What's the biggest renovation budget overrun you've dealt with, and how far off was i

Worcester, Massachusetts
Rehabbing & House Flipping
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What's the biggest renovation budget overrun you've dealt with, and how far off was i

Andrew FreedBusiness Member
Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes

Personally, I underwrite every deal with a 20% contingency built in for unforeseen circumstances, which has saved me more than once. Do you build in a buffer as a percentage, a flat number, or just eat the overage when it happens?

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James JonesPro Member
Investor · Collierville, TN 38017 · Member since 2017 · 678 posts · 491 votes
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I underwrite every rehab with a 10-15% contingency and I don't touch that money unless something real comes up. The overruns I've seen come from two things: surprises behind walls, and crews that drag the job out.

My system: pay per completed milestone, not by the day. Nobody gets paid for hours, they get paid for finished work. I never front money for materials. I buy them myself or reimburse receipts on delivered work.

My bread and butter is 2/1 to 3/1 and 3/1 to 4/2 conversions, and I know those numbers cold because I've done them dozens of times. The investors who blow budgets are the ones doing a new layout for the first time with a crew they've never used.

Trial job before committing. Milestone payments. Bench of backup crews. That's how you stay on budget.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    4d

    we just always put a contingency in there.. usually 10% on bigger jobs smaller jobs you might just stick 5k or 10k..

    most change orders we have seen come from opening walls and finding surprises.

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  • James JonesPro Member
    Investor · Collierville, TN 38017 · Member since 2017 · 678 posts · 491 votes
    4d

    I underwrite every rehab with a 10-15% contingency and I don't touch that money unless something real comes up. The overruns I've seen come from two things: surprises behind walls, and crews that drag the job out.

    My system: pay per completed milestone, not by the day. Nobody gets paid for hours, they get paid for finished work. I never front money for materials. I buy them myself or reimburse receipts on delivered work.

    My bread and butter is 2/1 to 3/1 and 3/1 to 4/2 conversions, and I know those numbers cold because I've done them dozens of times. The investors who blow budgets are the ones doing a new layout for the first time with a crew they've never used.

    Trial job before committing. Milestone payments. Bench of backup crews. That's how you stay on budget.

    2Reply
  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    4d

    I had a client where an underneath p-trap turned into a 30K sewer job. They ended up needing to replace all the way to the street, which took time, permits and dealing with the city. Always inspect the sewer and if it is rough assume 10K+ for that.

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  • Andy SabischPro Member
    Investor · Jackson, MS · Member since 2021 · 660 posts · 561 votes
    21h

    Anyone that pencils numbers and does not factor in a minimum of 10% contingency is setup for surprises and a failed project. There are ALWAYS unexpected issues that will arise - supplies that cost more than budgeted, issues in walls, contractor overages . . . the list is endless and without a buffer, there is little you can do but pay it and hope for a better sales price to cover it. With the market volatility, that almost always backfires on you.

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  • Nicholas FloydBusiness Member
    NY · Member since 2026 · 232 posts · 85 votes
    11h

    Great point, Andrew. I think having a contingency built into the budget is essential, especially with older properties where unexpected repairs can add up quickly.

    From the business funding side, I also believe having access to additional capital before it’s needed can make a big difference. Business lines of credit or other funding options can provide flexibility when renovation costs exceed the original budget.

    The last thing an investor wants is to have a profitable project stall because they ran short on capital.

    I’m curious, do you typically keep your contingency in cash, or do you also maintain access to a credit line as a backup?

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