Hello and welcome to The Vernacular Life podcast, where we talk about anything and everything that goes on in our 1906 vernacular farmhouse. I am Paige, your host as usual. And today we are gonna talk about money. Oh yes, very, very big topic.
We are going to specifically talk about how we are cash flowing this renovation, which means we have not taken out any loans. We are paying this all out of pocket month by month as we go. And we have come up with some systems and some tricks to make it a little bit easier on ourselves so that we’re not completely breaking the bank every month.
And so we’re going to talk about this today, so let’s get into it. Okay, so the first thing I have to say is kind of a preface to all of this, is that we have no experience with construction loans. So if you’re wanting to know how those work, if you’re wanting to know the best way to do those, I have no clue, honestly, because everything that we have done, we have either saved for, or it comes out of our monthly budget.
Any large things that we’ve done, like foundation work, we just saved for it. And we paid for it directly. So we have not done anything involving getting a lender or getting anybody to, you know, give us anything like that. It’s all been purely out of pocket. And I will warn you, doing it this way, it costs a lot of money.
There’s really no way around it. It’s that renovating houses and renovating houses extensively takes a lot of money. So we, anyway, yes, it does. It takes quite a bit of money. We spend almost twice our mortgage on home renovations each month. And that’s just what we decided to do based on how quickly we wanted to get this project done, based on how much has to be done here.
And it’s worked pretty well for the last four years that we’ve had this house. So there are kind of five things that we sort of follow when we’re going ahead and setting up these budgets. Because we set up this budget, I don’t know, maybe three months after we moved in and it’s stuck pretty much the entire time and it’s worked really, really well.
So the first thing to talk about is, before you spend a dime, before you tear into your first wall, before you look at a paint color, before you rip up carpet, the very, very, very, very, very first thing you want to do is to estimate how much this room is going to cost you. Now, if you’ve never renovated before that can be really hard because how do you know what needs to be done?
How do you know if a wall needs to be gutted? How do you know if you need structural work? How do you know if you need new plumbing? You don’t really know all of that, but by estimating the cost upfront, it forces you to really analyze what you need to do in that room and what you want to do in that room and what you plan to do in that room way ahead of time.
And it makes you think through everything that’s going to go on. So you understand not only what you’re doing, but how much it might cost. The way that I did this is, being an engineer. I used an Excel spreadsheet, and I just did that because it was much easier to tally everything up and keep a running total of how much something is going to cost.
And what we did was we knew that we were gonna have to gut the walls. We had done some tests. We had, you know, kind of looked around a little bit. And we saw that there was this horrible spray foam in all of the exterior walls. And there was no way to get it out except to take all of the plaster down.
So we knew that we were going to have to do that anyway. And then on top of that, now you know, I’m normally an advocate of saving all plaster because plaster is wonderful. It’s so nice to sing in. It holds heat better, it’s more historic. But our plaster, I actually think was installed poorly, in that the top coat was de-laminating from the base coat or the scratch coat, which there’s really nothing you can do about that.
You have to pull it all down and put new plaster up. So we knew that because of the condition of the plaster, because the house had had so much settling, because of the water damage and because of this foam, we knew the plaster was going to have to come down. Which means that we were starting essentially with a room at the studs. So what I did is we started in the front halls and I said, “Okay, what do these halls need?”
We need drywall, we need insulation. We need electrical, we need doing compound. We need trim, we need a new windows. We need a new front door, I need lighting. And I went through and I just did some research on how much each of those things cost, because you might be thinking, well, “Paige, how do I possibly know how much drywall I need?”
It’s like, well, you know, a drywall sheet is about four feet by eight feet, maybe bigger. So then measure your room and estimate how many sheets of drywall you think you need and then add maybe 25%. So if you count it and you say, “Okay, I think I need 20 sheets.” Then put in your budget for 25 sheets.
And it may not be right, it may not be perfect, but it’s going to get you close. That’s the point of this exercise, is that you don’t want to do your renovation thinking a room is going to cost you $3,000 and then it costs you $8,000. If you think it’s going to cost you 3000 and it costs you 3,500, okay at least we were in the ballpark.
But you don’t want any ridiculous surprises. So you go through everything like that. You say, okay, “What does my insulation look like?” And then you estimate how much installation. “How much money do I think I can spend on the door? How much money am I going to allocate for lighting, floor sanding, polyurethane, paint.”
Literally, anything that you can think of that might go into this room, list it and estimate a price. And this is where you can really decide where you’re going to save and where you’re going to splurge. But it also, as I said before, lets you get very crystal clear on what exactly you’re doing in the room.
So once you have all of that, once you think you have all of the construction things figured out, once you have all the lighting, once you have all the paint, once you think you have thought of literally everything, you’re going to add a miscellaneous line and add 500 to 1,000 to the bottom of your budget, just in case.
