Glossary
Contingency (rehab contingency)
A rehab contingency is extra money added to the renovation budget for surprises, like rot behind a wall or a failed inspection. It is usually 10% to 25% of the base rehab, rising with the scope of work.
Every rehab finds something. Contingency is how you price that before it happens, so an overrun eats a budget line instead of your profit.
How much to use
| Scope | Contingency |
|---|---|
| Cosmetic | 10% |
| Light | 10% |
| Medium | 15% |
| Heavy | 20% |
| Gut | 25% |
Add 5 points for a house built before 1950 or any structural work. When you enter a contractor bid as one total, the default drops to 10%, since the bid already prices the scope.
- Base rehab
- $90,000
- Heavy scope contingency
- 20%
- Pre-1950 add
- +5%
- Contingency ($90,000 x 25%)
- $22,500
How contingency gets used
During the project, overruns and approved change orders draw down contingency first. Once it is gone, every extra dollar comes out of profit. Track how much is used against how much of the job is done. Half the contingency spent at rough-in is a warning.
Common mistakes
- Treating contingency as profit and bidding it away to win the deal.
- Using the same 10% on a gut rehab as on a paint job.
- Forgetting that a lender's draw schedule usually does not fund contingency you never budgeted.
See the fix and flip budget template for where contingency sits in a full budget.
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