Finance Your Construction Project: How to Use Your Resources to Maximize the Outcome

I dream of renovating but am not sure if I can afford it.

– Yes, I know what you mean; it’s easy for so many people who have unlimited cash or enough savings to run their project in any way they want!

Really? I am a Home Designer, and I don’t know anyone like that!

Most of the people I came across don’t know much about the construction costs, nor haven’t set a budget for their project. Even better, they have no idea where the money would come from!

Before you start any construction project, it’s essential to get a clear perspective of your budget and how much you can pay for your renovation or custom home building. Better said, to finance your construction project, you need to be prepared to stretch and to know precisely how far you’re ready to go.  

I see many of my clients taking their project and asking a builder to provide them with an idea of the cost. Without a plan or drawing in hand, how could anyone expect the contractor to give an even remotely accurate estimation? 

Allow Me to Show You How to Finance Your Construction Project, and Do Things the Right Way, in Your Best Interest

Firstly, try to have an idea about what you want to do, even a basic one. Secondly, make sure to consult an experienced designer who will understand your needs and properly involve. Share your dreams and ideas of the renovation or custom home with a designer who knows their job well. 

An experienced home designer can offer you a reliable plan to develop based not only on your dream but also the approximate cash availability. Only after that you can decide how to finance your construction project. 

These are some options you can look at:

Savings Account

This is the most reliable way to finance your construction project, as long as you have enough money sitting in your account. The best use you can put it in is your overall life improvement.

Borrowing From Friends or Family

Many of my clients, who want to add a secondary suite to their property for the purpose of creating an extra income, rely on this idea. They borrow from their siblings, children, or parents to build a laneway home or an ADU, and pay them back in installments as the investment starts to pay off.

This way they don’t have to go through getting approval from a financial institutions. But what if you don’t have someone to borrow money from? That where you should get creative!

Finance Your Construction Project Through Shared Accommodation 

If all of the above fails, there are still many additional ways to jump over the financial obstacle. Some people dream of building a single-family home, and they don’t want to live in a condo. Usually, they team up with a friend and buy a duplex or a single-family house with ADU. This way, they can share the cost and still get their own paradise, avoiding significant debt along the way. 

Finance your construction project
Finance your construction project

Just the other day, a client called me to discuss the idea of building a duplex in Vancouver. She had it arranged with a friend to purchase a lot, build a passive house duplex, and share the cost so they can own a great affordable home, each on its own side. After calculating their budget, I told them the money wouldn’t be enough to finish the project in the way they want. But the solution was easy—they can apply for a construction loan, which I will explain next. 

Since each unit would have a secondary suite, the money they could collect from the rental could easily pay for that loan. After several years, the loan will be paid off in full, leaving them with an extra source of income.

Now, I am aware that my readers come from different regions, but most places have collected equity over the years. If the property you own doesn’t have any mortgage, there’s a good chance that the bank will grant a loan or refinance the house. The same applies if the mortgage amount is less than 30% of the house market value. Naturally, as long as you meet their other criteria and credit requirements.

Using the Bank’s Money

If you plan to renovate your house, you can ask your designer to draw the plans and have the contractor write an official cost estimate for you. Next, you have to present your project with the estimated cost and timeline to the financial institution’s representative. Banks love to give loans as it allows them to collect interest. However, for the same reason, they have to make sure that their money is safe, granted to a reliable person. 

If you are planning to build a new house, however, the scenario is a bit different. I had a client who bought a lot and paid a 40% down payment. He also had some cash aside, ready for starting the project. He hired me to design the house and help him to manage the builder and all trades for him. While revising, I found out that he didn’t have enough money to finish the project after all. The next step was to help him apply for a construction mortgage.

We finished the house’s framing, installed the windows and exterior doors, and fixed the roof membrane. This stage of the building is called “luck-up.”

