DocNextDoorParticipantStatus: PhysicianPosts: 32Joined: 01/27/2018
It’s good you are looking at all your options to finance the renovation.
I have done several home improvements over the years from 10K to 125K and have elected to pay cash. With my lower income it took many years of saving/planning which helps in making the project turn out how it is desired. I have always had a back up HELOC in case the funds were not available to pay the bill but never had to tap into it.
Good luck, renovations are always “fun”, I remember fondly the months without a kitchen, cooking everything either on the grill or in a microwave.KambanParticipantStatus: PhysicianPosts: 1949Joined: 08/01/2016Now it needs to be done again but I am going to cashflow a new house. I think Kamban is doing this also. Try not to hurry.Click to expand…
You are right. At this stage in my life I don’t want to take on new debt if I can. I have a combination of savings, continued income from working in my practice, passive income every quarter and also also a back up of my current home which is only 1/5 the value of my new home but is still available if I wanted the money. If I don’t need that I might change it to a rental.
By having a budget, knowing when to exceed ( foam insulation, geothermal heating and cooling, cabling house before the insulation and drywall) and cutting back ( firmly saying no to Hide a hose central vacuum that was pushed on to us, stating that all new homes over certain price range should have it in order to sell later and fancy granite) we will be able to cash flow over a year that it is being built.saildawgParticipantStatus: PhysicianPosts: 225Joined: 01/24/2016
Like many others I would recommend saving and cash flowing it. In sports analogies you have a fantastic offense, I would recommend playing vanilla or basic defense (i.e. not going into debt for purchases). Let your offense take control for a short amount of time and you can take significant risk off the table. Whatever you choose it sounds like you have done your homework, and with your salary you can make up for alot of mistakes. But in the end I think keeping it simple will be the best choice.January 10, 2019 at 8:14 am MST #180144JWebParticipantStatus: PhysicianPosts: 99Joined: 02/21/2017
Why on earth would you not just stop contributing to taxable account so you can pay for the renovation with cash?
Isn’t getting a loan for construction while also putting 6 figures into a taxable account the same as getting a loan to put money into the taxable account?!January 10, 2019 at 8:50 am MST #180152John Q MDParticipantStatus: PhysicianPosts: 7Joined: 01/09/2019
I will try to stop adding to this thread!! Again, Thanks to everyone for input. I apologize for likely being overly defensive at times. FLP is really the only person who I thought had some initial comments that were a little over the top…. but that being said I now understand that is just his/her personality/style… and to be honest I value the input from FLP too!!
I think I can just pay out of cash flow plus the money I have already set aside for project (and will set aside more over next few months). I may just drop my contributions into taxable brokerage for a couple months prn during project as some have suggested. I will likely set up the HELOC, but I don’t anticipate having any huge balance on that debt for any meaningful period of time (<1 year and likely with flows in and out, may never be above 50k). This has been helpful. I won’t go down the pathway of any long term additional debt with REFI or HE Loan (which in all honesty had not been the plan, but was just trying to see what people thought on ALL options).
As far as delaying 12 months to do project, I think that is the 100% right financial call. But I don’t think my plan of taking on small amount (50k max at one time) of debt on HELOC for cash flows with rate at 3.5-4% is really a huge financial mistake either. My spouse would like to get this done. We bought home 5 years ago knowing we needed to fix up and have waited until all student loans paid off, my salary went up last 2 years, built our emergency fund, and have set aside cash for 1/2 of project . And I do have the income/cash flow to essentially pay for it even if that means using HELOC intermittently for 6-12 months.
I have definitely learned that I can still continue to improve! I went back and over last 12 months: I have paid ~30% of income to taxes, saved ~37% (if you include the cash I set aside in Ally acct for the home improvement, extra principal paid towards mortgage, 529 funds, taxable brokerage, backdoor Roths, work 401k, solo 401k wife, etc), and spent about 33%. And some of that 33% is charitable giving and another fair chunk is tuition cost for children. Once I get this project done, I will plan on getting the extra money I have been setting aside on this project in Ally acct this last year more towards my brokerage acct even more.
Thx all. This has been humbling but useful exercise.tjohn7ParticipantStatus: Physician, Small Business OwnerPosts: 2Joined: 01/11/2019
I was in this situation a year or so ago. Was debating whether to remodel or just build new. Decided to go with a third option and just save for a little longer. The housing situation where I live (Birmingham, MI) is on the verge of what feels like a bubble. People demolishing $500k+ homes to build $1.4M on the lot. Pretty ridiculous for people living elsewhere, so I decided to just stay put and see how the market and economy performed. With a (likely) impending slowdown on the horizon I think I made a good choice.
Keep killing it.January 11, 2019 at 11:02 am MST #180507