Great Ideas!

No one likes to cut a budget, especially when it’s his or her own. But when it comes to planning a remodeling project, homeowners must establish a realistic budget . . . and actively manage it.

Preparing for a remodeling project is a lot like preparing to buy a car. You may know the room and style you want, but the options you choose may drive the price higher than you can reasonably afford. But there are ways to stretch the remodeling budget and end up with stylish results within budget.

Getting Started

• Hire a professional contractor who is familiar with the building codes in your area. Updating work that does not meet code can be extremely expensive.
• A well–written contract can prevent costly mistakes or additions to the scope of your project. It is a critical step in maintaining your budget.
• Save money by planning ahead. Go through the design process first and choose everything you want to include in the new room(s), from appliances to light fixtures, etc. This will define your budget and prevent hasty (and costly) decisions later in the project. Be sure to include all your product and material selections in the contract to avoid confusion and unnecessary change orders. Include the model, size, color, and other specifications. It is also wise to save 10–20 percent of your budget to allow for items added to the scope of work.
• The number one way to decrease the cost of your remodeling project is product choices. Look around to determine whether you can achieve a similar look with a less expensive product.
• In addition, pay attention to how labor intensive some design features may be, for example laying ceramic tile on kitchen countertops and the backsplash.
• Compare products and their prices carefully before you make final decisions. And keep an open mind when you discuss product and design ideas with your contractor.
• Make decisions based on value and quality, not just price.
• Think about staging the work being done to minimize the initial financial impact. It is often easier to create a more manageable budget by starting small and adding to the project at a later date. This will break the work into several jobs instead of one large project. The down side of staging a remodel is that you may end up paying more in the long run.

How Much Can You Afford?

This question alone is enough to strike fear into anyone’s heart. The truth is not many people enjoy establishing a remodeling budget-and many just don’t. Many homeowners prefer to call a remodeling contractor and expect him or her to create the budget for them, which is not the best way to begin. How do you start off right? You can begin by taking these four easy steps in the right direction:

Step One: Decide how long you plan on staying in your home. The length of time you intend to stay in a home will affect how much money you should invest in it. If you are going to stay in the home for more than ten years, you should spend as much as you are able to create the home of your dreams. However, if you are planning on moving in the near future, you should take care not to over-build for your neighborhood. Look into the real estate comparisons for your area and keep your investment in line with the average home sales price. You don’t want to invest thousands of dollars you won’t be able to recoup at closing.

Step Two: Make a list of all your debts. You should include any debts you pay on a monthly basis, such as mortgages, car loans, credit cards, and any other items with a fixed monthly payment. This list should not include payments for groceries, utilities, telephone services, or other general expenses. Call this list your monthly expenses.

Step Three: Determine your total gross monthly income. Include all sources of income that you would list on a loan application.

Step Four: Complete the following worksheet to determine how much you can afford to pay for your remodeling project on a monthly basis. These formulas are used when the remodeling project is going to be financed. Warning: Cash is not always the best option!

Calculations 101

Step 1 – DTI

Landers use simple Debt-to-income (DTI) ratio to determine if a homeowner can afford the additional debt of a remodeling project.

DTI

Enter Your Total Monthly Expenses $________

Add the Estimated Monthly Payment for the Remodeling

Project +$__________

Total =$__________

Divide the Total by Your Gross Monthly Income  $__________

DTI %=___________

Each lender will approve loans at a specific DTI percentage (most lenders will tell you what their set DTI ratio is, if you ask). For example, if the lender accepts DTI ratios of 45 percent and your DTI ratio is 30 percent, your loan would be approved. However, if your DTI ratio is 55 percent, you would need to find other financing options. Perhaps your lender offers debt consolidation loans that could reduce your DTI ratio, which brings us to the next step:

Step 2 – The Maximum Payment

The next step is to determine the maximum monthly payment you can afford for remodeling. Multiply your monthly gross income amount by the lender’s maximum DTI allowance, and subtract your current total monthly expenses, excluding the estimated remodeling payment.

Gross Monthly Income $___________

Lender’s DTI ratio x____________

Subtotal = $____________

Total Monthly Expenses – $____________

Maximum Affordable Payment = $_____________

STEP 3 – Consolidation

If your DTI ratio was above the lender’s accepted percentage, or if your maximum affordable payment was too low, you may want to consider a debt consolidation loan. This would incorporate your current debts into the home improvement loan. Not only does this allow you to roll your debts into what may be a tax deductible loan, it also provides one easy payment for your debts and lowers your DTI percentage. In addition, the interest rate on a debt consolidation loan may be lower, which will save you additional money.

The basic premise of construction finance is to utilize existing property value to leverage against borrowing funds to allow for building construction and property improvement.  As the value of the property increases, more funds can be advanced to complete the next stage of work.

