new partition could go in, what removing the ceiling and the wood paneling on the walls would mean, and what load each change would put on the structure. Every step was priced before the owner decided, so they knew what happens if they do it, and what happens if they don't.

So on a job we act a bit like a referee: we price it, supervise it, build it and guarantee it.

Now I'm curious how you do it. Do you still budget a 10-20% buffer, or do you price in stages? And what's the one thing behind a wall that blew up your numbers?

Have a great day!

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Ametria Chaney
Realtor · Memphis, Shelby County · Member since 2026 · 150 posts · 50 votes
19h

I think of contingency less as money that comes back or gets spent, and more as a reserve that protects the plan either way. If the work opens up cleanly, the reserve stays available for the next repair or the next project, rather than being treated as extra profit in the original numbers. If a surprise appears, such as old wiring, plumbing, or framing that was not visible at first, the reserve covers it without forcing cuts elsewhere. I do not share the details of a specific client's deal, but the principle I use is simple: the contingency is there so one hidden problem does not derail the whole budget, and any unused portion is still a cushion, not a reason to underwrite the next deal more aggressively.

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  • Vladimirs Veiss
    OP
    Real Estate Consultant · Riga, Latvia · Member since 2026 · 47 posts · 8 votes
    22h

    A quick follow-up to make it easy to jump in :)

    What buffer did you use on your last rehab?

    1. Under 10%

    2. 10-15%

    3. 15-20%

    4. More than 20%

    5. No flat buffer, I price in stages

    Just drop the number, and if there's a story behind it, even better. Have a great day!

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  • Ametria Chaney
    Realtor · Memphis, Shelby County · Member since 2026 · 150 posts · 50 votes
    21h

    I still keep a buffer, and I think of it less as padding and more as protection for the unknowns you cannot price from the outside. Detailed pricing in stages is a great approach, and I would use it too, but a wall can hide plumbing, wiring, or framing problems that no walkthrough will show. I would keep the detailed scope and stage pricing, and still hold a separate contingency that is only released when a surprise is documented and priced. That way the budget stays honest, and you are not forced to cut corners later just to stay on number. For an older home, or a home with limited access for inspection, I would lean toward the higher end of that range.

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    • Vladimirs Veiss
      OP
      Real Estate Consultant · Riga, Latvia · Member since 2026 · 47 posts · 8 votes
      20h

      @Ametria Chaney Thank you, Ametria, I really like how you put it: not padding, but protection for what you can't price from the outside. We just build that protection differently. We don't open the whole house and hope 15% will be enough. We open it block by block, and before a wall comes down we already have the options worked out: if the old plumbing is in there, what replacing it costs, and what happens if the owner decides not to. So a surprise is still documented and priced before anyone pays, just like your contingency, but the money stays with the owner until it's really needed, instead of sitting in the budget, where it has a way of getting spent.

      And you're right about older homes. That's exactly where we go in smaller blocks.

      Now I'm curious: on your last older home, did that contingency come back to you, or did it get used up? And what was hiding behind the wall?

      Have a great day!

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    • Ametria Chaney
      Realtor · Memphis, Shelby County · Member since 2026 · 150 posts · 50 votes
      19h

      I think of contingency less as money that comes back or gets spent, and more as a reserve that protects the plan either way. If the work opens up cleanly, the reserve stays available for the next repair or the next project, rather than being treated as extra profit in the original numbers. If a surprise appears, such as old wiring, plumbing, or framing that was not visible at first, the reserve covers it without forcing cuts elsewhere. I do not share the details of a specific client's deal, but the principle I use is simple: the contingency is there so one hidden problem does not derail the whole budget, and any unused portion is still a cushion, not a reason to underwrite the next deal more aggressively.

      1Reply
    • Vladimirs Veiss
      OP
      Real Estate Consultant · Riga, Latvia · Member since 2026 · 47 posts · 8 votes
      3h

      @Ametria Chaney thank you! I like your point that an unused reserve is a cushion, not a reason to push the next deal harder. I think we're looking at the same thing from two sides: you from the owner's side, me from the side of our app. Here's how the chain looks for us:

      The owner says: I want to renovate the house.

