diff --git a/upup/pkg/fi/cloudup/openstack/instance.go b/upup/pkg/fi/cloudup/openstack/instance.go
index c8a98bf936..7af275c953 100644
--- a/upup/pkg/fi/cloudup/openstack/instance.go
+++ b/upup/pkg/fi/cloudup/openstack/instance.go
@@ -101,10 +101,6 @@ func createInstance(c OpenstackCloud, opt servers.CreateOptsBuilder, portID stri
 	var server *servers.Server
 
 	done, err := vfs.RetryWithBackoff(writeBackoff, func() (bool, error) {
-		if server != nil {
-			// Note: this will delete the server from the last try, even if it is now ACTIVE or still in BUILD state
-			c.DeleteInstanceWithID(server.ID)
-		}
 
 		v, err := servers.Create(c.ComputeClient(), opt).Extract()
 		if err != nil {
@@ -131,7 +127,7 @@ func createInstance(c OpenstackCloud, opt servers.CreateOptsBuilder, portID stri
 
 		err = waitForStatusActive(c, server.ID, nil)
 		if err != nil {
-			return false, fmt.Errorf("error while waiting for server '%s' to become '%s': %v", server.ID, activeStatus, err)
+			return true, err
 		}
 
 		return true, nil
diff --git a/upup/pkg/fi/cloudup/openstacktasks/instance.go b/upup/pkg/fi/cloudup/openstacktasks/instance.go
index 3ebd49deb8..c47a79d9be 100644
--- a/upup/pkg/fi/cloudup/openstacktasks/instance.go
+++ b/upup/pkg/fi/cloudup/openstacktasks/instance.go
@@ -52,6 +52,7 @@ type Instance struct {
 	SecurityGroups   []string
 	FloatingIP       *FloatingIP
 	ConfigDrive      *bool
+	Status           *string
 
 	Lifecycle    fi.Lifecycle
 	ForAPIServer bool
@@ -198,6 +199,7 @@ func (e *Instance) Find(c *fi.CloudupContext) (*Instance, error) {
 		AvailabilityZone: e.AvailabilityZone,
 		GroupName:        e.GroupName,
 		ConfigDrive:      e.ConfigDrive,
+		Status:           fi.PtrTo(server.Status),
 	}
 
 	ports, err := cloud.ListPorts(ports.ListOpts{
@@ -244,6 +246,7 @@ func (e *Instance) Find(c *fi.CloudupContext) (*Instance, error) {
 
 	// Avoid flapping
 	e.ID = actual.ID
+	e.Status = fi.PtrTo(activeStatus)
 	actual.ForAPIServer = e.ForAPIServer
 
 	// Immutable fields
@@ -281,6 +284,9 @@ func (_ *Instance) ShouldCreate(a, e, changes *Instance) (bool, error) {
 	if a == nil {
 		return true, nil
 	}
+	if fi.ValueOf(a.Status) == errorStatus {
+		return true, nil
+	}
 	if changes.Port != nil {
 		return true, nil
 	}
@@ -309,7 +315,13 @@ func generateInstanceName(e *Instance) (string, error) {
 
 func (_ *Instance) RenderOpenstack(t *openstack.OpenstackAPITarget, a, e, changes *Instance) error {
 	cloud := t.Cloud
-	if a == nil {
+
+	if a != nil && fi.ValueOf(a.Status) == errorStatus {
+		klog.V(2).Infof("Delete previously failed server: %s\n", fi.ValueOf(a.ID))
+		cloud.DeleteInstanceWithID(fi.ValueOf(a.ID))
+	}
+
+	if a == nil || fi.ValueOf(a.Status) == errorStatus {
 		serverName, err := generateInstanceName(e)
 		if err != nil {
 			return err