Ready to remodel but stymied by pandemic? Here’s what you can prepare now – Minneapolis Star Tribune

Like everyone else, you've been spending lots of time at home during the past several weeks. And you've probably become more acquainted with all the flaws in your home: the outdated kitchen cabinets, the frayed carpeting in the family room that needs to be replaced by hardwood, the spare bedroom that needs to be converted into a dedicated office.

Maybe the thought of a renovation has crossed your mind. But this couldn't possibly be the right time for one, could it? Well, it depends.

Amid the coronavirus pandemic, home construction - including remodeling - had been deemed an essential business under the original stay-at-home orders in some states. But whether a specific project is considered appropriate is a matter largely determined by homeowners and contractors.

"Putting a roof back on is essential," said David Merrick, president of Merrick Design and Build in Kensington, Maryland.

Merrick, who also serves as chairman of the government affairs committee for the National Association of the Remodeling Industry (NARI), said contractors are more likely to take on outside rather than inside projects. In the case of a customer seeking to renovate the basement of her Washington, D.C., rowhouse, the decision was made to wait until the late spring or early summer when everyone would feel more comfortable.

Not surprisingly, home construction activity nationwide has fallen significantly since the covid-19 outbreak, according to the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University, and is not expected to recover until well into 2021.

The slump in activity may work to your advantage, experts say. Because work has dried up, some contractors may be more willing to give you a better deal on the pricing than they would have several months ago when demand for their services was high.

If you opt to wait until the pandemic eases, experts say, you can still use this downtime to plan your project and get on your contractor's radar.

"If you have a four to five month timeline, you can talk to friends on who they used and look at Angie's List reviews on their performance," said Kermit Baker, project director at the Harvard remodeling program. "You can do your due diligence as you prepare to get the project ready."

Once you decide on what work needs to be done and when to do it, be sure to put your order in right away. "If you wait until September to place your order, 1/8contractors will3/8 have five months of orders in front of you," Merrick said. Then, it will "be hard time to get the contractor to return your phone call."

Here are some other factors you can consider ahead of time during this lull:

Budgeting and financing

Probably the best thing you can do is not get too caught up in the aesthetics but to invest considerable time concentrating on the logistics.

"Every home improvement project will cost more than you think it will and will take more time than you planned," Bob Harkson, chief financial planner at Phase2 Wealth Advisors in Gig Harbor, Wash., told The Post in May 2019. Harkson said the biggest problem he sees with his financial-planning clients is that they haven't budgeted enough.

The tricky thing about home improvement is maximizing your return on investment. You want to spend money that will yield a return when you sell your home, but not overspend way beyond what a buyer would be willing to pay you. So how do you find the sweet spot?

Experts say that kitchen and bathroom renovations are among the projects that provide homeowners the best yields. According to Remodeling magazine, kitchens recouped 62.1% and bathrooms 67.2%. Others include: 70.8% for windows; 75.6% for siding; 68.2% for roof; and 75.6% for deck.

Dan DiClerico, a smart-home expert for HomeAdvisor, a New York-based home improvement platform, offered this rule of thumb: "You should spend about 5 to 15 percent of your home value on kitchen renovation," DiClerico told The Post in May 2019. "So, if your home is worth $300,000, you should spend $15,000 to $45,000 on the kitchen. A bathroom renovation should cost about 3 to 7 percent of your home value."

If you're into analytics, HomeAdvisor's State of Home Spending offers data and charts to help you determine whether your budget is in line with what other homeowners pursuing similar projects paid. Another useful source is the Remodeling Cost vs. Value Report, which offers searchable databases to compare renovation costs by Zip code.

"The more thorough you are in the planning stages, the more likely you are to come in on budget for your project," DiClerico said.

A major component of planning involves accounting for surprises. Sonu Mittal, head of retail mortgage lending for Citizens Bank in Plano, Texas, said you should budget an extra 10% for unforeseen expenses.

So how do you pay for a home improvement project? There is no shortage of methods. Here are a few:

Savings: This is the easiest because it doesn't require getting approval or paying fees and interest.

A Federal Housing Administration (FHA) 203(k) or Fannie Mae HomeStyle Renovation loan: "An FHA 203(k) loan offers flexibility because you can finance up to 97.75% of the improved home value," Catherine Holtman, operations support manager for Embrace Home Loans in Middletown, R.I., told The Post in May 2019. "There's a streamlined version for improvements up to $35,000 that are nonstructural and a standard version for major renovations including structural changes."

Home equity line of credit (HELOC): This provides homeowners flexibility in that they only pay interest on the line of credit they use, and the closing costs are minimal.

Cash-out refinance: Borrowers should keep in mind that closing costs for cash-out refinancing is higher than a HELOC, but interest rates are lower.

Personal loan: A personal loan is best for borrowing smaller amounts because it has to be paid back sooner and have higher interest rates than a HELOC.

401(k) loan: The loans have a low interest rate. Financial advisers discourage these type of loans because they must be paid back immediately if the borrower leaves their company.

Credit card: This is a simple way to pay for a project. However, they come with high interest rates.

Undertaking a major project

Before embarking on a major renovation, you should take some time to determine the best approach given your budget, timeline, patience and willingness and ability to do some of the work yourself. Here are seven methods:

Design-build firm: These firms, which include designers and architects, can manage the project from beginning to end and oversee all the subcontractors. The downside is that they can be costly.

Kitchen designer: These firms specialize in kitchens and can often provide a more custom look for your project.

General contractor: A general contractor is best for people who know what they want but need someone to manage the project. Because of their relationships with vendors, general contractors often can get discounts on supplies.

Specialty kitchen store: These retailers offer discounts on kitchen components and fixtures and custom services.

High-end design firm: This is for homeowners who want the best of the best, and don't mind paying for it.

Big-box store: Stores such as Home Depot and Ikea can often get special discounts on labor and can generally offer their services at prices lower than general contractors.

DIY: For people who would like to save a ton of money, and are also handy.

If you're pursuing a bathroom renovation, for example, keep in mind that 50% to 75% of the project's cost will be labor. So it's important to educate yourself on how to negotiate labor costs or hire a contractor who can do so.

Working with limited dollars

If you're looking to start off small to get your feet wet, Zillow offers some suggestions on lower-cost projects that can give you a bigger bang for your buck. For instance, Zillow says spending $3,000 on outdoor "curb appeal" projects such as paint and landscaping can yield $3,500 when selling.

Zillow also recommends that when renovating to sell that you try to incorporate the latest design trends into your home.

When trying to prioritize limited dollars, Zillow recommends that you simply ignore the basement. Basement projects, according to Zillow, yield only 50 cents on the dollar even when a bathroom is added.

Justin Pierce, a real estate investor and real estate agent, suggests that homeowners opting to manage their own projects should use a construction journal to stay on top of the project and to give them a record with contractors when something goes awry.

"Keeping a journal has really helped me," Pierce wrote in a Washington Post column in July. "If things go badly, it can be useful in court or arbitration. Contractors, especially shady contractors, are good at complicating the issue or adding doubt in your mind. They blame delays and increased costs on the weather, additional work, inspectors and the client. You may be shocked to receive $10,000 in change orders at the final accounting. This is impossible to unravel six weeks down the road. It's best to note things as they happen and share milestones and your understanding of them with the contractor."

Pierce said the journal should include the start date, major milestones, inspection dates, subcontractor work schedule and change orders.

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Ready to remodel but stymied by pandemic? Here's what you can prepare now - Minneapolis Star Tribune