Rehab Costs Don’t Creep — They Explode
Why small misses early turn into major overruns later — and how to budget rehab like a pro.
Rehab Costs Don’t Creep — They Explode
Rehab overruns don’t happen gradually.
They cascade.
A small miss early becomes a major budget failure later—usually when it’s too late to adjust.
Why rehab overruns compound
Systems are connected.
One missed issue can trigger:
- additional labor
- additional materials
- additional inspections
- additional delays
- additional holding costs
Example:
- missed roof leak → drywall damage → insulation → paint → labor → time
One oversight becomes five line items.
The pattern investors see over and over
A common portfolio pattern:
- projects that start 10% over budget
- finish 25–35% over budget
Why?
- labor changes
- scope creep
- inspection failures
- supply delays
- sequencing breakdowns (subs stacked wrong)
Rehab is not just a spreadsheet.
It’s logistics.
The three rehab numbers that matter
You can keep rehab planning simple with three numbers:
- Base scope (realistic, not best-case)
- Contingency (risk budget)
- Timeline (profit killer if wrong)
Contingency rules of thumb
- Cosmetic: 10%
- Light rehab: 10–15%
- Heavy rehab: 15–20%+
If you don’t know which bucket you’re in, you’re in the heavier bucket.
Labor is the real risk
Materials move.
Labor breaks budgets.
Reasons:
- contractors leave mid-project
- subs get pulled to higher-paying jobs
- crews disappear
- quality failures require rework
Professional operators price labor first, then finishes.
Scope control is profit
Most rehab blowups aren’t caused by paint choices.
They’re caused by:
- “while we’re at it…” decisions
- changing layouts mid-stream
- unclear scope documents
- no sign-off process
A simple discipline:
- freeze scope early
- approve changes only if they increase resale value more than cost
What wholesalers can do to reduce buyer fear
Wholesalers don’t need to be contractors.
But they should flag big systems:
- roof age
- HVAC age
- plumbing material (cast iron vs PVC)
- electrical panel type
- signs of foundation movement
When buyers know where risk lives, they price it.
When they don’t, they retrade.
Bottom line
Rehab doesn’t fail because of design.
It fails because of optimism and weak contingency.
Budget for reality. Control scope. Protect timeline.
That’s how you keep profits predictable.