Advice about a Home Improvement Project

[robman]

Hi all,

I am completely new here and struggling with a financial decision. I'm considering building a retaining wall in my back yard which will increase my usable back yard space twofold. I've had a couple estimates and the work is going to cost me 25K including the cost to rebuild my yard when the job is done. I'm also considering building a 10K covered patio.

In terms of liquid assets, we have a 15 month reserve. If I do the first job my reserve will drop to 9 months. Should I borow this money or spend the reserve or can the project until financial times are looking up?

[familyof4]

Will the 35k in work to your property ever be regained in a sale of the home? Do you have equity in the house now or will this give you the extra value so you do put your property above the current loan/value ratio?

Would doing this work adjust your way of using, living, enjoying the home to the point where you can seriously justify the cost?

I suppose many factors come into play as far as if you are set on completing the work. Do you have a single fixed mortgage? Home equity loan? How long would it take you to build up the 6 months reserve back, after the building project? Where will the other 10k come from after the intial work is compelte and you want to build the patio?

If you add value into the home and you can still maintain 9 months of reserves, I think you are doing fine as long as you set up a plan to repay the reserve account. Isn't this what the savings is meant for.. to be able to purchase and not create debt?

I have found that once I started a project on my home and got the initial stages complete, I was motivated to see the next steps complete. We added an addition on our home and started the work in 2002. We completed portions at a time with cash and finally this past winter refied to a 20 year fixed, cashed out 13k to finish the inside.

I am by no means an expert on this forum and have my own saving issues to overcome. If I had 15 months reserve and little debt, I would use some of that to invest in my home if it was going to help the value and increase my enjoyment of the home.

[robman]

Thank you for the comments. We have a 50%LTV even with today's market conditions and a single fixed rate mortgage. The work to the house would improve the value by probably around half the cost at my estimates. We have no debt sans mortgage and two cars that are only 5 years old and paid for. With the declining economy some of the labor is really cheap now and the materials costs havent escalated by much yet. The only thing working against me is that we are a single income family for at least another 3 years when both kids will be in school but I still feel comfortable with a 9 month reserve, it's just hard to write that check.

Thanks again, I welcome the input.

[familyof4]

I would wait for some of the more experience posters to give you more solid advice. The best rule to follow would be try to get it at a lower than estimated cost if you can afford it.

[maat55]

If you sense a financial grey cloud coming, you should wait on this project, but in any case, you should pay cash and rebuild the EF to your comfort zone.

[Scanner]

I would say go for it if you plan to stay in your home 7+ years or more.

If not, and be honest, I wouldn't do it.

I also thinking dropping from a 15 month reserve to a 9 month isn't too risky, as you can replace the reserves probably fairly quickly to 12 months and be within a good margin.

[Scanner]

I'm considering building a retaining wall in my back yard which will increase my usable back yard space twofold.

and

The work to the house would improve the value by probably around half the cost at my estimates.

Also. . .I appreciate your penchant for estimating conservative but IMO, if you actually increasing usable property (backyard for kids, property for a swimming pool, etc.), you may be able to recoup more.

I find a lot of the "old rules" regarding property are flying out the window. Land is at a premium now and if you are in effect "creating it", you may get 100% on return.

Now. . .I am being "liberal" with my estimate and it is correct to estimate conservative but the truth is probably somewhere in between.

Now, one place you may want to cut corners is on "sodding." I prefer seeding. It's a little extra work (throwing peat moss around, aerating) but to me, it's more hardy, it's cheaper, less maintenance, and to me gives you 80% of the look of sod (not quite as thick but still nice looking).

I think Americans have been on a "sod craze" the last 10 years.

[robman]

Thanks for your comments all. I'm probably going to stolonize the yard, it works really well here in Hawaii.