Construction stages or milestones are based on a predetermined degree of work completion that would effectively increase the value of the overall property.  For instance, a completed basement is of more value to a property than a partial hole dug for the purpose of putting a basement in.

At each of the predefined stages of construction, the lender would either self evaluate the degree of completion, or ask a third party professional, like an appraiser, to validate the work performed to that point.  If the work to that stage is satisfactorily completed, the lender will provide a construction draw payment and work can begin on the next stage, repeating the same process.

Construction financing requires solid project management to make sure that 1) the project advances in an orderly fashion; 2) budgets are accurate and relate to construction financing loans arranged, and 3) the administration process required by the lender is well managed so that funds can be paid out without delay.  There are many risks to construction financing applications including:

1.

The budget does not reflect the actual costs, causing the project to be left incomplete.

2.

The work flow does not align properly with the construction stage schedule for advances, causing the project to have no further money available to complete the existing stage before future advances can be made.

3.

Accidents, weather, or other unplanned events push up the costs of the overall project beyond the level of financing available.

As a result, construction loans can be hard to secure, depending on your financing profile and the specifics of the project you’re undertaking.

For a residential construction project where the house involved is a small to medium sized house, there will be more sources of financing available, especially if you have strong credit, an average to above average source of income, and a level of net worth that provides additional security to a lender.

As these elements of a borrower profile are reduced and overall project risk elements go up, the sources of available financing will go down.

For example, if a borrower wants to build a multimillion dollar residential home and has a strong credit profile, there will still be fewer lenders interested in this type of project due to its size and the amount of capital required.  More money in the construction process will lead to more complexity, and more things that can go wrong, pushing the project into a “no thank you” category for some lenders.  A less optimal borrower profile will result in still fewer lenders.

Borrowers also have to be very careful in their cash flow planning to allow for contingencies and to also remember that the lender will retain construction holdbacks and not likely pay for any type of retail or goods and services taxes associated with a construction project, so these need to be budgeted separately.

For commercial construction loans, the principles are basically the same.  However, due to the higher level of risk associated to construction projects, the available lenders are significantly less.

Construction projects for tenanted buildings can require certain levels of presold units or occupancy commitments not only at the beginning of the project, but at different stages of completion as well, further complicating the construction finance process.

Main line banks, credit unions, and trust companies will select construction projects to finance the same way they approve any type of personal or business financing opportunity and that’s based on very low risk criteria.

As a result, there are many construction loan requests that cannot be approved for what most would call “bank funding”.   And even though many of these projects are financially solid, they will still not qualify for lowest risk forms of construction financing due to the overall risk profile.

A large secondary market for construction loans is private lenders.  These lenders tend to charge slightly higher rates, but are also prepared to fund deals that do not have the same levels of security required by main line bank deals.  Private money is actually a major source of construction loans, especially in the commercial construction market.

And even though the private sources will charge more, the reality is that construction financing is only required for a short period of time, so the additional costs can still be manageable within the budget of the overall project.

Private funders may also provide greater flexibility than banks when it comes to construction financing applications.  For instance, privates may be more flexible on construction stage definitions and the requirements for qualifying for draws and advances.  Privates also can offer more flexible financing requirements where the private lender will provide finance up to 100% of the project costs, depending on the overall security position of the underlying property.

While construction loans are very common due to the amount of building that takes place every year, there is still considerable complexity and risk to manage.  Those who go into the process uninformed can experience significantly higher costs and even disastrous results if the project cannot be completed.

Before you start into a construction project requiring construction financing, you would be well advised to seek the assistance of a financing professional to help you locate the source of financing and related program that best fits your requirements.

While most contractors are generally not directly involved with the financing of a construction project, understanding the process of financing and how it relates to a construction business is extremely important. The following outlines many of the most common sources for obtaining construction loans.

Commercial Banks:
Commercial Banks make single-family short-term and a limited number of long-term loans. They are generally the largest construction lenders on multifamily and commercial projects. They also make short-term loans to mortgage banks and to real estate investment trusts (REITs).

Savings and Loan Associations:
Savings and Loan associations are the largest of all lenders of both construction and permanent or long-term loans on single family housing. They also make a considerable number of construction loans for multifamily residences such as apartment houses and condominiums.

Mutual Savings Banks:
Mutual Savings Banks are generally located within the northeastern United States. Their mortgage investments are generally concentrated in single family permanent mortgages. They tend to make only a limited number of construction loans, but do make long-term loans to mortgage bankers and to real estate investment trusts which in turn make construction loans.

Mortgage Banking Companies:
Mortgage Banking companies make a significant number of loans for construction and land development but are mainly intermediaries between borrowers and lenders.

Life Insurance Companies:
Life insurance companies do a minimum amount of temporary construction lending. Their principle commitments are long-term loans on commercial and multifamily projects.

Real Estate Investment Trusts:
These trusts provide long-term mortgages on commercial and multifamily projects and a limited amount of construction loans.

