Author Topic: Strategy help in funding home renovations, aka "too much" in 401K  (Read 1500 times)

blockzilla

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Hi all, this isn't a FIRE specific situation but I know many here are like myself and enjoy good financial challenges and comparison, and I'm looking for some help. My wife and I actually don't really want to FIRE, as we both enjoy our jobs and get lots of time off.  I'm trying to figure out a strategy of funding home improvements to the tune of ~$200K (we've been putting this off for 10 years, everything is getting to that point of needing to be replaced/remodeled).  My goals are to not interrupt our current cash flow and savings rate as I'd like to invest in a rental property in the near future.  Our financial basics are:
Age: both 40
Income: $315K/year gross
Home value: ~$1.1M
Mortgage balance: ~$400K @4.25% left out of original $520K mortgage, 21 years left to go on it
401K balance: $1.1M
Pensions: We've both got pension jobs which will provide top notch health insurance and about $120K/yr in today's dollars when combined.
Savings: $250K, current savings rate of about ~$5000/month net

Given all of that, I estimate that we can tolerate some risk, we likely very well already have enough in our 401K's given the pension situation, and it's time to fix up the house. No job is guaranteed but ours are both about as solid as you can get nowadays. Here are the options as I see them:

1. Pay $200K cash to renovate. The obvious zero risk solution, cash flow remains unchanged. I don't like this option though as I want to use ~$120K for a down payment on an investment property in the near future.

2. HELOC the $200K, and either A. Do a SEPP on 401K equal to the monthly payment to cancel out changes to cash flow, or B. Drop 401K contributions from current max to equal the monthly HELOC payment.  Or perhaps some combination of A and B.

3. Cash out Refi our mortgage, get the $200K and restart the mortgage to 30 years again as a new $600K loan, try to get the overall payment the same as current mortgage payment of $2,655/month which seems doable given rates are so low. Cash flow stays the same.

4. Pull 200K from $401K (well probably 300K+ to account for the tax hit to net $200K).  This seems like a poor option due to huge tax hit (we wouldn't qualify for any CARES stuff), but cash flow stays the same.

5. Buy the investment property now, save up for about 3 years to renovate, stockpile savings, and then in 2023 just use cash to pay for the remodeling.  Not sure we can wait 3 more years now, my wife has been patient enough as it is :-)


simonsez

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #1 on: June 01, 2020, 02:51:03 PM »
Option 6. Don't do all house projects at same time

Also, if you do decide that spending 200k is an absolute must - many times you can get 0% financing spread across several years.  This is assuming you're hiring out for most of this.  A place I was at this past Saturday was offer 0% financing for 72 months on all bathroom or kitchen remodels over 5k.  At your combined salaries - I'd think there are myriad ways you can figure something out without raiding your 401k or torpedoing the rental property opportunity.

Sibley

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #2 on: June 01, 2020, 03:05:05 PM »
Um, what are you doing that renos will cost $200k?!?

And fyi - just because the bathroom is an ugly color doesn't mean you have to reno. You reno because it's broken. So, do the stuff that must be done, then recognize the rest as a luxury item.

terran

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #3 on: June 01, 2020, 03:09:44 PM »
Is the house in its current state worth $1.1M? If so, could you buy a house you'd be happy with for $1.3M or less after subtracting transaction costs?

bacchi

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #4 on: June 01, 2020, 04:25:48 PM »
Option 6. Don't do all house projects at same time

The best and simplest solution. Cash flow it.

blockzilla

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #5 on: June 01, 2020, 04:41:40 PM »
Option 6. Don't do all house projects at same time

Also, if you do decide that spending 200k is an absolute must - many times you can get 0% financing spread across several years.  This is assuming you're hiring out for most of this.  A place I was at this past Saturday was offer 0% financing for 72 months on all bathroom or kitchen remodels over 5k.  At your combined salaries - I'd think there are myriad ways you can figure something out without raiding your 401k or torpedoing the rental property opportunity.

We arrived at the plan of doing it all at once, for peace of mind to just deal with living through it one time in a bigger chunk, but more importantly we have realized that we are not good at remodeling things using our own ideas/designs. We've learned that a contractor will do exactly what you tell them, which is great in theory, but we are TERRIBLE at leading a home design effort, even something simple like paint color.  We've gone to houses of friends that we've liked and they've used a designer to get a full home design that integrates well together. I think that if/when we do anything, we're pretty dead set on doing it all at once.

