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NOVEMBER 2002

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Renovations the Robinshore Way

by Scott and Wanda Robinson - Part four in the series focuses on how to pay for your renovation project.

We’ve taken several steps in the last few months to help make the new addition to your home or office a reality. We’ve looked at how to decide whether to add a room or start from scratch, how to pick a contractor and how to plan the project with that contractor. But the biggest step to making that dream a reality is to determine how to pay for it. The answer to that question may be simpler than you think. In fact if you are sitting in your home or office as you read this, the financial answer may be surrounding you.

That home or office has increased in value in the last decade – maybe significantly. Depending on the size of the project, the equity in the property may be all that is needed. Additionally, spending the equity in the home or office will likely increase its value at the same time.

Should the equity not be sufficient, there are certainly other financing options. Other types of loans may be available, and interest rates are better right now then they have been in decades. The best thing to do is go to a banker who you trust to get information about what kind of financing may be available.

If this is a loan for an office, and the resulting renovation will make the office more productive, that would be an added bonus with any financial institution.

Once the financing for the project is determined, it is critical to establish with your contractor how he or she will be paid. That could vary depending on the size of the project. It might require an initial down payment and a final payment on completion. But if the project is more involved, payments for equipment and supplies could be needed along the way.

After getting a loan, a good suggestion is to set up a separate construction checking account to pay all the construction costs. That way you will have a clear record of all the construction costs and payments.

As we talked about last month, communication with your contractor is a key in the design and construction of your addition. Communication is equally important when it comes to the financial picture. The contractor must have complete understanding of the financing as he or she deals with subcontractors and supplies.

Next month we will look at what to expect
during the actual construction phase.