Accounting for unexpected hidden costs is actually really easy.

Yes, you read that right.

The only thing is… no one really does it. 

And all it takes is 2 steps.

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READ THE TRANSCRIPT AND ADDITIONAL NOTES BELOW

1. Hire your contractor and have them review your property and / or existing home (depending on your type of project) for those specific hidden cost items. ie. you can't see until you start construction.

Become aware of things that could add additional cost to your project, and while you’re at it, use this time to talk about those items that may cost a lot more than you’d expect.

Hidden costs:

• Asbestos or any kind of hazardous materials

• Mold or any kind of water or fire damage

• Blue clay or poor ground material

• Blasting (rock)

• Damaged, missing or poor foundation

• Perimeter drain tile or other ground works, like scour protection or proper drainage

And of course there’s market costs or shortage in material or labor, as well as pandemics that can drastically change the prices.

Cost more than expected:

• Adding an upper floor to an existing home

• Vaulting a flat ceiling

• Opening up a structural / bearing wall

• "Bumping out" an exterior wall

2. Start your project with a contingency.

A contingency is an allocated amount of money, generally a percentage of your home project, for unexpected expenses and changes that may arise during construction. 

The purpose of a contingency is to provide financial flexibility and address any unforeseen issues that could impact the project’s timeline, scope, or cost. It allows for adjustments to be made without causing significant disruptions or the need to secure additional funding.

👆🏼 Remember: The difference between budget and cost.

How much should your contingency be?

New Home

New homes generally don’t come with a lot of hidden costs but it does come with potential changes or upgrades. If your contractor is good at budgeting projects (well get into more of that soon) then you shouldn’t see much change in the price. I have seen hidden costs come into play with excavation (having to over excavate to find better ground to build on) or additional environmental issues. Changes and upgrades are the leading cause of price increase to the budget. 

10-20% of the overall budget

Renovation

The leading cause of renovation budget increases are those hidden costs. Find out what yours could be before you begin. These hidden costs could also affect the option to make upgrades or any potential changes you want during the build. Depending on the size of the renovation, age of the home, etc. will gage the scale. For example, for large older home you might want to consider 30% (or more).

10-30% of the overall budget