Carrying costs: what the property costs you while you renovate
Every day a renovation runs long is money out of your profit. Most investors don't budget for it correctly.
Scenario
Marcus projected a 3-month renovation on a property purchased with hard money at 12% interest. His contractor took 5 months. The two-month delay didn't just push his timeline — it cost him an additional $4,200 in loan interest, $800 in insurance, $600 in utilities, and $400 in property taxes. That's $6,000 in carrying costs he didn't budget for. His projected $28,000 profit became $22,000. Carrying costs are real — and they compound with every delay.
Monthly carrying cost components
- Hard money or financing interest
- Property taxes (prorated monthly)
- Insurance — vacant property coverage
- Utilities (minimal but real)
- HOA fees if applicable
- Security costs if needed
How to factor carrying costs into your deal
- Calculate total monthly carrying cost
- Budget for projected timeline plus 30–60 day buffer
- Include carrying costs as a line item in your total project cost
- Model your deal at both the projected and extended timeline
- If the deal breaks at +60 days, it needs better pricing
Things to consider
- Hard money at 12% interest on a $150,000 loan = $1,500/month in interest alone.
- A 2-month delay at that rate plus other carrying costs can easily exceed $3,500–$5,000.
- What is your break-even point — at what total cost does the deal stop making sense?
- Does your profit projection account for the full timeline including listing and closing after renovation?
- What incentives does your contractor have to finish on time — is there a completion bonus or penalty in the contract?
BRIK takeaway
Carrying costs are not a rounding error. On a hard money deal, they can consume months of projected profit in a matter of weeks. Budget for them explicitly, model your deal at an extended timeline, and structure your contractor agreement to create completion incentives. Time is money — and in a renovation, it's your money.