[Gerald Withworth]

Hey everyone!

Not sure if I’m on the right place but I’m reaching out for some advice. I’ve been having a bit of trouble with rehab projects lately, especially when it comes to keeping contractor estimates from blowing way out of budget.

I’m trying to build long-term relationships with contractors, but I’m struggling to bridge the gap between their estimates and the actual costs. Let me give you a couple of examples:

First, I had a single-family home project where estimates ranged from 20k to 40k. I went with a contractor who quoted 30k, but the project ended up costing a whopping 65k!

Then, there’s my most recent project, a 4-unit property. The initial estimate was 35k, but now I’m looking at nearly 80k in total invoices!

Fool me once, shame on you. Fool me twice… well, you know the rest!

These were two different contractors, and not only did they go over budget, but they also missed their projected deadlines.

So, how does everyone here prevent this from happening? I get that there’s usually a 10% to 25% buffer for unexpected costs, but I’ve definitely exceeded that range.

What’s even more frustrating is that corners sometimes get cut in the finishing touches to stop the financial bleeding, which directly impacts property appraisals and, ultimately, the money I get back at the end of the deal.

I know there’s an element of luck involved in finding deals, but if that’s the case, I might need to steer clear of any casinos I come across! Any advice or insights would be greatly appreciated.

[Jeff Clifford]

In the construction industry, there’s an old saying about cost overruns: “You never know what you have until you put your hammer in a wall.” And it seems like you’re experiencing this firsthand.

Here’s where things might be going wrong:

You’re getting persuaded to buy “deals” that involve opening up walls or other hidden areas. The key is to stick to standard rehab areas that are open and exposed, or where there’s minimal risk of unexpected costs. Focus on things like floors, kitchens, and painting.

Don’t rely on estimates alone. Always insist on a final written quote with a detailed scope of work. Otherwise, you might as well be handing over a blank check. Stick to the first point, and this shouldn’t be an issue. If it is, consider finding different contractors.

Once you’ve established a relationship with your contractors, agree on set costs for all items and stick to them. Avoid the temptation to make changes or get creative.

Maintain control of the rehab process. Avoid making changes to the scope of work unless absolutely necessary. Asking “what if” questions often leads to cost overruns.