I suppose we could get a soup to nuts design from an interior designer, then just do it one piece at a time, so that is something to consider but then we lose the benefit of working with the same designer/vision through the process.

« Last Edit: June 01, 2020, 04:50:32 PM by blockzilla »

blockzilla

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #6 on: June 01, 2020, 04:43:40 PM »
Um, what are you doing that renos will cost $200k?!?

And fyi - just because the bathroom is an ugly color doesn't mean you have to reno. You reno because it's broken. So, do the stuff that must be done, then recognize the rest as a luxury item.

I could list it all out, but quite literally everything in the 3,000 sqft house is 30 years old and in need of updating. We're in SoCal, things cost a lot here. You're preaching to the choir that ugly and old kitchen counters are fine, but I also have my wife to consider :-) She's wanted all this for 10 years of living here, and has been patient for my sake to be financially wise about it.

blockzilla

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #7 on: June 01, 2020, 04:47:26 PM »
Is the house in its current state worth $1.1M? If so, could you buy a house you'd be happy with for $1.3M or less after subtracting transaction costs?

Yeah, 1.1M would probably be a conservative estimate.  For reference, the same floor plan just up the street that was totally remodeled inside and out (owner is a friend and said $400K total renovation cost), and it is listed at 1.4M right now.

If you aren't familiar with SoCal real estate as well, we have this thing called Prop 13 for property taxes.  It means my taxes pretty much stay the same for life (plus some small inflation adjustments), but do not adjust up if the house increases in value.  So it heavily incentivizes us to stay in the current home, because if we were to buy that house for 1.4M, we'd be paying tax on that new price vs. our locked in tax on our 2011 650K price.  That'd be close to 15K/year more just in tax, for life if we did that plan.

dragoncar

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #8 on: June 01, 2020, 04:51:59 PM »
If you have stable income, cash out refi or second mortgage.  Rates are very low right now, you should refi regardless of home improvements. 

You should be able to pay it back quickly, within a couple years.  If not, then agree with option 6 above and reconsider your frugality muscles

affordablehousing

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #9 on: June 02, 2020, 10:18:50 AM »
We're in a similar position and are paying cash for our project. I would be very suspicious that you can do a whole house remodel of finishes for a house that big for only $200K. If you use unlicensed labor and act as your own GC, sure, but if you use an architect or designer and try to get a licensed contractor, good luck.

If your project really is only $200K, I would just pay for it in cash. You'll be saving up at the same time, and your project will probably take about 8 months so you'd add another $40K. You should almost be there for the investment property by the time you finish. Lastly, why haven't you refi'd already just to get a better rate? You're wasting money stuck above 4%. With your location and LTV you should be below 3%.

bacchi

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #10 on: June 02, 2020, 02:32:53 PM »
The real question is, how does a 3000 square foot house cost only $1.1M in SoCal?

researcher1

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #11 on: June 02, 2020, 02:44:56 PM »
Why are you over-complicating a very simple decision???

You have the funds in savings.  Just cash flow the renovations and forget about these other dumb schemes.

You can buy the investment property in 14 months.  By then, you'll have the $120K saved back up.

dragoncar

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #12 on: June 02, 2020, 04:02:15 PM »
The real question is, how does a 3000 square foot house cost only $1.1M in SoCal?

Location

Also likely a conservative estimate.  I just did a refi and the appraisal came in 10% higher than my personal estimate

bacchi

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #13 on: June 02, 2020, 04:33:33 PM »
The real question is, how does a 3000 square foot house cost only $1.1M in SoCal?

Location

Also likely a conservative estimate.  I just did a refi and the appraisal came in 10% higher than my personal estimate

So this house is in the Inland Empire? (Does that exist in SoCal or is that only northern California?)

dragoncar

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #14 on: June 02, 2020, 05:06:25 PM »
The real question is, how does a 3000 square foot house cost only $1.1M in SoCal?

Location

Also likely a conservative estimate.  I just did a refi and the appraisal came in 10% higher than my personal estimate

So this house is in the Inland Empire? (Does that exist in SoCal or is that only northern California?)

Did you mean it the other way around?  Inland empire is specifically in socal

nereo

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #15 on: June 02, 2020, 05:25:10 PM »
You have $250k in ď(non retirement) savingsĒ and $5k/mo savings rate?  Where is the option of using your savings plus non-retirement savings cash flow?