      The app answers: $20,000 as it stands, $22,000 if the pipes need replacing, $24,000 if the wiring needs replacing too.

      That's your 10-20%, just written out as named options with a price on each. So if that's what you mean, I agree with you. We price every option upfront and warn the owner about each possible increase, but we start with the short block we're sure of. When a wall opens up and there's extra work, the owner already knows what it costs and simply says yes or no. And the money for options that never happen just stays in the owner's pocket.

      The calculation takes us about 2 minutes. On our last project in Switzerland the full estimate was CHF 28,000, and we were off by just CHF 132 on materials. We didn't charge that, it was our miss. Everything outside the original scope was paid separately. Even cutting channels in a concrete wall for new switches and outlets, we estimated 24.6 ft and it came out at 26.2 ft.

      So here's a question for everyone: where does unused money do more good, in a reserve line or in the owner's pocket from day one? Is that a debate in the US too? Have a great day!

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  • Robert CervantesPro Member
    Flipper/Rehabber · Fresno, CA · Member since 2022 · 16 posts · 6 votes
    12h

    I'd keep it. On the lending side, the flips that get into trouble usually aren't the ones with a bad ARV, they're the ones that run 10% over on rehab and the borrower has no cash left to finish. Draws get funded against completed work, so if you're short mid-project the job stalls while holding costs keep running. If you've got tight bids and a crew you've used a bunch of times, you can probably run leaner, but I'd at least keep a line for what you can't see until walls are open: electrical, plumbing, foundation.

    1Reply
    • Vladimirs Veiss
      OP
      Real Estate Consultant · Riga, Latvia · Member since 2026 · 47 posts · 8 votes
      5h

      @Robert Cervantes thank you, a great point from the lending side, and I agree with your diagnosis: the losses start not with a bad ARV but with a rehab that runs over, and with draws paid only against completed work, the job stalls while holding costs keep running. That's why I'd assess all the risks right at the start, not only the construction itself, but also permits and contractor availability. So here's my question: if you had all the cards on the table and could see the whole process on a Gantt chart, with the costs and the hidden costs, every contractor confirmed, and a clear stage-by-stage handover with sign-off and a check at each stage, would you take on more flips, or is the real bottleneck somewhere else? Have a great day!

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  • Divin KanyamaBusiness Member
    Accountant · Seattle, WA · Member since 2025 · 566 posts · 239 votes
    9h

    @Vladimirs Veiss I like the staged approach, especially the idea of pricing what happens if the owner says yes and what happens if they say no before anything comes down. That's the part that builds trust, and it turns surprises into decisions instead of arguments. Where I'd push back a little is on dropping the buffer completely. Staged pricing works well when the owner can pause between blocks and approve each step.

    For many investors, though, the budget is tied to a loan, a draw schedule or a fixed sale price, so I'd still keep a smaller reserve at the project level, even if it isn't baked into each line item. The two ideas work well together: price in blocks where the unknowns are real, keep the reserve for what you couldn't have seen, and be open about how much of it you've used. As for the usual suspects behind a wall, the ones that tend to cause trouble are old wiring, hidden water damage, undersized or altered structure and plumbing that doesn't match the drawings. Just keep in mind this is my general take and not professional or financial advice, so confirm structural questions with a licensed engineer.

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    • Vladimirs Veiss
      OP
      Real Estate Consultant · Riga, Latvia · Member since 2026 · 47 posts · 8 votes
      5h

      @Divin Kanyama thank you so much, really good to hear your view, and thanks for the list of usual suspects! Your loan point is exactly why I'd skip any reserve, even one the investor holds himself. When people borrow for the work, they need to know exactly what they'll spend, not a number plus a cushion that may or may not get used. So I believe the tool should calculate the exact cost with no percentages added, and every contractor should get a clear plan of work with a set payment for each part. Think of a car on autopilot: it knows exactly what to do, and when an obstacle shows up, it brakes or goes around. That's your "surprises into decisions." Everyone knows what they have to deliver, so together we reach the finish line. In the US, would a lender fund draws against an exact priced plan like that, or still insist on a contingency line? Have a great day!

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