And that’s for all of the stuff that you don’t know, that’s for all of the things that you didn’t realize you’d have to do or didn’t understand how expensive they would be. That’s your safety net. Now, best case scenario, you don’t touch any of that money when you get to the end and you have a little bit leftover maybe for a nice rug or a pretty piece of art or something like that.
But by building that in ahead of time and by really narrowing down on the budget and understanding how much you’re going to spend before you even start the project, you will feel much more in control of the project because you will understand what it’s going to take to accomplish your dream and your vision.
And you will also have a good idea of what actually needs to be done. So then when you go to start renovating, you will have a place to start. So once your budget is figured out, and once you kind of understand how much you expect to spend the second thing to do, if you’re going to cashflow it, is to decide on your timeframe.
Because let’s just say for the sake of easy numbers that you’re going to renovate a room and you’ve estimated it’s going to cost $5,000. If you personally want that room done in five months, then you need to be able to find $1,000 extra a month in your budget to put toward that renovation.
If you are okay with it being done in 10 months, then you only have to find $500 a month. If you can only find $100 a month, then your renovation is going to be done in 50 months. Now we did this step next to because we wanted to get the house fairly done pretty quickly. We wanted to get the living spaces looking nice.
And we moved very fast. I’m sitting in the master bedroom and we did this room in four and a half months, which is insane. But because we knew we wanted to move so quickly, we had to make other sacrifices in our budget to make sure that we had the funds so that each month when we said, “Okay, this month we’re going to do trim and that’s $800.”
And then we have drywall, which is another $300. You know, when we wanted to work on those projects, we needed to make sure we had the funds to support that, which meant that we had to find a lot more in our budget. So the first step is to figure out how much you think you’re going to spend.
And then the second step is figuring out over what time period you want to spend that. And once you know that you can kind of start rearranging your budget. And this is also a really good reality check because if you want the room done in five months, but you can’t come up with $1,000 a month or that’s just not feasible in your budget then you know you’re gonna have to slow down a little bit.
You’re going to have to find some free projects. And free projects are a really, really good way to kind of scratch your renovation itch without necessarily spending any money. So stuff like pulling up carpet, taking down wallpaper, sometimes stripping paint if you’re using like a heat gun outside. Don’t use heat guns inside, please don’t do that.
But projects that just require your time, but don’t necessarily require money are really good to pair with expensive projects so that you can still keep your momentum up without breaking the bank. Now after you’ve figured out how long this project is going to take you, how much time, how much you’re going to set aside each month, we’re not quite done because this is tip number three.
And this has saved us so many times. I can’t even describe how much this particular tip has helped us. And as far as I know, we came up with it when we were sitting, doing our budget, trying to understand how we were gonna pay for this house. I haven’t seen it anywhere else. But if it is from our somewhere else, it’s a great idea.
So when we save for the house or when we set money aside each month to take care of the house, we don’t allocate everything that we’re saving to the current project. We actually split what we can afford roughly 70, 30. So if we can afford a thousand dollars a month toward our home renovation projects, $700 of that will actually go toward the room project or the current monthly project.
So what did we do with that other 300 that other 30%, this goes into a short term savings account. We actually made a separate bank account for it. And we call this the home fund. And this is how we are slowly saving for small to medium sized purchases that need to happen around the house.
So our house doesn’t have air conditioning, it’s never had air conditioning. To put an air conditioning we actually have to get a different furnace because the furnace we have can’t be retrofitted to have an air conditioning unit with it. So it’s going to be a several thousand dollars expense.
And rather than stopping all renovation work for three or four months, while we accumulate that money, we take that 30% that we can set aside each month. And we put that in savings for the home and it’s for purchases like that. It’s for the water heater goes out, the stove explodes. The washing machine is beyond repair, anything like that.
And this is really good because not only does it help you save for larger projects down the road, maybe you need siding, maybe you need windows. Maybe you need something like that. But it also provides a safety net for you for when things inevitably go bad during your renovation.
When, like I said, you come home and your basement’s flooded because your water heater exploded and you now have to pay for flood remediation and you have to get a new water heater. And it’s going to be a couple thousand dollars. You don’t have to stress about it because while you’ve been working on your house and while you’ve been doing these renovations, you have also been saving for exactly that kind of occurrence.
The other thing that we use for this, the other thing we purchased from this particular fund are large tools. So if we need a table saw, we check our home fund. We make sure that we have enough money in there. And then we’ll purchase a nice table saw out of that home fund. When we needed a miter saw, when we needed a router, anything like that, we purchased out of the home fund.
And this doesn’t take away from your renovation because you have the rest of the 70% that you can set aside, but it does give you a way to pay for these things and does give you kind of some comfort really, because you’re going ahead and saving for them every month ahead of time.
