, Property
You budgeted £40,000 for the refurbishment. Twelve weeks in, you have spent £52,000 and the kitchen is still flat-packed in the front bedroom. Nothing catastrophic happened. No fire, no collapse, no builder absconding with the deposit. You simply found more than you expected, and then found that finding more costs time as well as money.
This is the normal outcome, not the unlucky one. Most refurbishments overrun because the budget was built from the things you could see on a viewing, and the cost sits in the things you could not.
The contingency is money you have already spent
Investors are told to add 10% for contingency. Most do, then treat it as a buffer that might not be needed. It is more useful to assume the contingency is committed before the first skip arrives. On a pre-1960 property with original services, 10% is optimistic. Between 15% and 20% is closer to what a full strip-out demands, and if you cannot make the deal work with that allowance included in the purchase price, the deal does not work.
The reason is structural. A budget is a list of known items priced at today's rates. The overrun comes from unknown items priced at panic rates, because you are discovering them mid-project with a team already booked and a lender charging interest. A tile choice made calmly in February costs less than the same choice made in a hurry in April.
What is behind the plaster decides your number
You cannot price a refurbishment properly until the walls are open, which is precisely when it is too late to renegotiate. The common discoveries in British housing stock are predictable enough to plan for:
- Wiring that predates the current edition of BS 7671, with no earth to the lighting circuits. A rewire on a three-bedroom house is a serious line item, and Part P of the Building Regulations means notifiable work goes through a competent person scheme or building control.
- Asbestos in artex ceilings, textured coatings, floor tiles and boiler flues. The Control of Asbestos Regulations 2012 governs how it is handled, and any building constructed or refurbished before 2000 is a candidate. Licensed removal is not a job for the general builder.
- Lath and plaster ceilings that come down when the joists above are disturbed, turning a wiring job into a plastering job.
- Joist ends rotted where they sit in a damp external wall, which turns a floor replacement into a structural repair.
- Drains and soil stacks that were fine until somebody put a new bathroom on the other side of the house.
None of these are exotic. They are the standard contents of a 1930s semi. The mistake is treating each one as bad luck rather than as the base case.
Trades stack, and the gaps between them cost the same as the work
A refurbishment is a sequence, not a pile of tasks. First fix electrics and plumbing come before plastering. Plaster has to dry before decoration. Flooring goes down after the kitchen units in some sequences and before in others, and getting that wrong means paying twice.
The consequence is that a delay anywhere pushes everything behind it. Your plasterer is booked for the week beginning the 14th. The electrician finds the consumer unit needs moving because the meter position fails the current requirements, which takes four days and a network operator visit. The plasterer is now on another job for a fortnight. You have lost two weeks, and you did not lose them because anybody was slow.
Two practical defences. Book trades with a buffer week between them rather than nose to tail, and accept that the buffer costs you programme time you will otherwise lose anyway. And order long-lead items, staircases, made-to-measure glazing, anything from a single supplier, at the start rather than when you need them.
If the work touches a shared wall, the Party Wall etc. Act 1996 applies and notice periods are fixed: two months for work to a party structure, one month for excavation near a neighbouring building. Those months do not compress because you are in a hurry. If you are managing the site rather than employing a principal contractor, the Construction (Design and Management) Regulations 2015 give you duties as a client, and on a domestic project those duties pass to the contractor only where the written arrangements say so.
Holding costs run whether or not anyone is on site
This is the part that turns a slow project into a bad one. The building costs you money every day it is not earning.
Bridging finance is priced monthly and the rate is materially above a term mortgage. Two months of overrun on a £150,000 facility is a real number, and if the loan has an exit fee the extension is not the only charge. Development finance with rolled-up interest hides the pain until redemption, which is worse, because you do not feel it while it accumulates.
Council tax is the quiet one. Empty property discounts are set locally and most councils have withdrawn them. Since April 2024 English councils have been able to charge a premium of up to 100% on dwellings left empty and substantially unfurnished for a year, and many now do, with a higher premium after longer periods. The Valuation Office Agency can also remove a property from council tax and place it in the rating list in some circumstances, which changes the bill again. Check the specific council before you assume an empty house is cheap to hold.
Then there is insurance. A standard buildings policy will not cover an unoccupied property under renovation. You need an unoccupied or renovation policy, it costs more, and it carries conditions about visits, water isolation and the scope of works. An overrun that pushes you past the policy term is an underwriting conversation, not a formality.
One offset worth knowing. Renovating a dwelling that has been empty for two years or more can qualify for the 5% reduced rate of VAT on qualifying construction services, and ten years or more can bring other reliefs into play. The contractor has to apply it and will want evidence of the empty period, usually from the council. It is not automatic and it will not rescue a bad deal, but on a long-empty property it is worth several thousand pounds and most first-time buyers of such a property never ask.
Where this shows up in the game
Property and construction arrive in Business Baron with the Property & Construction Track, an add-on to the full game. Premises work in the game is a project rather than a purchase: it takes months you can see in the cash flow, and every week it runs over is a week of costs on a building that is not yet earning. The contingency you set at the start is usually the difference between a profit and a lesson.