Also, I find it unlikely you will need $200k all at once - that level of renovation will take time... many months to a year or two.... unless you are pissing money for the sake of speed. Do you shouldnít need more than $50k to get started. Just begin one major project and add that comes near completion start the next. Doing the entire house all at once is probably the most expensive abs stressful approach unless you are living elsewhere and have a project manager you trust to be there daily.

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #16 on: June 02, 2020, 10:24:47 PM »
Option 6. Don't do all house projects at same time

Also, if you do decide that spending 200k is an absolute must - many times you can get 0% financing spread across several years.  This is assuming you're hiring out for most of this.  A place I was at this past Saturday was offer 0% financing for 72 months on all bathroom or kitchen remodels over 5k.  At your combined salaries - I'd think there are myriad ways you can figure something out without raiding your 401k or torpedoing the rental property opportunity.

We arrived at the plan of doing it all at once, for peace of mind to just deal with living through it one time in a bigger chunk, but more importantly we have realized that we are not good at remodeling things using our own ideas/designs. We've learned that a contractor will do exactly what you tell them, which is great in theory, but we are TERRIBLE at leading a home design effort, even something simple like paint color.  We've gone to houses of friends that we've liked and they've used a designer to get a full home design that integrates well together. I think that if/when we do anything, we're pretty dead set on doing it all at once.

I suppose we could get a soup to nuts design from an interior designer, then just do it one piece at a time, so that is something to consider but then we lose the benefit of working with the same designer/vision through the process.
I have done a $200k reno.

I will caution you that this is not a "peace of mind" renovation.  It does not work that way.  The money is spent in a whirlwind that you have little control over, it is going so fast, and your $125k quote ends up at $200k very quickly before you can blink twice.

Cut it up into pieces that are $75k or less at a time and buy a breathing space for a go / no go on the next step.  Breathing space to review the finances on the overall project so far, with all the invoices accounted for.
« Last Edit: June 02, 2020, 10:35:14 PM by Goldielocks »

former player

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #17 on: June 03, 2020, 02:31:35 AM »
Were you planning to live in the house during this renovation?  Because I can't fathom living in the kind of chaos that a whole-house renovation costing that much would create.

Also, I think @Dicey is between renovation projects at the moment and would be well worth hiring as a consultant - although I think she is Northern Cal rather than Southern she could do a lot over the net and has an RV, could travel.  Just don't tell the Internet Retirement Police.

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #18 on: June 03, 2020, 06:08:05 AM »

I have done a $200k reno.

I will caution you that this is not a "peace of mind" renovation.  It does not work that way.  The money is spent in a whirlwind that you have little control over, it is going so fast, and your $125k quote ends up at $200k very quickly before you can blink twice.

Cut it up into pieces that are $75k or less at a time and buy a breathing space for a go / no go on the next step.  Breathing space to review the finances on the overall project so far, with all the invoices accounted for.


Goldielocks put it better than I did above.   It's easy to get sucked down the whirlpool when you've got multiple, large renovation projects going on simultaneously.  My most recent wasn't nearly as complex, but we had contractors doing major plumbing, spray-foaming/insulation, electrical and roofing all together.  They won't up stepping on each others toes and some never finished portions because "we can't get in there while the plumbers are working" and the finish work got dumped on me.  Spent weeks trying to renegotiate contracts for substandard work, and ultimately I just swallowed some cost and work because it was easier than fighting for every dollar back or every final board nailed back in place.

+1 to hiring Dicey or someone who has experience as a project manager.  What you pay in fees you will more than make up for in saved time, money and frustration. 

Dicey

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #19 on: June 03, 2020, 08:02:07 AM »
Dicey is FIRE. She only does paid work for herself, 'cuz IRP, plus on an another thread, a Midwesterner is busy telling her she doesn't know fuck-all about real estate in her own area, sigh. Thanks for the votes of confidence, @nereo and @former player.
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Back on topic: I just got an email from my local bank, offering 30-year refis at 3.375 with no closing costs. Start the re-fi process now. See how much cash you can get, and definitely restart the 30 year clock. You can always pay it down later, but grabbing as much cheap money as you can right now is a smart move. Ixnay on all the other options.

Your tax considerations are valid. Be aware that anything that's permitted can trigger an increase in your tax basis, Prop 13 or no. As soon as you apply for a permit, the tax assessor will come sniffing around start monitoring yoyr project. Even work that doesn't require permits but adds to the overall value will be included. Speaking of value, how are your local comps? It's a huge mistake to overimprove for the neighborhood.