This is where I introduced him to a bank rep and presented the bank with the drawings. We went over the total construction cost, the amount that has been spent to that point, and the estimated value of the house after the finish. The bank sent an appraisal, and I had to present the same documentation to him, now for his approval. After the assessment has been done successfully, the bank granted my client the money he needed to finish his project.
If you think you need help with a similar process call me to discuss further at 604-929-6696.

organic architecture
More budget, more features and benefits

Why Is It Good to Use Banks’ Money to Finance Your Construction Project?

Firstly, you can take advantage of the low-interest rate and use it to upgrade your project further. That is particularly convenient if you have the potential of implementing a rental suite within your project. The income you collect from the rental unit will pay for the mortgage.

I understand some people are afraid of going under any dept. Like another client of mine, who could have been easily approved by the bank for the entire renovation of his house. The only problem? His wife was against any loan or mortgage. So they ended up living in their run-down house for the rest of their lives.

What Exactly Is a Construction Loan

A construction loan is a segment of short-term loans, tailored specifically for use by an individual home builder. Construction loans serve to finance your construction project of either building a new home or renovating the existing one.

Construction loans are not supposed to cover the entire cost of the project. Instead, those are used as a temporary financing bridge that can cover the missing part of the budget during the build time. Typically, after the construction is complete, the homeowner will obtain a longer-term solution. The options include refinancing the existing construction loan and transition to a conventional mortgage.

It may happen, though, that a bank considers your construction project as a risky investment. In that case, you may still get the money, but the interest rate will likely be somewhat higher. Also, such a loan will feature strict terms that you must adhere to, like paying off in entirety by the time the construction is complete.

What A Construction Loan May Include

A construction loan comprises one application and one closing. Those cover the construction phase and the permanent financing.

It can start with the initial loan payment you need to purchase a lot. If you already hold a loan on that property, the first disbursement of the loan will pay off that specific loan before the construction starts.

The bank may make scheduled payments to your builder during the 12-month construction phase. Subsequently, they will offer a transition to a fixed-rate mortgage after that period.

Finance your construction project and build a laneway house
Finance your construction project and build a laneway house

How Can You Use Construction Loans to Finance Your Construction Project

Construction loans provide more flexibility in utilizing your budget to get the most out of it. That may include expansions, hiring better designers, making payments to contractors, or even getting more luxury materials. Even when the initial budget seems sufficient, by upgrading it with a loan, you can get more quality in each segment and get more creative with design solutions.

The Bottom Line

As Robert Kiyosaki says, there is good debt, and there is bad debt. To apply for a loan and mortgage to upgrade your living standard, which gives you better mental and physical health, especially if you can collect rental income, is good debt.
So, do not be afraid to get into a good debt if the end result will give
you a better financial outcome as well as more comfort and mental health.

After all, life is too short and we should live it to the fullest!

Renovation or Building a New House: Ernest Story

Ernest is a 61 year young who lives with his wife in a spacious house, but at the moment they come to our story, it has long begun to show signs of ageing. Little by little, problems kept getting bigger, and the house needed a major repair. The question was, how to decide between renovation and building a new house.

One day, Ernest had decided to finally do something about it. He asked himself: Is it a good idea to repair the old house? How much a full renovation would cost? Is there any better solution? What would be better, renovation, or building something new?

Ernest realized that it would be best to investigate all options. He asked neighbors and friends for opinions first. Naturally, everyone had their own idea about what should be done. The problem is an utterly personal perspective. People have good intentions, but they can’t know what’s best for you, especially when it comes to your home. It’s all about different lifestyles, different habits, different needs. And when it comes to the matter of aging in place—different health. 

One idea started to make sense, though. Why spending a significant budget on a renovation if it’s possible to build a new house instead? But then again, could such an investment really pay off? 

What Ernest didn’t think of, at first, was consulting a design professional. He did make a call to the municipal hall in order to find out regulations that would help him decide. Mostly he was interested in how many square feet of a new house he could build.

