Take the monthly carry first, because that's the number people leave out. On a heavy renovation you're paying interest on the loan, property taxes, insurance, water, electric and often gas for the crew's heat in winter. On a 250k loan at hard money rates, interest alone is frequently in the two to three thousand a month range, and taxes and insurance on top. Call the all-in monthly carry somewhere between three and five thousand on a mid-sized project, then multiply by the 120 to 150 days the chapter recommends rather than 90. That's roughly fifteen to twenty-five thousand of pure holding cost before you've bought a single cabinet.
On insurance, a standard homeowners policy generally won't cover a property that's vacant and under construction, and most carriers write a builder's risk policy or a vacant dwelling policy for this instead. The 30-day thing you read comes from vacancy clauses in ordinary policies, which commonly suspend certain coverage after a property has been unoccupied for a set period, often 30 or 60 days. Those terms differ by carrier and by state, so get the actual policy language from your agent before you close rather than after.
Reserves means cash you can reach that isn't in the budget. Operators generally want the contingency inside the rehab number plus a separate pile for carry overrun. If your monthly carry is four thousand, two extra months is eight thousand, and that's a reasonable floor for a small project.
The cost people forget entirely is the exit. Agent commission, transfer taxes where your state charges them, and seller concessions can run 7 to 9 percent of the sale price. That comes out of the same 30 percent the 70 percent rule set aside.