There is always scope creep, and everything costs more than you think and takes longer. My nephew is a GC. He's doing a big job right now for family acquaintances. He is losing his mind, because they keep making changes. He makes money on every change, but finds it aggravating, because he actually wants to get the job done. Don't be like them.

I was looking at older "Sold" properties recently and was kind of surprised to realize that the whole gray+white-everything-with-white-Shaker-cabinets look has been going on for nearly a decade. This means that it's about to be pushed out by all the forces that want you to get tired of what you have and spend big bucks on something new. Be sure the choices you make aren't on the tail end of a design phase, aka fad.

There is a blogger I enjoy who used to be based in San Diego. Her firm and vlog are called Robeson Designs. Go down that YouTube rabbit hole. You will learn a lot. Given your description, hiring a designer like her would be a good move. I'm not suggesting you hire her specifically. You're going to want someone very local, because you're paying for every trip. IDK if you need an architect, but a good designer will.

If you or your spouse struggle with decision fatigue, own that. There are a shitload of decisions to be made in this process. There is value in buying something that's "Done". If it comes down to paying more taxes vs. the high cost of divorce, higher taxes might be more cost effective in the long run.

Happy to answer more of your questions. Ask away. As long as it's on this forum, the IRP don't mind.

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We're in a similar position and are paying cash for our project. I would be very suspicious that you can do a whole house remodel of finishes for a house that big for only $200K. If you use unlicensed labor and act as your own GC, sure, but if you use an architect or designer and try to get a licensed contractor, good luck.

If your project really is only $200K, I would just pay for it in cash. You'll be saving up at the same time, and your project will probably take about 8 months so you'd add another $40K. You should almost be there for the investment property by the time you finish. Lastly, why haven't you refi'd already just to get a better rate? You're wasting money stuck above 4%. With your location and LTV you should be below 3%.
User name doesnít check out... 200k is an epic fuckton of money and should pay for gold plated soaker tubs with 800 jets, massage toilets, 3rd kitchens, shower heads that rain the tears of orphaned children, floors made from iPhone 11ís, etc.

To the OP?  Cash out refi your house.  Rates are so stupid low that you canít not take advantage. 


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bacchi

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200k is an epic fuckton of money and should pay for gold plated soaker tubs with 800 jets, massage toilets, 3rd kitchens, shower heads that rain the tears of orphaned children, floors made from iPhone 11ís, etc.

Lol. Great imagery.

Sibley

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #22 on: June 03, 2020, 10:06:34 AM »
Ok. Here's what I would do. Make a list of everything that needs doing and wants doing.

New roof
HVAC
Insulation
Windows
Siding
Bathroom 1 - detailed list of everything
Bathroom 2 - detailed list of everything
Kitchen - detailed list of everything
New floors
etc

Then, think through what's involved, high level. There is a logical order to things. Bad roof? Deal with that first. Don't replace flooring before you redo the bathroom, because you're just going to risk messing up brand new flooring. Need new windows and new siding? Do them combined.

This is besides the design, fyi. Sure, get a designer to help do the overall vision if you want. But when you start projects? Group them sensibly. And don't do everything all at once. Come up with your groupings, tackle things in a logical order. What that order is, and what the groupings are, depends on having a really good list of needs/wants. It might seem like you're stretching things out longer, but it will keep things from getting out of control. And it will keep the overall chaos down during the whole process.

Dicey

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User name doesnít check out... 200k is an epic fuckton of money and should pay for gold plated soaker tubs with 800 jets, massage toilets, 3rd kitchens, shower heads that rain the tears of orphaned children, floors made from iPhone 11ís, etc.

To the OP?  Cash out refi your house.  Rates are so stupid low that you canít not take advantage. 

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I love it when people from places like, say, O-HIGH-o, tell us how things are in Gloccca Morra California. We gutted a CA house last year and refitted it to current standards. It was nice, but not ridiculously over the top. In fact, it had none of the things on PB's list. We did most of the work ourselves and subbed out the few things we couldn't, mostly through our own known resources. We pinched pennies like the mofo badasses we are and it still cost around $250k. Of course, we made a nice, fat profit.

Besides, everyone knows if you want that stuff, your last name has to be Trump.

However, the bolded part of PB's response is solid gold (heh). Good on you, sir!

Papa bear

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User name doesnít check out... 200k is an epic fuckton of money and should pay for gold plated soaker tubs with 800 jets, massage toilets, 3rd kitchens, shower heads that rain the tears of orphaned children, floors made from iPhone 11ís, etc.

