A Major Home Expansion Renovation

[Fishindude77]

We've been in the same home for 31 years, a 100+ year old farm house which started out pretty crummy, but we've gradually turned it into a pretty nice place. After a couple friends built new places, and seeing how nice those places are, we've kind of gotten the bug to do a big renovation & expansion on this place. There are just a lot of nice home amenities that we've never had, that would be nice for our last years in this home (I'm 62, spouse 59). Some of the big wants include:
* A large master bedroom with full bath, walk in shower, huge closet, etc.
* A huge kitchen with large island w/ stove, all open to rest of the living area.
* Large area to have meals with family, friends, etc. (can currently only seat 5-6)
* Much more open floorplan with kitchen, dining, living room kind of all together.
* An additional full bathroom and half bath (currently only have one large bathroom)
* A dedicated laundry room with big folding counters, etc.
* Big pantry closet in the kitchen
* Centrally located gas fireplace
* Make everything old fart friendly; no steps, wide doors, wheel chair accessible, bars in showers and restrooms, ADA height fixtures, etc.

We've gotten plans prepared and its a pretty major project involving additions on two sides, and pretty much total gut out remodel; new plumbing, HVAC & electric, new roof, windows, doors, siding, all new interior finishes, etc. Will be pretty much like a new home when done.
Got my builder quote yesterday and price tag all in, including the things we are going to have to purchase is winding up somewhere between $550-600k (I'm working on a spread sheet). NOTE - Moving to a new house or building new elsewhere is not an option, current home is part of a large family farm.

This would consume about half of our liquid cash savings outside of retirement IRA ($2 mil), net worth approx. $6 mil much of which is real estate. We spend about $140-150k annually, have about $70K in income from real estate and various things, have been drawing $48k from the IRA (2.4%), and the balance has simple been coming from the cash savings. Have not tapped social security yet, last I checked +/- $33k at 67. Also should be health insurance cost reduction getting off ACA and going on Medicare at 65. We carry zero debt, just monthly credit card bills.

Would be more money than we've ever spent at one time so a little nervous, but thinking we can pull this off without any huge inconveniences. I'm not crazy about making payments, but could also take a look at a partial mortgage to conserve cash? Also, always have the option of selling off a piece of real estate if we ever got in a pinch. Also, we could get by just fine if we didn't do anything. It's a want, not a need.

I'd be curious to hear thoughts on how you weigh big decisions like this?

[disneysteve]

I have no personal experience relevant to this but I'll give some thoughts in general.

1. A "total gut out remodel" would mean moving out for a substantial amount of time so be sure to include that cost in your estimate. Don't forget to add in dining out expenses as you'd probably be eating/ordering out more even if you stay in a place that has a kitchen.

2. What's the remodeling rule of thumb? I think it's that the job will cost twice as much and take three times as long as anticipated. This is even more true when working on a very old property because many hidden issues tend to be discovered once you start opening up walls and floors and such that result in higher costs and longer time frames.

3. Do you need to do it all to be satisfied? I'd suggest the two of you sit down with the whole list of upgrades and prioritize them. Then decide if you truly want to do everything on the list or just your biggest priorities, keeping in mind that you could always do more at a later time.

4. Ultimately, if the numbers work and your remaining portfolio would be sufficient to cover your costs long term, go for it. It sounds like you plan to live out your days in this home so you might as well enjoy it and, as you said, make it a better and safer place to age in place with upgrades geared for that purpose.

5. How to pay for it? You'll find two schools of thought on that. Some feel that the low interest rates of the day shouldn't be passed up and that you should finance the cost. Others would rather remain debt-free and prefer to pay cash. Neither one is wrong.

[rennigade]

We're in the process of finishing up an entire home makeover. Kitchen is last on the list. Should be done within 6 months. Take it from me. I would avoid this like the plague. Both my wife and I agreed that we will never do a major renovation again. If we ever move it will be new construction.

With your budget, why not knock your house down and build a new one in the exact spot? Wouldn't you rather downsize as you get older? No matter how many upgrades or renovations you do, it's never going to feel like a new house. It's over 100 years old. It'll never be air tight or efficient like new homes. You're electrical is dated. Probably have cast iron plumbing. Our home was built in 1990 and technology has improved a lot since then in terms of sealing up a home and new practices builders do that are much better.

We renovated our entire upstairs before we moved in. Just doing the downstairs and living there wasnt fun. And we did most of it ourselves which means it was done much quicker than having to rely on some contractors who aren't reliable.

Also, building from scratch is much easier than renovating. Ask any contractor. The process would be easier if you started from the ground up. You already have a well and septic in place so that's a nice cost saving.