Government Agencies:
Approximately every sixth house built in the United States is financed by the GI loan program. The Veterans Administration (VA) makes construction loans on housing for veterans, their dependents, and other beneficiaries of deceased veterans. The Federal Housing Administration (FHA) insures mortgage loans made by approved lending institutions, however, FHA does not lend money.

Other Sources for Loans:
Finally, miscellaneous sources of loans which should not be overlooked include individuals, syndicates, service organizations, and Community Housing Authorities.

Those who talk about spa today know little or nothing about the word’s origin. We do not include in this category scientists, spa resort owners, hot tubs manufacturers, geography and history passionate learners or Belgian citizens. Why not Belgians? Well, just because the famous mineral springs in Spa, Belgium, are the reason why the common noun spa is so often used nowadays, denoting not only places with medicinal and mineral springs, but also a “tub for relaxation or invigoration, usually including a device for raising whirlpools in the water.”

It is the very tub for relaxation we have to consider when we think about the home spa, and a few other elements necessary to create a comfortable atmosphere. The ones who visit spa resorts seek tranquility in a healthy environment. And they pay for it. Every time. If you are a busy businessman, or woman, with just about no free time, visiting a spa to release stress might sound like a nice option, as long as you can make it there before the closing hours.

Many people have too much to do and close to no chances to find the time to combat the effects of the stress. Besides, there are also people who cannot afford to spend each week a small fortune to experience the benefits of a day at the spa. So let’s bring the spa resort home…

What is a home spa? To put is simple is a spa resort in the comfort of your own house. No schedule, no entrance or club fees. You can go in and out whenever you want. There is just one catch to it: if you want to socialize there’s no one around but your cat (that’s if you have one)

Whether you plan to build a new bathroom, or just to remodel an existing one, plan a step ahead and create a modern, comforting environment. “Modern” doesn’t refer to a futuristic design. In fact, building a bathroom that reminds of the Roman thermae is as modern as building one that takes you on a trip to Mars. A modern design combines technology and fantasy to create the bathroom of your dreams: a unique space where you can relax after a hectic day at work. Many of the contemporary bathrooms are more practical than relaxing. Some are small and uncomfortable, some are large and cold. No matter the space you have to work with or your budget, a bathroom can become a pleasant, luxurious spot. All it takes is careful planning and the will to succeed.

Don’t get this wrong: luxurious doesn’t necessary mean expensive. In this particular case we refer to “something inessential but conductive to pleasure and comfort” as the “American Heritage” dictionary defines luxury. With so many offers and manufacturers out there, you’ll find options to accommodate any plan.

The building consultants from EEKHOF Objekt Beratung have gathered a few tips you might want to consider when planning your relaxing bathroom. Let’s take a look at what they could come up with:

- Water, combined with other elements such as light, aroma and sound, is a perfect relaxer. For large rooms bathtubs are a must. The long, rectangular bathtub is out. Nowadays there are hundreds of different styles, shapes, and features including massage tubs and soft bathtubs available for everyone to choose from. The most durable bathtubs are also the heaviest ones since they are made from enameled cast iron. So, if you go for the best, that’s your choice. Acrylic reinforced with fiberglass tubs are lighter and come in more complex styles than cast iron. Fiberglass bathtubs tend to scratch too easy – so we wouldn’t recommend them as a long-term investment. When it comes to color and revolutionary materials, for more design options we would recommend Quarry cast bathtubs. Quarry cast is a mineral crystal composite developed by Victoria & Albert, a UK manufacturer. There are also bathtubs designed to fit in small spaces. All you need is to browse the web and you will find the right one.

- Built-in showers are a good choice for small rooms. Yet, don’t think that showers cannot bring you that spa feeling you long for. Showers have evolved and now they are able to bring you as much pleasure as a sophisticated bathtub. Such products are also known as “shower towers”. Designer showers provide new relaxing means: therapeutic massages, rain-like feelings, or experiences similar to a steam room at a health club or spa.

- To perfect the luxury feeling, more and more people prefer to warm up the cold floor tiles in their bathrooms with electric heating systems that fill the room with floor-to-ceiling warmth. Try the Upon or products if you are looking for a market-leading manufacturer, or look for other products such as the ones offered by Radiantec, Warm-up, Heat link. No more chills after a hot bath on a cold winter day.  “House building”

Craftsman homes imbue warmth and simplicity, a getaway from today’s hectic everyday life. By incorporating a few elements with a Craftsman touch, you can transform your house into a cozy and inviting bungalow.

* An inviting entryway: The front door sets the tone for the entire home and adding a premium wood Craftsman-style door, like those offered by JELD-WEN, can truly add traditional appeal. These wood doors feature clean lines, simple flat panels, squared sticking and optional shelves.  Because incorporating light is important to creating atmosphere in an Arts and Crafts home, doors can also include decorative glass designs that enhance the natural light and ambiance of the house. Selecting a Craftsman entryway can set the stage for an interior’s decor and leave a lasting impression on anyone crossing the threshold.