To the OP?  Cash out refi your house.  Rates are so stupid low that you canít not take advantage. 

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I love it when people from places like, say, O-HIGH-o, tell us how things are in Gloccca Morra California. We gutted a CA house last year and refitted it to current standards. It was nice, but not ridiculously over the top. In fact, it had none of the things on PB's list. We did most of the work ourselves and subbed out the few things we couldn't, mostly through our own known resources. We pinched pennies like the mofo badasses we are and it still cost around $250k. Of course, we made a nice, fat profit.

Besides, everyone knows if you want that stuff, your last name has to be Trump.

However, the bolded part of PB's response is solid gold (heh). Good on you, sir!
Well, a total gut job, new mechanicals, insulation, roof, siding, etc are all going to add up. No where in any of OPís posts (that Iíve seen) does it say anything about updating these items.  Plus, even retrofitting an old house to earthquake standards is about adding a lot of steel fastening and shear walls. (My experience in building science is for Ohio, NY, and Florida, though).


Am I hyperbolic with my posts? Sure. But I believe weíre talking about a 30 year old house that needs some ďupdates.Ē  Material costs arenít that much different state to state. So 200k for an update job is luxury, pure and simple.   


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dragoncar

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #25 on: June 03, 2020, 01:58:03 PM »
Where else can I read diceys words of wisdom on real estate and construction in NorCal?  Iím always working on some project in the Bay Area but there will eventually be some where I have to hire someone and just the pain of dealing with selection and quotes on my last job led me to do it myself.  Based on the quotes Iíve saved myself over $60k installing $6k worth of material myself (great equivalent $/hr)

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #26 on: June 04, 2020, 12:54:21 AM »
Where else can I read diceys words of wisdom on real estate and construction in NorCal?  Iím always working on some project in the Bay Area but there will eventually be some where I have to hire someone and just the pain of dealing with selection and quotes on my last job led me to do it myself.  Based on the quotes Iíve saved myself over $60k installing $6k worth of material myself (great equivalent $/hr)
Haha, that's why we prefer to do our own work whenever possible. If you have the tools and experience, doing it yourself can be so much easier. One surprise on our last project was insulation. The guys that buy the material in bulk get a much better price. We were able to get the whole job done by a pro for less than the cost of buying just the material at HD. Same stuff, too. Of course, it helps if you're willing to pay cash and let them do the job afternoons and weekends. Oh and the guy that did ours was crazy fast. It definitely would have taken us longer.

@dragoncar, If you're in The City, DIY skills are worth at least double. Getting anything done there is a pain in the ass!

blockzilla

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #27 on: June 08, 2020, 08:16:07 AM »
Thank you for all the input! We went for the "worst house in the best neighborhood" strategy so that is why I estimated 1.1M. The one across the street that is updated just closed at 1.4M.  Here's my guesstimates for what it's worth on what needs to be updated, it came out to $210K. I thought I probably estimated high on some, but low on others:

Outside:
Landscape, exterior paint, new fence - $25K
Inside:
Windows/Shutters/Screens: $45K
Doors: $10K
Kitchen: $50K
Master Bath: $30K
2 additional baths: $10K
Built in: 5K
Fireplace covering: $5K
Molding/Trim: $15K
Staircase railing: $5K
Interior paint: $3K
Lighting: $7K

I'm okay with lots of quick decisions, but my wife is paralyzed by these kinds of decisions. She's spent hours and hours (and hours) on just the color of the exterior paint, which is the first job.  I know we can't expect a designer to just do it all though, so i expect challenges.  Too bad we didn't know this when we bought or we would've bought something that was just DONE :-)

The whole thing really does seem insurmountable, so perhaps we'll just have to resign ourselves to what we've been doing: fix things that are broken or really crusty, and live with things that are just dated. Easy for me but I want her to have what she wants too so we'll see. I'm okay doing basic "fix it" plumbing, electrical stuff but not anything that requires a craftsman touch like cabinetry, molding, flooring, etc.

Sounds like the refi is the way to go though! I'll get that paperwork going to see what kind of numbers we can get. Thanks again for the help!

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #28 on: June 08, 2020, 10:49:33 AM »
Ok. Here's what I would do. Make a list of everything that needs doing and wants doing.