[Jluke]

I was thinking tear down as well and saw rennigade suggested same.

worth asking and getting a quote.

I would be looking into construction loans and eventual mortgage.

Like disneysteve said where are you going to live/eat during the Reno?

I imagine you will want to be close so you can monitor progress. Otherwise a nice long vacation would be an option.

[bjl584]

At 100 year old home you will be looking at some substantial "beneath the surface" upgrades to make everything up to code.
Wiring, HVAC, plumbing, will probably all need upgraded.
You might also encounter things like asbestos and lead paint.

Nothing that can't be dealt with, but I would guess that your budget will balloon once your contractor starts doing the demo and discovers all the hidden things behind the walls.
Just prepare to spend more money and add more time to whatever numbers your contractor gives you
Good luck

[ua_guy]

If writing that big of a check doesn't hinder your retirement goals, then, why not?

I'd also consider a teardown. You didn't mention if the existing structure is one level or not. If it isn't I'd strongly consider tearing down if this will be your final resting place. Make it one level, and do as you said - plan for old age, and think big. ROLL in showers, curbless, huge area around the toilet for wheelchair, wheelchair access next to bed. Seriously, consult an ADA specialist. You're not that old, but I've seen it happen twice now where relatives get too old to live in their places because of stairs and lack of access. And it was really sad because they wanted to stay in their homes, but couldn't.

If the build can be knocked out between the Spring and Fall, consider living in a 5th wheel or travel trailer on the property. It can serve as your residence, job shack, and security HQ while the build is under-way.

[Fishindude77]

Thanks for all of the feedback, definitely some things we've considered, as well as some we've not given much thought to.

This is a six month project (April - Oct), so we will definitely need to move out. We're strongly considering buying another house (whatever is reasonable and close by) to use and keep for a year, then sell it soon as we get moved back in, probably the route we will go. The way homes sell around here, I think we could get our money back pretty quick without sitting on it for long. Have talked about moving in with family, buying a big RV, then selling when done, etc. but neither idea sounds very appealing. Would have to spend some $$ setting up power, septic and water for an RV on site. Isn't much available anywhere real close to rent. Will need to be rather close as farm work, mowing, gardening, etc. will continue during construction, plus we've got several outbuildings and equipment to keep an eye on.

Regarding sticking to budget, I was a professional general contractor for 40 years and built a whole lot of projects much more complicated and costly than this. I worked with a friend to do design work and laid out a multi page scope of work for my GC to use in preparation of his quote. I have a fairly high degree of confidence I can control the budget and will insert allowances in the budget for things that I know could be a surprise. Schedule is big with me, so I'm working with a GC that has the manpower to reliably knock this project out in the six month timeframe. We won't be going out for multiple quotes or a low bid.

Knocking it down and new construction is not an option. I would have done that if it wasn't sitting on the best site on the property and has some real neat features you don't get in new homes, the place has pretty good bones and a gorgeous stone porch that is pretty irreplaceable. About all that will remain of the old home is a large percentage of the exterior shell; walls, roof & floor framework, the foundations, and the stone porch, everything else will be all new, so not too much different than a new home. Total new guts; plumbing, elect, HVAC & finishes. I have no concerns about lead paint or asbestos, any of that stuff is now long gone. The home is and will be two stories, but master bedroom and everything we need will be on ground floor. Upstairs will be a couple bedrooms and restroom for kids, grandkids or guests. The old fart access and accessibility and safety stuff is all worked into the plans.

Will be working the next few days on a spread sheet that will include my contractor costs and a rather lengthy list of all of the items which we will need to purchase direct, such as; flooring, appliances, landscaping, etc., as well as inserting some cash allowances for areas where we wont know exactly what we have until demolition is done, etc. This should get us quite close to the final cost, minus temporary housing. At that point we'll need to make a decision pretty quickly to pull the trigger or not. We're nervous, but I'm leaning towards proceeding for the simple fact that we aren't going anywhere, we've never had a new home, so why not have a nice new place to enjoy and use the way we want for final years of our lives.

I think we could do everything using cash, but will also be meeting with my banker buddy soon to tell him what we're thinking, and talk about the possibility of some short term construction borrowing and / or the pros & cons of a small mortgage.

Thanks for all the input thus far.

[disneysteve]

We're strongly considering buying another house (whatever is reasonable and close by) to use and keep for a year, then sell it soon as we get moved back in, probably the route we will go. The way homes sell around here, I think we could get our money back pretty quick without sitting on it for long. Have talked about moving in with family, buying a big RV, then selling when done, etc. but neither idea sounds very appealing. Would have to spend some $$ setting up power, septic and water for an RV on site.
Will need to be rather close as farm work, mowing, gardening, etc. will continue during construction, plus we've got several outbuildings and equipment to keep an eye on.

