When Does Home Remodeling Make Financial Sense?

NJ Today

 

My wife and I survived two major home remodeling projects and we’ve got the battle scars to prove it. Like most people feeling cramped for space – thanks to two growing children in our case – we weighed the plusses and minuses of remodeling versus moving to a larger home.

Because we live in a great neighborhood with strong local schools, we ultimately decided to stay put and remodel, but everyone’s case is different.

Here are a few considerations to weigh before you decide to remodel:

Wishes vs. needs. How necessary are the improvements you want? The days when many improvements paid for themselves in increased home value are over for now, especially such strictly cosmetic upgrades as new kitchen cabinets or a bathroom skylight. That doesn’t mean certain projects aren’t worthwhile. For instance:

    * Repairing a leaky roof or faulty plumbing might spare you from water or mold damage.

    * Installing attic and wall insulation and energy-efficient windows or replacing older appliances and light fixtures will lower utility bills and may be tax-deductible (visit www.energystar.gov for information on tax credits and rebates).

    * The IRS allows tax deductions for certain home improvements such as bathroom remodeling in Pennsylvania to accommodate medical conditions or disabilities with a doctor’s recommendation. The rules are complex, so read IRS Publication 502 at www.irs.gov and consult a tax advisor before proceeding.

Budgeting. Gather cost estimates for each job or item and create a chart with columns for high-, medium- and low-cost options. Don’t forget supplies for do-it-yourself projects and always add an extra 20 percent or more for unexpected expenses. If contracted labor is involved, gather three estimates and carefully check references and business licenses. Also, ask about discounts for grouping multiple projects together.

Financing options. Ideally, you’ve already established a Saugatuck home improvement savings plan. But if you’re planning to borrow, proceed with caution. Just a few years ago, home values were skyrocketing and many people took out a home equity loan (HEL) or line of credit (HELOC) to tap their home’s equity.

The real estate market’s collapse left many people owing more than their homes were worth, so now even folks with excellent credit and significant home equity have difficulty finding such financing. Lenders now demand stringent income documentation and have cut back on the debt-to-value percentage they will allow – only 60 or 70 percent or less of the appraised value in some hard-hit areas. So if your existing mortgage is over that amount, you may be out of luck.

Comparison shop. First, ask if your existing lender offers HELs and HELOCs. If so, compare their interest rates, fees and qualification criteria to what other lenders are advertising. Bankrate.com has home equity rate comparison tools for both banks and credit unions; but be forewarned, pickings are slim right now. You might have better luck talking directly to lending officers at local branches.

One important caution: HELs and HELOCs are considered secured debt in which your home is used as collateral for the loan. If you miss payments or default, you could lose your home. If you’re not certain you’ll be able to make the payments (worries about unemployment, prolonged illness, etc.), it’s probably best to forego Pennsylvania home remodeling projects until you have sufficient savings.

Tips on Pricing Windows

Reed Construction Data

 

Windows with wood and vinyl frames are priced preglazed. The usual configuration for these wood and vinyl windows is a double glaze as insulating glass. In addition there may be coatings for low e, tints, films or possibly triple glazing all to enhance the insulating value and to control the sun’s rays. The configuration is different whether you are in a Southern or Northern region.

Metal framed windows either steel or aluminum may be priced preglazed. These same metal frames maybe priced as a frame only and then you would have to add in the price of glass and glazing to have a finished material for installation, ensuring you have added in labor for both the window and glazing.

As to additional items such as locks, screens and grilles, all of these may come as a package with the window, but be aware that packages are basic add-ons with higher grade or security grades as an additional cost.

Other considerations when choosing glazing in addition to insulating value are:

Tempered glass: Toughened glass is two or more times stronger than annealed glass. When broken, it shatters into many small fragments which prevent major injuries. This type of glass is intended for glass façades, sliding doors, building entrances, bath and shower enclosures and other uses requiring superior strength and safety properties.

Impact glass: The Miami-Dade Building Code requires that every exterior opening — residential or commercial — be provided with protection against wind-borne debris caused by hurricanes. There are two types of impact-resistant products: large-missile resistant and small-missile resistant.