* Earthy appeal: Traditional Arts and Crafts homes are painted in earth tones, emphasizing natural warmth inside and out. Choose greens and blues for a bold splash of color in the great room or living room; paint trim in whites or leave molding a natural wood color for an earthy feel. Creams and taupe have long been associated with the Craftsman style, and incorporating these colors into your home furnishings or decorations will add to its appeal. Bringing plants into your home’s interior will also help achieve a warm, natural Craftsman feel.

* The finishing touch: Craftsman or Mission style furniture is an important element in creating a simple, earthy environment in your home. This furniture is extremely popular and can be found in stores as varied as woodworkers’ studios, antique shops and even major retailers.

Most often known for its simple but sturdy design, Craftsman furniture, found in a wide variety of wood species including red oak, mahogany and walnut, is recognizable by its slats and spindles, hand hammered copper hardware and geometric lines without ornamentation. With the right pieces in place, furniture can put the finishing touches on your Craftsman home.  “House Building” by Mihaela Lica (NewsUSA)

Steel doors can be expected to give a much longer service life. Even in hostile or high usage applications than the other alternatives, it is important that they are galvanized to prevent rusting, a problem especially for outside applications. Corrosion is not only unsightly but in time will reduce the integrity of the door and frame.

There are environmental benefits of fitting steel doors. Not only do they have a longer life, but unlike wooden or plastic doors, they do not deplete valuable resources. At the end of their life, they can be recycled. Thermal efficiency can be improved by using Rockwool filling and good quality door seals.

Steel Doors do not swell or warp in damp weather. They do not need ongoing maintenance to retain their appearance and integrity.

Because of the material, all steel doors are fire resistant. Certified fire rated doors are available when a greater level of protection is required.  Most certified doors offer at least 4 hours protection.

Since most modern steel doors are now supplied with easy fit adjustable frames, they are very easy to install with only a limited amount of finishing off required.  “Tech Notes” by Haldis Ackworth

Elevator and Stairway-An elevator shaft or hoist way could be a potential chimney and double the peril by bearing what could be the most vulnerable people in the house.

Surprisingly, there are still some residential elevators in modern construction that are installed without a shred of fire safety code.

Keeping standards up to code is more commonly found in fire-blocking wall and floor structure (and stairway structure to an extent). The eminently more airflow-permissive elevator shaft or for that matter the stairwell itself, is all too often overlooked.

Details of today’s Residential Elevator and Stairway Fire Safety Standards are described below.

In regard to residential elevators and stairwells, what’s at stake is fire-degraded wood stud walls and wood ceiling joists collapsing within hoist way or stairwell, engaging cab or stairway. Mid-landings in winders and longer runs, too.

As for residential elevator fire safety, this passage is from Before The Architect’s House Construction Design Standards 1Q06 draft (edited from outline form):

A residential elevator shaft, or hoist way, shall be framed with lightweight, or cold-formed, steel. Where exterior surfaces are available for wallboard application, exterior walls shall be finished with 1 layer-5/8″ Type-X gypsum wallboard taped and mudded not less than 3 coats, and where the interior wall surface with 2 layers-5/8″ Type-X gypsum wallboard taped and mudded not less than 3 coats (remembering to adjust shaft framing dimensions to accommodate thicker interior clad).

Similarly, the shaft ceiling shall be framed and sheathed on exterior and interior by a door at each stop fire-rated, self-closing, self-latching, and smoke-sealed.

Within the cab and outside the door at each stop a smoke detector shall be applied according to manufacturer instruction, shall be permanently connected to each other overall throughout the residence such that when one or more alarm, all alarms throughout the entire house, shall run on both permanent 120V and replaceable battery with each alarm to feature a combination of ionization and photoelectric sensors and shall not disconnect by wall switch.

As for residential stairway fire safety particularly to structure, this passage also is from Before The Architect’s 1Q05 e-book: For other than the spiral staircase, sheathing shall be fastened underneath from outer stringer to outer stringer including header cleat with 1 layer, 5/8″ Type-X gypsum wallboard [existing standard].

Where walls run below or immediately next to outside stringers, walls shall be framed with lightweight, or cold-formed, steel and exterior sheathed with 1 layer-5/8″ Type-X gypsum board.

If continuous Type-X envelope cannot be applied on the vertical below a staircase, then contractor shall frame with lightweight, or cold-formed, steel and sheathe the interior with 2 layers-5/8″ Type-X gypsum wallboard and where applicable on the exterior of the wall sheathe with 1 layer-5/8″ Type-X gypsum wallboard.

“Before the Architect” by Ralph Press (House Building)