New-Westminster-Renovation
New-Westminster-Renovation

Renovation or Building New, Ernest Couldn’t Decide

He discovered that it was possible to build a duplex house with two laneway houses, and two secondary suites on each side (ADU). This way, he could live on one side of the duplex and have a laneway house and the suites for renting. Naturally, a secondary suite sounded like a great way to secure some passive income for his retirement. He thought that, if he could also manage to sell the other side of the duplex, it would pay off the construction cost.

But as we are getting older, we start craving more quietness, peace, and privacy. Ernest understood that, very soon, he might come into a situation to regret the original idea. Having too many people roaming around his property sounded tiring by itself. Having the same but with a bunch of strangers on top…well, let’s say he cooled off the idea pretty fast. 

It would be great to have a new house, and even better if the project could pay itself off—but not at the cost of his privacy. After reviewing all options once more, he decided that it would be better for his family to build a duplex without any ADU’s.

Once again, Ernest picked up his phone and called several local builders for an interview. He thought it would help him choose which one to hire. Then he found Aryo, whom he found by filling an online form.

The first question he asked Aryo was if he had any experience building duplexes in the area. Of course, Aryo replied positively.

“But, before we go further about my experience, let’s talk about your project and your goals.”

Master Bedroom
North Vancouver home design

Aryo Knew Better

After a long conversation, Aryo found out a lot of interesting facts. First of all, it turned out that Ernest did not really think his project through, not nearly enough. He failed to consider the age he was approaching and too many difficulties it will gradually bring. Moreover, he planned to build a tri-story duplex on each side, featuring less than 600 square feet on each floor.

Like many others, Ernest believed that living in a brand new, beautiful, and shiny house would be enough. The truth beyond, however, was different. Just any kind of new, shiny house wouldn’t bring the kind of happiness he imagined.

Aryo explained to Ernest why it’s good to have a proper, thoughtful plan. He elaborated on the significance of hiring a professional designer, and not just any. He needed a designer who takes into consideration the occupant’s lifestyle so that the final project would maximize personalized functionality. That way, the outcome would be much more beneficial for Ernest and his wife in the long-term. 

That kind of consultation is rarely, if ever, offered by a builder. Not that the builders don’t care—on the contrary. But there’s a difference in knowledge and approach. A good builder knows how to build a sturdy, reliable, good quality house that the homeowner has ordered. But what if the homeowner doesn’t know what he wants, or what is good for him/her in the first place? Then a proper consultation can make all the difference between a disaster and a happy ending.

Maple ridge modern architect renovating or building a new home
Maple ridge modern architect

Renovation or Building New: Deciding Together

Aryo and Ernest talked for many hours. They brainstormed, and the plan slowly started to come up. Ernest was surprised to find out just how many small but significant details he was missing to consider. 

The idea of having to climb endless stairs, many times a day, suddenly exploded in all colors. Indeed, his original ideas were very fashionable, and those floating staircases would have been gorgeous. Still, now Ernest realized that he would probably end up establishing a mini studio on the ground level in just a few years, only to eliminate the need for endless climbing. 

Aryo knew that sooner than later, they would probably regret the decision. When your knees are hurting, and your muscles are weak, the last thing you want is a challenge in maintaining personal hygiene. There was no reason why Ernest’s wife should give up her dream of a fancy new tub. The thing was to have a proper one, as functional and approachable as striking in design. 

In the end, Ernest decided to build a house quite different from what he originally intended. But he was delighted to do so. The new project was smart, thoughtfully designed, and full of handy amenities that would add to the quality of their lives in fifteen years just as much as they do now. 

senior living
senior living

What Can a Professional Designer Do, That I Can Not?!

An outstanding design professional will compose the house that fits the homeowner’s lifestyle of today, as well as ten years or more in the future.

A designer who thinks outside the box doesn’t focus solely on what a client desires today. Many times, the homeowner is simply not aware of what is ahead or even what would be best for him/her. Both renovation or building a new home can bring significant overall improvements if done correctly.

A good designer should really get to know his client. He will think about the homeowners’ present lifestyle as much as about all changes that will come to their life. Often, these changes involve newcomers (babies, in-laws) or a need for rental income, lifestyle improvement, even upgrading to catch up with new trends.