New roof
HVAC
Insulation
Windows
Siding
Bathroom 1 - detailed list of everything
Bathroom 2 - detailed list of everything
Kitchen - detailed list of everything
New floors
etc

Then, think through what's involved, high level. There is a logical order to things. Bad roof? Deal with that first. Don't replace flooring before you redo the bathroom, because you're just going to risk messing up brand new flooring. Need new windows and new siding? Do them combined.

This is besides the design, fyi. Sure, get a designer to help do the overall vision if you want. But when you start projects? Group them sensibly. And don't do everything all at once. Come up with your groupings, tackle things in a logical order. What that order is, and what the groupings are, depends on having a really good list of needs/wants. It might seem like you're stretching things out longer, but it will keep things from getting out of control. And it will keep the overall chaos down during the whole process.
  Agree with all this. I know a few people (neighbors, coworkers) who were changing a and b, and it ended up snowballing and c-f got involved. Sometimes with breathtaking amounts. I also know whener a designer is involved, while they can have access to things you can't get a normal retail, the overall price goes up.  Anyways. Yes, have an overall plan. What are musts or critical replacements repairs. Break the work into smaller chunks, that is done linerally, not everything at once. Have an overall budget, so if cost rise in one area, you know what you will cut elsewhere to make sure priority items are covered. The rest can be done on a budget/dyi or deferred. Be aware that except for necessary repairs you are doing this to increase your standard of living, Not as an investment. ETA the designer is going to give you a reality check of prices. Then you may have more info what is critical or not. And honestly if you are changing so many things including lights or any layout stuff, good idea to involve a designer.
« Last Edit: June 08, 2020, 10:58:53 AM by partgypsy »

dragoncar

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #29 on: June 08, 2020, 11:42:41 PM »
Where else can I read diceys words of wisdom on real estate and construction in NorCal?  Iím always working on some project in the Bay Area but there will eventually be some where I have to hire someone and just the pain of dealing with selection and quotes on my last job led me to do it myself.  Based on the quotes Iíve saved myself over $60k installing $6k worth of material myself (great equivalent $/hr)
Haha, that's why we prefer to do our own work whenever possible. If you have the tools and experience, doing it yourself can be so much easier. One surprise on our last project was insulation. The guys that buy the material in bulk get a much better price. We were able to get the whole job done by a pro for less than the cost of buying just the material at HD. Same stuff, too. Of course, it helps if you're willing to pay cash and let them do the job afternoons and weekends. Oh and the guy that did ours was crazy fast. It definitely would have taken us longer.

@dragoncar, If you're in The City, DIY skills are worth at least double. Getting anything done there is a pain in the ass!

I don't have the experience, just the willingness to fix my mistakes

Sibley

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #30 on: June 09, 2020, 08:40:54 AM »
Thank you for all the input! We went for the "worst house in the best neighborhood" strategy so that is why I estimated 1.1M. The one across the street that is updated just closed at 1.4M.  Here's my guesstimates for what it's worth on what needs to be updated, it came out to $210K. I thought I probably estimated high on some, but low on others:

Outside:
Landscape, exterior paint, new fence - $25K
Inside:
Windows/Shutters/Screens: $45K
Doors: $10K
Kitchen: $50K
Master Bath: $30K
2 additional baths: $10K
Built in: 5K
Fireplace covering: $5K
Molding/Trim: $15K
Staircase railing: $5K
Interior paint: $3K
Lighting: $7K

I'm okay with lots of quick decisions, but my wife is paralyzed by these kinds of decisions. She's spent hours and hours (and hours) on just the color of the exterior paint, which is the first job.  I know we can't expect a designer to just do it all though, so i expect challenges.  Too bad we didn't know this when we bought or we would've bought something that was just DONE :-)

The whole thing really does seem insurmountable, so perhaps we'll just have to resign ourselves to what we've been doing: fix things that are broken or really crusty, and live with things that are just dated. Easy for me but I want her to have what she wants too so we'll see. I'm okay doing basic "fix it" plumbing, electrical stuff but not anything that requires a craftsman touch like cabinetry, molding, flooring, etc.

Sounds like the refi is the way to go though! I'll get that paperwork going to see what kind of numbers we can get. Thanks again for the help!

Ok, additional piece I didn't spell out before.

Bring your plans down to reality. 50k for a kitchen?!? 40k for bathrooms? Sure, you're in HCOL. But even so, that seems REALLY high. It is possible to get a good looking, quality result without paying a fortune. Go googling for the low cost recreations of the expensive designer spaces. You do not need a $500 basket when a $20 basket will work just fine. It takes a bit more legwork and planning is all.