Blast resistant: Security-glazing include laminated glazing materials, and applied films. In order to specify the appropriate security glazing solution, it is necessary to make assumptions about the level of performance required to resist the anticipated threat.

DIY: Installing a Toilet

North Jersey.com

 

Before the recession, bathroom remodeling projects typically came in the form of exorbitant overhauls. Today, consumers have become unwilling to part with their dollars, and many are pulling the plug on expensive renovations. There’s been a resurgence in DIY installations and/or repair jobs.

Installing your own toilet or replacing one that has seen better days, for example, is becoming commonplace.

"There’s a real change in focus," said Sandy Torgersen, a sales manager with Hardware, Bath & Spa, a showroom of high-end, decorative bath and kitchen fixtures in Fairfield. "People are looking to economize. They’re discovering that there’s a satisfaction to accomplishing something big on their own."

"One reason for installing your own toilet, of course, is money," Torgersen said. "When you hire someone, you have to pay for the service. You could also pay for their drive time and could pay for them to come during off hours.

"When you install it yourself, it’s on your own time. It’s relatively easy and it can all be completed in one day."

To start, follow these steps:

* After turning the water off, flush the toilet to empty most to the water. Remove the remaining water with a sponge and a water bucket. Then disconnect the supply line from the base.

* To remove the old toilet, pop off the trim caps at the base. Next, remove the nut and washers on the closet bolts securing the bowl on the floor.

* Use a putty knife to pry up and remove the old wax seal. Install the new wax seal and hook the new closet bolts into their slots on the flange.

* With the closet bolts and seal in place, you can attach and assemble the toilet. Slip the tank bolts through the opening in the bottom of the tank. Line up the shank of bolts with holes in the bowl and drop the tank into place. Secure the tank to the bowl by tightening a nut onto each tank bolt.

* Set the toilet onto to the flange, making sure that the closest bolts protruding from the floor line up with the holes in the base.

* Secure the new seal and lift onto the bowl with mounting bolts. Use clip joint pliers to reconnect the supply line at the bottom of the tank.

Montana: Grain Bin Remodeled into Living Quarters

Great Falls Tribune

John Thiebes takes a break inside the "caBin" he constructed from a grain bin on his farm near Carter, Montana   (PHOTO/SUZANNE WARING)

As John Thiebes made plans to construct living quarters on his farm near Carter he decided to think outside the box. In fact, his ultimate plan involved a perfect circle.

"Thinking I could remodel something, I looked around at the different farm buildings on the property," he said. "My mind kept coming back to the grain bins that were no longer being used."

After studying the bins and drawing up plans, Thiebes concluded that comfortable accommodations could be constructed in one of the bins to use when he spent time on his farm. He talked with a grain bin manufacturer, but the company wasn't much help. Manufacturers had no experience with putting doors and windows in a metal bin.

As Thiebes went forward, purchasing construction materials, bathroom and kitchen appliances, and heating and cooling units, he realized he was on his own. No one he knew had done anything like this.

The most challenging task was trying to make straight items such as bathtub and shower surrounds, kitchen cupboards, plasterboard, doors and windows fit into a curved structure. Thiebes found that if prefabricated windows were larger than two feet, they would extend too far out from the sides of the curved bin.

On the main level, he installed four small windows that were placed low so that he could see the wildlife while sitting down, and one window upstairs to let in natural light.

Despite complications, Thiebes and his sons pressed on when they had time during the summer of 2008. Figuring out the optimum gypsum wallboard size, they installed furring strips, insulation, the Sheetrock, and finally one-by-four-inch battens that covered the Sheetrock seams.

They laid the 18-foot diameter floating oak floor and then tackled the second floor loft, which is above the bathroom and kitchen area and provides the sons with sleeping quarters. It's accessed by a ladder at the side of the sitting area.

The biggest last-minute modification to the plan was in the bathroom remodeling. The electrical code wouldn't allow for the shower to be in the same room with the electrical box, so Thiebes installed a partition between the shower enclosure and the toilet area that contained the electrical box. Sliding closet-like doors shut off either or both sides of the bathroom from the sitting area.