As homeowners, we often think that we are the only ones who know what is best for us and our houses. Some even believe that a professional designer is a redundant category, who will do the same as we would, but also charge for it. The truth is somewhat different, though. 

You certainly know what your needs are….right now. Aging brings challenges that we might not be aware of until we face them, and that moment might not be the best time to do something about it. Thinking ahead is the key, but how to think ahead if we don’t know what will come? And if we don’t know what is ahead of us, then how could we even think of preventing the issues?

modern-architecture-home1

Don’t Wait, Prevent!

That’s where a good designer comes to the scene in full glory. A good designer has abundant experience in preventing issues. Not because he faced all of them, but because his clients did. One by one, they kept facing and solving different problems, learning a lot in the process. That is why a designer might know some things better than you. In a certain way, he was already there.

Before you start a major renovation, building a new house, making a considerable investment, dig deep down all the challenges that might come to your life. Pinpoint them and design your house with the future in mind. And the moment you find an obstacle, ask for professional assistance that will help you determine all necessities and come up with the appropriate solution that matches not only your lifestyle but your personality as well. 

Wallpapers are Back in a Big Wave

Wallpapers are back, can you believe it? 

Do you remember houses in the ’60s and ’70s with patterned wallpaper that could make you feel dizzy at a glance? Some were flashy and colorful, and some were discreet. And then they went to history. Who would have thought that only half a century later, they would return? 

What you perceive as wallcovering now entirely differs from the era when virtually every vertical surface featured visually striking layers of paper. Sometimes the rule of thumb was一the more bizarre, the better. Wallpaper was everywhere, and, at some point during the eighties, the world eventually got tired.

There are many other logical reasons as to why it happened. Lifestyle was changing, and so were the trends. The need for simple, minimalist interior designs was on the rise, and flashy wallcoverings didn’t quite fit anymore. Predictions were not optimistic, and it truly seemed that this kind of deco had finally bottomed out so much that it’s unlikely ever to see it return.

And yet, wallpapers are back in full glory, much more modern, in new designs and textures, in 3D version, or in a combination of patterns and exposure from the wall. I see new decals combined with fabric and vinyl or thin metal, and I love them because they give a different dimension to the room. Wallpapers are inspirational; they give you the feeling of who you are and can even help your mood and daily activity. 

Stay with me to get a little insider knowledge and truly take the best out of wallpaper trends for 2020.

Contemporary-House-design
Contemporary-House-design

Wallpapers are Back in Style

Wallpapers feature a rollercoaster of a reputation. Not as far as ten years ago, if you heard someone mentioning how they were thinking of putting up wallpaper, you would probably stare in disbelief. It’s not so weird, as some of us still remember spending endless hours tediously removing old wallpaper from every surface of the house, in order to coat the walls with refreshingly simple layers of paint. 

But this is 2020, and that means improvement: no thick paste anymore, no hard labor, and no messy, exhausting removal. Wallpapers are back pre-glued and ready to be applied directly to the wall. Many of them come in specific designs, such as giant stickers, for effortless removal without damaging the surface under. Very convenient, as it allows for experimenting and refreshing without a permanent commitment.

In contrast to the cool and neutrals tones that dominate as choices, wallpapers feature bold colors, statement patterns, and nature-inspired prints. In difference of wallpapers from the 20th century, you should not cover your entire home in landscapes or florals. Quite the contrary, the trend focuses on visual accents and a chance to make a significant impact on a smaller scale.

Also, wallpapers are back in unusual spaces. Toilets, bathrooms, kitchens, foyers, and closets are all excellent places to experiment with a bold print. If you want, you may even try covering the entire small room for a unified, statement look. In a living room, dining room, or bedroom, though, it’s better to stick to accent zones. 