Now, you can do the math and figure out how much you want to spend on your room and then figure out that 70% of what number and then figure out how much you should be saving if you want to spend $1,000 a month on your room. You can do all that math if you want. It really just needs to be close.
The concept is that whatever you’re spending on your monthly renovation projects around the house, the active renovations, the rooms that you’re painting, the floors that you refinishing, the bathrooms that you’re retiring, whatever that number is, you need to save about half that much again for your general home fund.
So if you can save $500 a month and put that toward your active renovation projects, then it’s really a good idea to be able to find about $250 to put toward your home fund. And even if for some reason you’ve stopped renovating or you’re burnt out like we are, and you’re just not moving quite as quickly, still save into that home fund because you never know, like even if nothing happens with your home specifically, that is a version of savings.
If your car goes out, if for some reason need finances quickly, you’ve been saving for it all the time. So the summary of that is whatever you decide to spend on your active renovation each month, whatever you can afford, try to put half that much again, a way as part of your home fund.
And again, the home fund is for furnace repairs and for you know, freak appliances breaking and for repair people to come out and for a new electrical panel. Anything large pertaining to the house as a whole can come out of that fund, along with tools and lawn mowers and any kind of large purchase like that, that isn’t specific to a project, go ahead and be saving for that every month so that when something happens and you need those funds quickly, you have them because you’ve been saving for them.
So the fourth tip about cash flowing renovations, and you probably could have seen this one coming is to really learn how to DIY as much as you possibly can. Now, as a disclaimer, I am not saying that professionals are not worth the prices they charge. They absolutely are because they can do things quicker. They typically know the codes better.
They have more experience. They know where to get the right supplies. They’re more familiar with what you’re doing. There’s no doubt that they are worth the money that they charge. However, if you are trying to cashflow this and you are trying to keep your costs as low as possible, figure out how to do as much as you can on your own.
There are a lot of things that don’t need to be hired out. Painting doesn’t really need to be hired out, very basic woodworking, you might mess up a few pieces, but that’s still cheaper than hiring out a carpenter. And the good news is that the internet is a very, very large place, a very large place. And there is a lot of information on there.
There are blogs that have been around for 15, 20 years that are just packed full of information on how to DIY things. Now, from my experience, a lot of the DIY instructions out there are not necessarily the highest quality way to do something. I’m trying to say that very nicely. There are a lot of things that are quick fixes, which is again, no problem if that’s what you are wanting.
You may have to dig a little bit to find people who really understand the correct way of doing things and the high quality way of doing things. And you also probably will do some things wrong. Our very first window that we put in, we actually had to take it out because we put it in wrong. We didn’t use proper caulking.
We didn’t use proper sealing tape, all these things we did wrong. But since then, we’ve put every other window in this house in correctly. So it will take you some trial and error and it will probably take you more time to get to a correct result than a professional would. But at the end of the day, you will save yourself two to four times over what it would cost to have a professional to do it.
And for us, that is the only reason that we are able to do this house the way we can. If I had to pay someone to do what we’ve done in this house, easily would’ve been four times the cost of what we’ve done. If we could even find somebody to do it because the other problem with old houses is, nothing is normal.
Sometimes it’s just simply not feasible to put things in the proper way. You have to get creative and you have to do things a little bit differently and you have to attach things weirdly and by DIY buying it, not only can you work around all of those weirdnesses and all those little old house quirks and the things that the old house you just, you’re shaking your head thinking, “Okay ,house why are you doing this? I’m working with you and I love you, but why are you making it this difficult?”
You can work around those, but because you are emotionally invested in the outcome, because it’s your house, you can actually control the quality. If you’re not happy with how something turned out, take it down and do it again. And you’re only really out your time and the material costs.
Now I know it’s not always easy when you have families and you have jobs and you have other obligations to find the time to do those renovation projects. And we are going to talk about time management and strategies to get more done in less time, basically while you’re renovating. But DIY has enabled us to have the house that we have on, you know, a fairly small budget.
When you consider the amount of work that we’ve had to do. I mean, we’ve had to take these rooms down to the studs. We’ve had to completely jack up the corner of one house and repair the corner of the dining room and repair the foundation board, the seal board, we’ve had to, rebuild door headers, we’ve had to reinforce load-bearing walls.
We’ve had to put in windows and, you know, we may have some advantage being trained as engineers, but we’d never done anything on this scale. And when I think back to our level of skill when we started the hall renovation, which was the first room we did, versus what we’ve done now with putting in a wet room bathroom in a concrete floor, to rebuilding a wall around the chimney, to rebricking in a chimney, to building cabinets and doing wall trim and rebuilding closets.
And it’s like, you don’t learn it all overnight. You learn it very slowly. You start with a project that you think you can do, but might be a little bit challenging. And then you accomplish that. And then you do one that’s a little bit more difficult. And then you accomplish that. And you keep building on your skillset and building on your confidence until all of a sudden you can do pretty much anything you want to do.