Because Thiebes and his sons did the work themselves and looked for items that were on sale, construction costs were just more than $7,000, including the most expensive purchase, the $1,000 toilet.

To eliminate the need for a septic tank, Thiebes installed an electrical toilet that burns the waste much on the same principle as self-cleaning ovens.

The sitting area, defined with an area rug, is tastefully furnished with two cushioned, wicker chairs and a couch that can be made into a bed. A wood stove with a visible black stack that extends to the tin roof dominates the room. A television, music system and small air conditioner are built into the exterior wall. The paintings that adorn the sage-green walls were done by Thiebes, who has been an artist in his spare time since high school.

The kitchen area, with upper and lower cupboards on the curved wall, has all the amenities. The counter contains a sink with hot and cold running water and a two-burner range top. A microwave is built into the kitchen space, and a portable roaster oven has its own nook.

The 20-gallon hot water heater is hidden away under the sink, and an apartment-size refrigerator is built in under the counter. Furniture is arranged so that the table optically divides the kitchen from the sitting area. A rack overhead serves as storage for skillets, griddles and pans.

Gravity drains the gray water from the kitchen sink and the shower onto the grass and trees nearby. When no one is staying there, the hot water heater and all the pipes drain with ease because there are no traps in the plumbing.

Because the windows, looking out on the farm, are located toward the back side of the bin and the metal bin door covers the regular door when no one is at home, the structure looks like another grain bin in its row of bins to the passer-by. The deception becomes an advantage that lessens the chance of vandalism.

After a year, members of the Thiebes family are still excited about the creation. Usually only John Thiebes and one or two of his sons stay at the farm on an occasion. However, six of them were comfortable when they spent last Thanksgiving there, and last summer one of the Thiebes' sons stayed there all summer while he worked.

"I know this project could easily be replicated," Thiebes said. "Besides serving as living quarters on a distant place for a farmer, remodeled grain bins could also be modified to become living quarters for hired workers or guests."

Remodeling Without A Home Equity Loan

Nashua Telegraph

Kelly Hess and her husband, David, spent $8,000 in April remodeling the outside of their Dallas house, and they paid for it without a home-equity loan.

They tapped their “house savings account” to replace the roof and install an 8-foot-high wooden fence in the backyard of the four-bedroom brick ranch house they bought in 2006.

The Hesses prove there are other ways to pay for home improvements besides borrowing against the equity in your property. Home-equity loans and lines of credit have provided homeowners with a reliable, usually tax-deductible, cash stream for many years. However, home equity has dried up during the nation’s four-year housing slump.

Many people don’t have the necessary equity in their properties to qualify for a home-equity loan. In fact, almost one-third of the country’s homeowners holding mortgages at the end of the third quarter have negative equity or near-negative equity in their homes, according to a recent report from First American CoreLogic, a California company that tracks real-estate data.

“Negative equity continues to be pervasive and to impact almost every segment of the housing market,” says Mark Fleming, chief economist with First American CoreLogic.

While home values have tumbled nationwide, banks and other lenders have tightened the rules for borrowers to qualify to leverage their home equity. This means people should be thinking about alternative financing for home upgrades such as outdoor decks.

Paying cash is always the best option, financial experts say. However, they acknowledge that’s understandably difficult for many who depleted their savings during the recession.

“My husband and I are both very much on the same page when it comes to money,” says Kelly Hess, a legal secretary. “We don’t like to use credit except for buying a car or a house.”

The following are alternatives to home-equity loans that financial experts suggest homeowners consider to pay for home improvements.

Anybody can open a savings account at a bank or online for remodeling projects, but experts say making regular deposits is the key.

Rebecca Schreiber, a Certified Financial Planner and owner of Solid Ground Financial Planning in Silver Spring, Md., suggests putting your two “extra” paychecks a year – if you, like many workers, are paid 26 times a year – into a separate account for home improvements. Those two paychecks are the third checks you get in two months of the year.

Since 2006, the Hesses have paid for $20,000 to $25,000 worth of interior and exterior remodeling on their Dallas home built in 1970 by tapping their house savings account.

Using plastic to buy paint or new carpeting, for example, might be tempting, but financial experts urge caution.

