Contingency - 20%+

If you read any decent remodeling guide, almost all advocate setting aside or obtaining funds of at least 20% of your estimated remodeling budget in addition to whatever you determine to be your budget.  Some actually advocate even more anywhere from 30-40%.

If you think about…20% is a lot.  Assuming you’re doing a simple addition that will cost you $100K, that’s an extra $20K.  $20K can buy you a lot of finishes.  Why would you need to retain so much for contingency?  There basically a couple of reasons why your contingency fund needs to be so large:

1. every remodel is custom and unique requiring a custom solution
2. complications arising from details not known inside the walls
3. poor estimation of effort on the part of your contractor or subcontractor
4. change in scope from you as the owner

#1 is a statement of fact that you need to appreciate.  If you do any comparisons of projects to get an idea on cost make sure you’re comparing apples to apples.

There is really not much you can do about #2, unless you have blueprints of your current home AND remember the general layout and placement of your rough plumbing, electrical and HVAC.  The older the home, the higher the risk that some structural or home system detail may arise to complicate things.  #2 also arises because of your construction plans are put together without knowing those details as well, if something structurally needs to deviate from your plan it could mean your structural engineer having rework part of the plans and cost you more time as well as additional material and labor.

You can minimize #3 and #4 and in doing so you’ll save yourself a lot money in the end being able to apply your contingency more finishes in the end after you’re done with all work in the expensive work in the rough.

#3 - Contractors are NOTORIOUS for poor estimation.  I haven’t found years of experience to be any good corollary between how well they can estimate - why?  Because contractors don’t routinely deep dive into the details when coming up with numbers as diligently as they should.  To protect themselves and their profit, they’ll slap on a huge fudge factor that insulates them from risk and assures them of an even bigger profit should things go their way.  In the end - you pay for it up front, no matter how the dice are rolled.  The best way to insulate yourself from #2 is to get multiple bids and even consider getting professional cost estimation done.  If you get multiple bids and still get a wide range of numbers, go back and ask the odd ball out what their assumptions were.  You’ll usually find one or two things that they assumed that are not in line with what you want or what was designed on your plans.  Professional cost estimators are not foolproof either, although they do utilize a more methodical and scientific approach to how they arrive at their numbers by breaking as much detail as possible presented on your plans.

#4 - The more you know exactly up front of what you want down to every last detail you can possibly think of in the finishes, the more thorough your plans can be followed without deviation.  Changes after you’re underway in the construction phase can mean big dollars because of rework.