I have a question - the first of many, probably. When you're budgeting for work to be done by a contractor, how much do you estimate for unforeseen overruns?

Background - my 1BR garden-style condo was built in the '40s as rental housing for folks working in the Pentagon during WWII. It was renovated in the '70s when the neighborhood went condo. I bought it almost 5 years ago. The previous owners lived out of state and rented it out for at least 10 years. For the most part, before I moved in, nothing had been done to it since the '70s. The stove and tile backsplash in the kitchen were harvest gold. (Talk about an appetite killer.)

Since I moved in, I have replaced the windows and replaced all the appliances. I painted the gold tile backsplash white, which works as a temporary fix. I've also gotten a bunch of new furniture. Right now I'm working on replacing the water heater.

Next, it will finally be time to get a contractor in here to get some serious work done. Every room needs work. I won't bore you with the details, at least not yet. My plan is to divide the work into chunks according to what I can afford, so it will take at least a few more years to get everything done.

For starters, I would like to spend about $5,000. But I want that to be my total budget, so I need to leave room for the likelihood that once the contractor gets started, he will find something that needs more work than we anticipate at the start. It's an old building, so I'm sure there will be some surprises. For example, there's supposed to be hardwood floors under the wall-to-wall carpet, but I've heard that some people find sections of plywood when they rip up their carpet.

So, is there a good rule of thumb for budgeting? Such as, assume you'll spend X% more than the contractor's estimate once everything is final?

Also, I would love any advice you all have on how to work with contractors. I'll be working with someone who has done a lot of work in this neighborhood for decades, and several people I know recommend him.

Thanks!