They suggest only using credit cards for home remodeling when you can avoid paying interest. And Schreiber says, using a card with a cash-back reward then paying the entire balance with no interest is even better. She took her own advice this summer, charging about $5,000 for electrical work, lighting and new carpeting in the living room of her five-bedroom Maryland home.

You might be surprised how much you can make selling the unwanted items in your garage or attic.

Sarah M. Place, the president of Place Trade Financial, a brokerage and financial advisory firm in Raleigh, N.C., raised about half the $10,000 she spent this summer remodeling the master bathroom, installing ironing centers, replacing iron plumbing and refinishing a staircase, among other upgrades, by selling items on Craigslist.

“I had not intended it to work that way, but … I had made so much money that I just kept working on the house,” Place says of her three-bedroom Raleigh real estate.

Doing some or all of the work yourself can save a lot. And you can learn how to do home projects by reading detailed instructions for kitchen or bathroom remodeling in a book or online. Place can attest this works.

“We probably ended up saving at least $5,000,” she says. “I learned how to do most of it by researching it online.”

Although it doesn’t work for every family, Schreiber says getting financial help from relatives remains an attractive option. An important thing to remember, she says, is to be sure to put the loan terms in writing. Then repay the money even if, say, your parents forgive the loan.

Is the Remodeling Slump Over?

The Dallas News

Home remodelers that have been hammered by the recession can look forward to better times in 2010.

Forecasters say the home improvement and fix-up business should pick up this year after a 25 percent slide in activity since 2007.

"The downturn appeared to stabilize in the second half of 2009," Kermit Baker of the Harvard University Joint Center for Housing Studies told builders and remodelers at the National Association of Home Builders' annual meeting last week in Las Vegas.

"We are starting to see some positives in where the market might be headed for handyman services and home remodeling."

The Harvard researchers said nationwide remodeling expenditures are likely to rise about 6 percent in the coming quarters.

Baker said the cutbacks in home improvement and repair activity during the recession were substantial but were less than half what the homebuilding business experienced.

"If you are a remodeler, times have been tough. But it could be worse – you could be a homebuilder," he said. "In this economic environment, households were spending more on home improvements like kitchen remodeling projects last year than they did on the purchase of new homes."

North Texas outlook

The outlook for increased home remodeling is good news for North Texas builders, some of whom have diversified during the downturn.

"Quite a few of our builders have expanded into remodeling," said Bob Morris, executive vice president of the Home Builders Association of Greater Dallas. "Some of our more inventive small custom builders have been doing remodeling.

"There is still work out there. It's a viable market because the economy here wasn't hit nearly as hard."

Even in Dallas-Fort Worth, some homeowners have put sunrooms and other fancy fix-up projects on hold for the last year or so.

"If you think the prices of homes are going down, it makes it hard to argue that outdoor decks or bath remodels will hold their value," said Paul Emrath, a researcher for the builders' association. "People have less equity in their properties to finance remodeling.

"Even if you don't have problems there, sometimes lenders are more reluctant than they have been in the past to finance remodeling or a home addition."

Smaller projects

Homeowners in the market for a redo are taking a more measured approach. The days of over-the-top remodeling and double-size additions are mostly gone, analysts say.

"Of those that are planning to spend money, 52 percent are doing needed repairs or maintenance, as opposed to large-scale home remodeling projects." said Eliot Nusbaum of Better Homes and Gardens, which commissioned a new housing study. "The focus is on smaller projects right now like painting a room or replacing or adding flooring.

"What we are seeing in remodeling as well as new construction is practical considerations."

Energy-conserving or environmentally friendly upgrades are still on many homeowners' must-have lists.

"The focus for future projects really seems to be about saving money," Nusbaum said.

Harvard University research points to the same frugality, Baker said.

"We have seen a pronounced shift over to replacement projects in the last two years," such as energy-efficient windows or heating and cooling systems, he said. "But we are now seeing a little more life in discretionary projects – kitchen and bathroom remodeling."

The majority of fix-it fans are doing the upgrades out of their pockets, Baker said.

"This market is heavily dominated by cash financing," he said. "Households either don't want to take out loans because they are nervous about economic conditions or they can't get loans."