Also, I don't see any signs of DIY here. Some things are inherently low(er) skill high labor - painting, the grunt work of landscaping, etc. There's a reason why DIY is so popular, it saves a lot of money.

As for your wife's decision paralysis - I sympathize. However, you need to address that upfront with her. Maybe you and she agree on the overall vision (it'll look generally like this), and then you do all the nitty gritty decisions. Maybe some other solution is found that works for both of you. But unless you figure it out, it's going to make everything 10x harder than it needs to be and you will blow your budget, and timeframe.

researcher1

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #31 on: June 09, 2020, 09:11:25 AM »
Bring your plans down to reality. 50k for a kitchen?!?  Sure, you're in HCOL. But even so, that seems REALLY high.
This doesn't sound particularly expensive to me at all.

The OP lives in a 30 year old 3,000 sq ft house in Southern California.

How much do you think a full kitchen renovation should cost for the OP?

nereo

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #32 on: June 09, 2020, 09:27:19 AM »
Bring your plans down to reality. 50k for a kitchen?!?  Sure, you're in HCOL. But even so, that seems REALLY high.
This doesn't sound particularly expensive to me at all.

The OP lives in a 30 year old 3,000 sq ft house in Southern California.

How much do you think a full kitchen renovation should cost for the OP?

It depends on what the OP is trying to do.  If it involves moving load-bearing walls and re-routing plumbing, $50k is not outlandish.  But if the project is redoing cabinets, countertops and appliances - that's on the expensive side of things.  Sure, you certainly can spend $50k just on cabinets and countertops (I've seen people spend $100k) but you can also do a medium-sized kitchen with decent quality materials for $20k. 

As this is the MMM forums the question of cost will always come up.  We don't compare ourselves to what is 'typical', but rather what makes the most sense given the project objectives.

Sibley

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #33 on: June 09, 2020, 09:47:31 AM »
Bring your plans down to reality. 50k for a kitchen?!?  Sure, you're in HCOL. But even so, that seems REALLY high.
This doesn't sound particularly expensive to me at all.

The OP lives in a 30 year old 3,000 sq ft house in Southern California.

How much do you think a full kitchen renovation should cost for the OP?

It depends on what the OP is trying to do.  If it involves moving load-bearing walls and re-routing plumbing, $50k is not outlandish.  But if the project is redoing cabinets, countertops and appliances - that's on the expensive side of things.  Sure, you certainly can spend $50k just on cabinets and countertops (I've seen people spend $100k) but you can also do a medium-sized kitchen with decent quality materials for $20k. 

As this is the MMM forums the question of cost will always come up.  We don't compare ourselves to what is 'typical', but rather what makes the most sense given the project objectives.

I'm not thinking of the re-configuring side of things. It is simply not something I think of typically - moving walls, etc. But nereo is correct. If OP is thinking of that sort of thing, then $50k may be more reasonable. And I MAY be more willing to grant them that. In general, I think it's silly to follow trends in design, especially when that trend is focused on appearance, not functionality. But if the changes were to fundamentally enhance functionality and it happens to look good, that's fine.

If it's just cabinets and countertops, I'm likely handing out facepunches.

GoConfidently

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #34 on: June 09, 2020, 10:01:31 AM »
Thank you for all the input! We went for the "worst house in the best neighborhood" strategy so that is why I estimated 1.1M. The one across the street that is updated just closed at 1.4M.  Here's my guesstimates for what it's worth on what needs to be updated, it came out to $210K. I thought I probably estimated high on some, but low on others:

Outside:
Landscape, exterior paint, new fence - $25K
Inside:
Windows/Shutters/Screens: $45K
Doors: $10K
Kitchen: $50K
Master Bath: $30K
2 additional baths: $10K
Built in: 5K
Fireplace covering: $5K
Molding/Trim: $15K
Staircase railing: $5K
Interior paint: $3K
Lighting: $7K

I'm okay with lots of quick decisions, but my wife is paralyzed by these kinds of decisions. She's spent hours and hours (and hours) on just the color of the exterior paint, which is the first job.  I know we can't expect a designer to just do it all though, so i expect challenges.  Too bad we didn't know this when we bought or we would've bought something that was just DONE :-)

The whole thing really does seem insurmountable, so perhaps we'll just have to resign ourselves to what we've been doing: fix things that are broken or really crusty, and live with things that are just dated. Easy for me but I want her to have what she wants too so we'll see. I'm okay doing basic "fix it" plumbing, electrical stuff but not anything that requires a craftsman touch like cabinetry, molding, flooring, etc.

