How to Afford a Renovation: Phasing a Project: Part 2
In Part 1, I covered why phasing a project isn't the panacea it may seem at first - or in other words, why it's really dang complicated. But even in the face of the most difficult and intractable problems, I still can't help but try to come up with potential solutions...so that's what we'll cover here in Part 2.
I can't single-handedly change the economics and realities of owning buildings and doing construction, so don't get too excited that I've got miracles up my sleeve here...but I couldn't leave us hanging on that downer of an ending in Part 1!
By the way, if you haven't read Part 1, you should read it here; it'll place Part 2 in proper context.
Ok, so...now...what do we do? I have four strategies, with a few variations…let’s dive in:
1. First, and most simple: find the money to do the whole project.
As I mentioned in Part 1, the most efficient way to do a project - both in terms of time and money - is to do everything at once. There's no other way to put it. If you really don't have the money to do the whole project now, consider some options:
- Could you delay the project for a year or two, til you've had more time to save up? If you choose to do this, keep in mind that you need to save up *real* money to make this worth it - not in terms of actual amount, but in terms of percentage of the overall project cost. Saving an additional $10k toward a $500k project isn't going to make much difference, but saving $10k toward a $75k project is a big deal! Also keep in mind that while you're saving, the economy is cooking along, and construction prices may be increasing faster than you can save. A conversation with your experienced architect [you *are* working with an experienced architect, aren't you?] and with your accountant or financial advisor should help you put some real numbers together. If you can make some real changes in your lifestyle so you can save up some real money...this could be a great option.
One final note on this approach - as discussed in Part 1, permitting can be quite a lengthy process - and during that time, you're mostly just waiting as the project makes its way through the system. Your architect will be assisting you [and billing you for that time], to prepare for and attend zoning hearings, historic review boards, home owner association meetings, etc, but you won't be under construction [aka paying the big bills] yet. This is prime time to save!
- Could you tap into equity in your home, or get a construction loan? There are a variety of financing options available for homeowners looking to do a major renovation, and it's worth talking to your financial advisor, local banks, and/or accountant to take a close look at what might be available to you. Especially if you've owned your house for a while, and have built a lot of equity, you might be surprised what's possible! As of this publication, interest rates aren't the greatest, but if you wait til we're seeing 3% rates again...you might never do your project. As always, speak to those professionals who know your situation best and can properly advise you here.
- Look into state and federal tax incentives. The Inflation Reduction Act, which went into effect recently, has many tax incentives for home improvements like insulation, switching to all electric [no gas] in the house, windows, skylights, HVAC equipment, lighting, even energy efficient woodstoves! States like Massachusetts, where I do most of my work, also have a robust slate of state programs - like zero interest loans for replacing your HVAC system - so look into what your state [and/or utility company] might be offering. You may be surprised! While these incentives, credits, and deductions mean more paperwork for you and have stricter requirements, I've seen plenty of clients make their projects happen because of these types of programs.
2. Second, put together a sensible phasing plan. While I went into some detail in Part 1 on why phasing *doesn't* work, there are ways to break up a project that can work well. Think of the phases less in terms of rooms or floors, and more in terms of how a GC would conduct the work [an experienced architect can help you with this conversation here].
One of the easiest and best ways to phase a project is interior work and exterior work. If you need both, consider doing one, and then the other. The great part here is that, while exterior work is disruptive, you don't have to move out. You can also split the project over a couple of years. You may not even need a building permit for the exterior work, depending on your jurisdiction and on what work you're doing, and you may not need any drawings, either. Of course I always advocate for working with an architect if you're planning a big project, though - even if you're just "replacing the siding" there can be a lot of subtlety that an architect will capture for you that a builder or subcontractor won't. Also, you may want to move some windows around [related to the future interior renovation], and during the exterior renovation is the time to do it.
This inside/outside split means you're still giving over the whole interior of the house, moving out, and redoing all the systems...but each phase will be faster, since it contains less work. It's also avoiding the complications of trying to phase the interior, but keeping that all as one project!
3. All that said, if you can't find the money to do the whole project, and the "inside/outside" phase chunks are still bites that are too big...you're going to have to scale back the project.
This is just the Law of Budgets: the surest way to cut costs is to, well, buy less stuff. Sure, you can do stuff like choose simpler tile or cut back on the number of recessed light fixtures or switch the kitchen cabinets to Ikea, but those may shave 10-25% off just their categories...a drop in the bucket over the whole project. What you need to do is remove *scope.*
Could you leave the basement unfinished for now [stub up the plumbing for future bathroom/kitchen]? Could you leave the attic unfinished [run electrical for future guest room/office]? Could you cut out the roofdeck? Could you scale back the landscaping, and work on that over time? If you're building an addition, could you scale back the size? We routinely do what I call "micro additions" - as small as 3'x12' - that just make everything on the inside work better. Great design can do that, while also saving a ton of money.
You can take a look at fixtures and finishes as well, but at this stage, we're looking for the big stuff that will really move the needle. Don't cut out stuff that's hard to do later [insulation, HVAC, etc]. And...no fun here...take a hard look at the project. Do you really need everything that's in there? It's kind of like packing for a trip - you'll fill whatever suitcase you have, and you won't wear everything or need everything - so take your time and really ask yourself if you need *everything* in the project.
4. Now for the big no-no:
DO NOT search high and low til you find someone who will tell you what you want to hear! If you have reputable architects and GCs telling you what the project will cost, and cautioning you about various aspects of the renovation that they see might be costly, and those comments are all mostly in line...believe them.
I don't know how many times someone has asked me about their project, I've given them my honest opinion based on 20 years in the industry, and they get upset with me. As if *I* am ruining their dreams by encouraging them to look at the situation factually. I have zero interest - and incentive - to tell you or anyone anything other than my honest assessment of your situation. Invariably, I find out later that they went with the guy who told them what they wanted to hear and ended up spending way more than I told them in the first place - it's a classic move of unscrupulous characters in this industry - lowball to get the job, get into it, and charge, charge, charge once the owner is on the hook. I've even been brought back into projects later to clean up these messes!
That said, that doesn't mean the most expensive solution is automatically the best one. Working with an experienced architect [sensing a theme, here?] can help you sift through the BS. Notice I said "experienced." A fresh-faced newbie architect or the "contractor's wife who does design" might seem like an attractive, cost-effective option, but...you'll end up paying for that in various ways as well.
Conclusion
It is *very* hard to hear that your dream project may be out of reach financially. It's happened to many clients of mine over the years [and me too, on my own house!] - the key is to acknowledge that you're bummed about that, and then go into action to find a creative solution. If you've got a good team, and are ready to make smart decisions and a few realistic compromises, you'll end up with a great project you'll be happy with and proud of.
So back to our family from Part 1: What would I advise them to do? Well, it all depends on the details and particulars of their situation, and in a personal consulting session I could learn more about what they're goals, parameters, dreams, and situations are, I could learn more about the house in question, and I could tailor my advice to all of that.
Learn more about those services here.
Keep in mind that the *best* advice is given by someone who can visit your house with you - someone who knows houses really, really well, and who knows the particulars of your market, codes, regional construction quirks, etc - and can walk you through various options. I do that, as well, over Zoom and in person, though as I'm often saying...finding a local expert is almost always a better bet.
These are tough conversations, but if done right and done sensitively, you *will* find a way to do your project - it just may be a bit different than you initially envisioned - hopefully even in ways that are better!
Thank you for your support, as always! It really does make a difference, and make this work possible. Help me grow my audience, it would be very helpful to keeping this work going!