New Statement Wallpapers are Back

Feel free to experiment. The best part of new wallpapers is: if you don’t like it, just take it down and start again. Whatever might be in your taste, there is something to fit with it. Everything goes, from traditional florals and tropicals to modern geometric and architectural designs. New printing techniques made possible a large variety of finishes, and the availability of new technologies makes it even more exciting. Leather, silk, 3d, you name it, and someone will have it already made. 

Wallpapers are back
credit to: https://www.flickr.com/photos/studio_zlamal/7073350935/

Bold Patterns and Palettes

Pops of colors add dynamics in contrast with neutrals, offering some edge in interior design and moving the overall palette towards the warmer side. Combinations of different patterns are encouraged by designers, and an eclectic mix of classic stripes can work great with exotic styles. Still, it’s not a good idea to make the whole space look too busy, so go with colors that complement each other. 

Naturals

Sustainability is expected to hit its highest in interior design trends for 2021. Increased awareness of our planet and the expendability of its natural resources is finally supported by the elevated desire to repair, repurpose, and recycle, on a global level. Durable, raw materials and designs take over the scene. Simultaneously, green hues follow with the biophilic trend of wellness, together with real plants and foliage. Bringing the outside in is the new black.

Graphic Patterns

A rise in popularity of ordered, structured design brought interiors embossed in elemental geometric arrangements and monochrome palettes. Considering the challenging times we live in, it’s not surprising at all. Geometry in the interior offers some psychological relief through comfort found in routines and stable, defined patterns.

Wallpapers are back
credit to: https://www.flickr.com/photos/[email protected]/15233317154/

Monochrome Graphics and Patterns

Black and white combinations are an eternal synonym for style, that gets another dimension in monochrome wallpaper solutions. From eclectic to high-tech design, it features pictures that can trick the eye, ranging from endless spirals to “moving” images. These wallpapers can be indicators of your condition. According to some studies, the faster the picture “moves,” the more tired the person is.

Murals and Decals

Murals and scenic wallpapers are a huge trend this year. They present an extraordinary statement for your walls as well as a road to some much-needed escapism. Wall murals have been rising in popularity for some time, as a convenient choice of a statement feature wall for designed homes. Popular categories include forests, world maps, or striking floral arrangements.

Peel and stick materials offer the most effortless way to refresh the room, and a lot of extra flexibility in decorating. It’s broadly used in rental properties as a temporary solution, but also by homeowners who are not ready for a more permanent change.

Chintz

Traditional schemes, in eclectic tones and quirky motifs, are both whimsical and sophisticated. Chintz is probably the closest reminiscent of the old centuries wallpapers. It’s a transitional treasure, as they can look simply amazing when paired with modern furniture and decor pieces. That juxtaposition provides a new sort of dynamics that is edgy, fresh, and interesting at the same time.

Old Glamour

Old Hollywood, art deco, decadence, and romantic vibes of the Golden Era with a modern twist are more desirable than ever. Botanicals, golden-lined geometrics, rich reds, and deep hues offer a dramatic, opulent finish. It bears a sense of careless luxury, quite welcome as a way to shelter from the harsh reality in 2020.

Luxury home builder wallpapers are back
Luxury home builder

Metallics

The original novelty in wallpapers is a metallic effect, an ideal companion of modern minimalist design for a living room or bedroom. It comes in a variety of stylish options, with black or graphite being the most popular. The combination of matte and glossy coatings of the same color is recommendable as a way to add some energy between the walls. Relief metallic wallpapers and rougher textures present a welcome refreshment from a standard flat look.

Waves

Very fashionable wallpaper in 2020 offers an incredible variety of options, from wide stripes with a gradient color transition to calming, zen-style aquarelles. Novelties feature wave patterns with a 3d wavy surface, attractive in appeal, and perfect as a focal point for the interior of the living room or bedroom.

Alternatively, you can go for a middle solution and choose a mix of embossed wallpaper with a wave pattern and a metallic effect. Use it only to finish one of the walls, though; otherwise, the result will be beyond overwhelming and unpleasant to spend a lot of time around.