Learning how to DIY, it’s in my bones, I can’t help it. I just like doing things. I like to be able to have exactly what I want, which is really the reason that I like to DIY is because I’m extremely particular and also very frugal, but learning how to do that, utilizing the power of the internet and not being afraid to do something incorrect will really save you so much money in the long run.
One final thought on the idea of DIY versus hiring it out. As long as you haven’t burned the house down. If you get into something and you decide that this is not for me, this is over my head, I need to professional. Professionals will probably not be too upset at you, if you call them mid project.
Think about if you were trying to demo something and rebuild a wall. If you’ve already done all the demo and a contractor comes in and says, “Yeah, we can finish this up.” You’re not paying for them to do the demo. You’re just paying for the part that you don’t understand, which is rebuilding a wall or hanging a door or something like that.
So there’s always part of it that you can do that will lower your cost overall, even if you can’t do everything. So just don’t be afraid, I promise, don’t be afraid. You will gain so much confidence. You will gain so many skills and you will have the house that you actually want. The last tip is kind of in the same vein, but not exactly and it’s to economize and save your money but intelligently.
And what I mean by that is that there are lots of different places in a renovation that you can save money. There are of places that you can, you know, skimp a little bit, and it’s not too big of a deal, but you don’t want to do that everywhere. For example, you don’t want to be doing electrical and use a smaller size wire than you should because it was cheaper, because if you do that the load in the wire could exceed what the wire is rated for.
And then you have a melt and a fire, and it’s a terrible situation. But if you put in a $20 placeholder light fixture, and then in two years find a $200 light fixture that you really love, that is a good version of economizing. So you do want to kind of figure out how much money you’re willing to spend.
And that’s really something that happens in that initial budgeting phase, where you go through and you list everything out and you figure out how much money it’s going to cost. You are going to start looking at lighting, and you’re going to start looking at the quality of drywall and looking at how much trim costs and looking at how much light fixtures cost, and you are going to be seeing kind of where the price range is.
And everybody, I really think they have their own idea of what is okay to spend on things. And I think you kind of pay attention to that by when you’re looking for something, you’re looking for lighting, like if I see a chandelier and it’s listed at $600, I’m like, “Oh, okay, that’s too much for me.” Now, if I see a chandelier and it’s listed at $250, I’m like, “Okay, that’s like not cheap, but that’s not a bad price.”
And so if you start to kind of pay attention to your own internal clock of how much you’d like to spend, then you can get a sense of where you want to economize and where you don’t. In general cosmetic things, as long as it’s not tile, you can be okay to spend a little bit less on because those are easier to upgrade in the future.
Switch plates, lighting, rugs, paint colors, all of that stuff is very easy to change down the road. But skimping on insulation, skimping out on structural reinforcements or structural builds skimping out on plumbing or electrical. Those are things that you really just want to make sure you have it totally right, because you have to ask yourself what happens if I get this wrong?
Well, if I pick the wrong light fixture, I’m going to be looking at a light fixture I don’t like until I find something different. That’s not really that big of a consequence. If I get the plumbing wrong, my house has a leak. I have to tear apart all the walls that have already done, I might have to fix water damage.
And then I’ve caught leaking plumbing and sewage all in the rest of my house, that’s a much, much, much bigger problem. So when you’re looking at where to save money, just think about how big the consequence is going to be if you get it wrong. Now I said tile because yes, you can change tile.
It’s a little bit more extensive to change tile than painting a room. As far as my personal feelings on tile, I just can’t bring myself to splurge. The tile in our master bathroom on the walls is like 15 cents a tile, it’s four by six subway tile. And it’s not that expensive or three by six. And it’s not that expensive, it looks totally fine.
I just can’t bring myself to spend that much money because I’m not willing to put $10,000 of tile in a bathroom. But tiles one that you kind of don’t want to mess up just because of how complicated it is to replace, but just about every other cosmetic thing, if you have to replace it, it’s okay and you can do it.
So don’t splurge on cosmetic things. If you don’t have the budget, put your budget into the infrastructure and making sure all of the inner workings of the house are safe and will not cause you harm down the road. So, that is a little bit of our budget theory of how we cashflow this renovation.
And we have pretty much stuck to this for the whole four years that we’ve been doing this renovation. And I think almost every room has come out right at budget pretty much, like we haven’t really gone over our monthly allotted amount for each room. For the most part. We’ve had a couple of months that have been a little squirrely for various reasons, but for the most part, this has really helped us renovate our house to look like this without needing a loan and without breaking the bank.
So I hope this was helpful. You can check out the blog post and the more links and references in the show notes at farmhousevernacular.com/podcast. And thank you so much for listening. I really appreciate and love having you here. And I will see you next time. Bye.