Sounds like the refi is the way to go though! I'll get that paperwork going to see what kind of numbers we can get. Thanks again for the help!

Since you're both not good at design/envisioning spaces, I would ask your wife to spend some time with you creating a collection of interior and exterior images you both LOVE and write down why for each one. Eliminate anything one of you hates or that is unrealistic for your lifestyle. Organize it into categories (these paint colors/tones, this style of doors and trim, etc.) and then have a realistic conversation together or speak to a designer and see if any amount of money can make your wants a reality. If you have an airy, open-plan McMansion and you both just adore warm, cozy mid-century modern spaces, it's not going to happen in your current home. Expect to pay for a consultation, but going into a big budget project with realistic expectations is important.

What exactly has she done with hours of pondering paint colors? Just looking at pictures? Or driving the neighborhood, choosing samples, and painting test swatches? There is a process to this stuff that anyone can do, but it requires certain actions that narrow choices through a process of elimination. It is doable on your own, but you need an action plan and you will have to set deadlines for yourself.

2 small bathrooms for $10k sounds low to me compared to your other costs. Is one of them a half bath? Or maybe you're just updating paint, surfaces and fixtures in these? For comparison, it cost me close to 3k to do a total gut/redo of one small bathroom completely on my own. I was quoted 10-12 to have it done by three contractors, and I'm not in fancy-pants CA.

Be careful with your door and door hardware choices. I'm assuming on a 3000 sq ft home you probably have 2-3 exterior doors and at least 14 interior doors. Designers are going to steer you toward pretty choices, and that gets hella expensive. You could easily get talked into spending half your budget on just a new front door with installation, especially if you're juggling a bunch of choices at once.

No flooring updates anywhere other than kitchen/baths? All of your house needs updating except floors? That's unusual. Are you going to be happy with the existing floors after everything else is new? If it's even a question, make that decision now. Floors before trim.

It's also important to note that your list above does not include any furniture, rugs, curtains, decor, or art at all. Maybe you're planning to keep everything you currently have as it is, but remember that paint color and changes to lighting will change the way your furnishings look in the space. Even going from a warm white to a cool white will make a difference. If you are going to use a designer, you should be very clear up front that you are not buying any new furniture and the current furnishings need to be considered in the design. Of course, it's stupid to spend 200k updating an interior space around furniture that's going to be replaced later, so really think about what furnishings you have that are forever pieces (family pieces, antique rugs, original art, etc.) and which ones are going to be on Craigslist as soon as they get a few stains or dings.

That said..... you can save a ton of money doing it on your own without a designer. Not just because of their fees but also because their job is to bring you 3 choices that match your vision so you don't have to look at 150 choices. Their choices are going to be in a higher price range than anything you would probably find on your own. But since you are set on using one, choosing the right person is important. You want them to have experience in the aesthetic you want, and primarily work with clients in your price range or lower. You don't want to be the cheap client that balks at every item they show you because it's too expensive, or the lowest project on their priority list. Saying no wears people down, so go with someone you can say yes to more often and you'll all be happier.

partgypsy

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Re: Strategy help in funding home renovations, aka "too much" in 401K
« Reply #35 on: June 09, 2020, 12:46:05 PM »
I actually think if you include a designer those prices are not outlandish and may actually be low. My sister worked for a interior designer a decade or so ago and the cost of the designer doing a single room was 10-15K, going up from there. I'm talking about a living room. For a kitchen, who knows. 
My only question was if some of those things really need to be replaced (windows, doors). Also what is not on that list that might need to be included once it starts going (flooring, structural). 

If you hire a decorator/interior designer, the whole thing is going to be at a different price point (and some argue quality). I mentally assume any decorator in CA is going to be $$, but yes do your research and see if you can find one who is sympatico to your vision and price point! Ask the neighborhood. Saving pictures from magazines or creating a pinterest of rooms is really useful homework to do. Discuss and get to some agreement with your spouse about overall visuals, and where you think the money should be spent beforehand, so you don't have to hash this out in front of the professional. Having 1 person be the contact point for the designer avoids miscommunication/duplication.   

What sometimes is an option is hiring a designer to basically make sketches of how different parts of the house should look, color schemes. Basically hire them for 1-3 consultations but not do the work or purchasing (some designers will do this; others will not).   
« Last Edit: June 09, 2020, 12:53:57 PM by partgypsy »