Buying a house to use for a year seems pretty extreme and much more risky. The market is starting to show signs of cooling. It's pretty much a guarantee that there will be 2 or 3 rate increases in 2022 which should further slow the housing mania. You could find yourself losing money or even stuck with the place for a while. Also, if you buy a house, then you need to furnish it, or at least temporarily move stuff there from your current house and then move it back.

How much would it actually cost to set up what you'd need for a mobile home onsite? Since you still need to be present to maintain the property, that seems like the more logical route.

[rennigade]

Knocking it down and new construction is not an option. I would have done that if it wasn't sitting on the best site on the property

It absolutely is an option. It's just not one you want to do. No one said to relocate or move a new house.

Good luck with your project. You already had your mind made up but the thread was fun either way. Let us know how smooth it goes and post some pics of the renovated house. With that sort of budget it should look really nice on the surface.

[Fishindude77]

How much would it actually cost to set up what you'd need for a mobile home onsite? Since you still need to be present to maintain the property, that seems like the more logical route.
That has it's own set of challenges:
* Finding, buying and moving in a mobile home
* Prepping ground anchors, perimeter skirting and access steps / deck.
* Utility feeds; water, septic, gas, internet and electric
* Removal and selling the unit, then cleaning up site, terminating utility feeds, etc.

It absolutely is an option. It's just not one you want to do. No one said to relocate or move a new house.
True, I've said from the get go, this is a want, not a need.
The place has some pretty cool historical / architectural features it would be shameful to just destroy. Hard and costly to duplicate.

[Like2Plan]

You are getting into the time frame where your income will determine whether or not you pay IRMAA for medicare. It starts at age 63 (they do a 2 year look back).
link to part B IRMAA: https://www.medicare.gov/your-medica...s/part-b-costs
link to part D IRMAA https://www.medicare.gov/your-medica...ts-at-a-glance

https://thefinancebuff.com/medicare-irmaa-income-brackets.html

They go by MAGI plus they add back any deductible interest--(and it is before deductions). Pulling money from pretax could have an impact on this.

If you were able to get a low interest loan (on one of the properties you own?), it might allow you to better control the timing on the distributions. (Not to mention that interest rates are so low compared to the historic return on the stock market.)

[Fishindude77]

Well, we pulled the trigger and signed a contract with builder, starting in late March or early April.
Whole lot of things to get done in the next several months, including find a place to live.

[LivingAlmostLarge]

I'm curious about complete renovation versus teardown. Everyone i've talked to has said tear down is always cheaper or moving to a different homes than a complete renovation. Mostly because you can't get exactly what you want in a renovation usually and if you do it's super expensive. And with older homes (ours was a 1880s victorian) there are so many problems and upgrades and suprises that it never stays to budget.

So tell us what is the budget and timeframe and work being done? I agree by the way I hope you talked to a ADA specialist and are making double wide hallways, doors to accomodate either a walker or wheelchair. Also to make it one level mostly so you can age in place. Also making it accesible and easy for an elderly person to maintain. There are lot of things you don't think about when youa re 62 and a great age to buy/build the home you live in the rest of your life.

[LivingAlmostLarge]

We're in the process of finishing up an entire home makeover. Kitchen is last on the list. Should be done within 6 months. Take it from me. I would avoid this like the plague. Both my wife and I agreed that we will never do a major renovation again. If we ever move it will be new construction.

With your budget, why not knock your house down and build a new one in the exact spot? Wouldn't you rather downsize as you get older? No matter how many upgrades or renovations you do, it's never going to feel like a new house. It's over 100 years old. It'll never be air tight or efficient like new homes. You're electrical is dated. Probably have cast iron plumbing. Our home was built in 1990 and technology has improved a lot since then in terms of sealing up a home and new practices builders do that are much better.

We renovated our entire upstairs before we moved in. Just doing the downstairs and living there wasnt fun. And we did most of it ourselves which means it was done much quicker than having to rely on some contractors who aren't reliable.

Also, building from scratch is much easier than renovating. Ask any contractor. The process would be easier if you started from the ground up. You already have a well and septic in place so that's a nice cost saving.

what happened to yours?

[rennigade]

what happened to yours?

What do you mean? We renovated our entire house. Ours wasn't that terribly expensive to renovate. It just takes time and a lot of work. I will say I am thankful to have learned a lot of skills from doing it. From mudding walls, electrical work, plumbing, sweating pipes, etc. Skills I can use for home repairs forever. Before the Reno, I couldn't do any of it.