What does one week of delay actually cost you on a flip?

Question

A lot of the overrun stories here aren't about one trade going over. They're about the schedule. The drywall crew shows up a week late, an inspection gets pushed, and holding costs eat into the profit without any single line item going over budget.

One way to make that visible is a daily holding cost for each deal:

• Add up the monthly carrying costs (loan interest, taxes, insurance, utilities, HOA, lawn care or security) and divide by 30. That's your cost per day.
• Write that number at the top of the budget so every schedule decision has a price. If it's, say, $85 a day, a 10-day slip is $850, which is often more than the change order everyone is arguing about.
• Track two dates: planned completion and current forecast. Each week, multiply the gap by the daily number and take it off projected profit.
• When a contractor offers a cheaper option that takes longer, compare the savings to the extra days times the daily cost before saying yes.
• Tie draws to schedule milestones as well as scope, so a stalled job doesn't keep getting paid on time.

Add up the monthly carrying costs (loan interest, taxes, insurance, utilities, HOA, lawn care or security) and divide by 30. That's your cost per day.

Write that number at the top of the budget so every schedule decision has a price. If it's, say, $85 a day, a 10-day slip is $850, which is often more than the change order everyone is arguing about.

Track two dates: planned completion and current forecast. Each week, multiply the gap by the daily number and take it off projected profit.

When a contractor offers a cheaper option that takes longer, compare the savings to the extra days times the daily cost before saying yes.

Tie draws to schedule milestones as well as scope, so a stalled job doesn't keep getting paid on time.

How do you handle schedule slips with contractors? Do you put completion dates or late penalties in the contract, or manage it week to week?

Caleb Brown · Answer

Best way to handle is to be on top of them. Many contractors need a continued kick in the butt, Don't pay $$ upfront. If they continue to lack find another one to take over.

Ametria Chaney · Answer

Brandon, the daily-cost framing is excellent — I'd add that most delays I see are decided before closing, not during the rehab. The flippers who stay on schedule do three things: they sequence every trade before demo starts so each crew knows the day they start, they order long-lead items (cabinets, windows, fixtures) before closing day, and they put a completion date in the contractor agreement with draws tied to finished milestones. Managing week-to-week without a written schedule is how a week quietly becomes a month. One more use for your daily number: when a seller's agent tells you a property has been sitting, that same math tells you exactly what each extra week is costing the seller — real leverage in negotiation.

James Jones · Answer

Brandon, I run the same math on the rental side, and the number is uglier than the flip version. A week of delay on a Memphis BRRRR costs me the carry plus a week of rent that never comes back — on a 3BR at $1,395 to $1,950 a month, that is roughly $325 to $455 a week gone, plus a refi that starts a week later. I do not use late penalties. I manage the sequence instead: every trade is booked in order before demo starts, each crew knows the day the crew before him finishes, and finishes come out of one standard package so nothing waits on a special order. My target is rent-ready in 21 days, and the schedule is built before closing, not after.

Hossein Sharifi · Answer

The daily number is the right frame, and I'd push it one step further. A slip costs more than carry, because the sale gets pushed too. A month late into a softer market can mean a $2,500 price cut, which is the same as another 30 days at $85.

So I'd use that daily cost to fund a carrot instead of a stick. Offer something like a $1,000 bonus for finishing on the forecast date, paid out of the holding cost you'd save. Crews tend to respond better to getting paid early than to a deduction they'll argue about anyway.

Matthew Morrow · Answer

@Brandon Hadler I like the daily number at the top. People feel $85 a day a lot more than 'a little over budget.' We put holding and financing costs into the deal from day one and budget the rehab plus about 10%, and that cushion only holds because the contractors are people we trust. Planned vs. actual dates are worth tracking, but the real fix is being on top of the job every week so you catch the slip before it turns into a month.

Anthony Gayle · Answer

Brandon,

Good follow-up to your budget thread. A completion date in the contract, yes. Penalty clauses on a small residential job usually don't get you much. Contractors tend to either price the risk into the bid or pad the schedule, and if the job does run late, you'd be withholding money from the person you still need to finish the house.

Tying each draw to finished, inspected work does more of the enforcing, along with holding some money back until the punch list is done. Retainage rules and how penalty language holds up vary by state, so if you want either in writing, have a local attorney look at it.

What does one week of delay actually cost you on a flip?

6 Replies