Unbudgeted items that can kill a budget.

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Over the years, I’ve gotten better at creating a budget that can actually be met.  I used to create a budget with the hopes of everything going smoothly.  After performing more the 30 plus rehabs, I’ve learned now to expect everything to go wrong.  But even with this, sometimes there are issues that pop up which you don’t expect.  Below are a couple of items I’ve run across.

Gas Leak

This is one that use to always catch me by surprise.  Why?  Because usually, I buy a property from someone who occupied the property and the gas service was on, so I would assume everything is working properly.  So how is it discovered?  Well, usually I call the gas company and transfer the service in my name.  But occasionally, if I know it may be a few weeks before I start rehab, I will let the service be terminated and turn it on just before the appliances arrive or sometimes even after I’ve put the house on the market to save on utility bills.  However, when this happens, the utility company will perform a pressure test before activating the service.  If the pressure test fails, you will find a lock on the gas meter.  Usually, this is not a cheap fix and more importantly, you hope the repair is outside of the house since the rehab is or near complete.

So while this is still something I haven’t caught in my initial budget, I now instruct my plumber to perform a pressure test before rehab begins on every property.  So if there is a leak, I can catch it early in the process and possibly look for ways to cut other expenses to still have a chance to stay on budget.

Sewer Line Leak

This is another tough one to budget for.  It’s one you usually can’t catch during your initial inspection of the property.  I know some rehabbers here in Texas will just make an assumption in their budget for the sewer line to be replaced if the house was built before a certain year.  The reason they pick a year is because galvanized pipes were used on most houses built before mid 80’s.  In that case, they will replace the whole sewer line with PVC.  While this is great practice, PVC sewer lines can also have leaks at the connection points.  This can be a very expensive repair, especially if you discover it after the rehab is complete and tunneling is required.  

Again, this is where having a handy reliable plumber can help you discover this early.   You should have a hydrostatic test performed early on or even before the rehab begins.  You still won’t avoid the expense, but the earlier you catch it, the better chance you have in making other adjustments to reduce the impact on the total budget.

These are two which I always had trouble with and now spare a small expense upfront to help me determine if I need to make some changes to my budget.  

The best practice is to plan for the worst and hope for the best. If you have had these experiences before, then you have a good idea of what those costs will be. If you are renovating, it is always wise to add 10 to 15% for unexpected issues that you may encounter. Better to be pleasantly surprised than shocked.

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