Wallpapers are back in Various Materials

Paper-backed or solid sheet vinyl is typically a base for patterned wallpaper designed for residential use. It’s resistant to stains and grease and effortless to maintain. Still, it’s good to avoid paper-backed wallpaper as a covering of a wall in a bathroom or any other room that generates a lot of steam. Moisture affects the paper and causes the vinyl to separate, also decreasing the longevity. 

Wallpapers are back
Credit to: https://www.flickr.com/photos/decorology/3008718272/

Vinyl-coated paper is a wallpaper with a layer of liquid vinyl sprayed on the surface. It provides a good base for printing details and patterns. Also, it is durable and easy to maintain.

Fabric-backed vinyl is considered to be the most durable base for a wallpaper since it’s made of notably dense fabric. It is not very suitable for pattern printing, so you’ll likely find it in different monochrome palettes and specific finishes. This material is heavy and sometimes challenging to install, especially for DIY. On the other hand, it’s a suitable solution for kitchens and bathrooms, as more moisture-resistant than standard paper-backs. 

Digitally printed vinyl is, commonly, custom-designed for printing realistic photo images according to the customer’s choice. It comprises a very thin layer of paper and a paper liner to be placed underneath to keep the placement as smooth as possible. Printed vinyl works excellent as a mural, suitable for any room or area. 

Wallpapers are back
Credit to: https://www.flickr.com/photos/[email protected]/15338122089/

Wallpapers are Back, Period.

All trends in 2020 fluctuate between maximalism in design and warmth in colors. Geometric designs seem to grow bigger, and whimsical vibes follow closely. It’s exciting to wait and see what will come next, as 2021 is promising to be a bold and colorful year, at least in terms of wallpaper design. 

When Should a Contractor Join to Start a Renovation Task?

This is the continuation of last week’s conversation about “Where to Start a Renovation”
A contractor’s job is to materialize the architect’s design. Larger projects may employ one general contractor and several subcontractors for specialized tasks. When you hire a contractor at this stage, his/her job will include removing and installing walls, light fixtures, staircases, flooring, countertops, and more. Their expertise will secure a successful design implementation and a quality final result.

If you start your renovation with a contractor, he will rely on you to conduct the process and navigate him through your vision and goals. That means the typical responsibilities of an architect/ designer will be yours to bear. It may undoubtedly seem tempting, like a convenient way to save some money. But then again, are you sure you know what you’re up to? Every obstacle, challenge, and delay will come with a price tag. Moreover, expect the unexpected. In some situations, neither you nor your contractor will be able to come up with a solution. 

contemporary designer surrey
Contemporary Designer Surrey

Using a contractor in place of an architect or a building designer can make sense only up to a certain point. It’s acceptable when the remodeling is a small, prevalently cosmetic task that costs less than 5% of your home’s value.

Otherwise, all projects that involve significant structural changes should start with an architect’s/ or a building designer and eventually an engineer’s expert input, that will continue throughout every stage. You probably don’t want to risk any legal, financial, and safety consequences. Thus, when researching the initial cost of your remodelling, calculate the hazards too. 

Also, don’t forget that many architects have their own contractors, and that connection can greatly affect the final price

Word of Caution Before You Hire Anyone to Start a Renovation Project

Before you hire anyone, make sure to perform thorough research. Ask around for recommendations from friends and family. Inquire about all kinds of experiences they have had during the contract. That way, you will get some valuable insights that will help you recognize possible red flags and handle the issues more conveniently.

In general, it’s recommendable to look for an established company with a trackable record and a good reputation. Find out everything about their credentials, particularly qualifications and licensing. Check out if the license is valid and not expired, or worse—suspended in the meantime.

Make a list of prospective candidates and meticulously check each one. Look through their websites, google their names and details, find ratings, read reviews, and search for any traces of officially filed complaints. It’s a good idea to google names+keywords like “cheat,” “scam,” “fraud,” or “rip-off.”

Red Flags

Now, we don’t advocate paranoia, and for sure it’s impossible to predict everything. However, some warning signs should be a reason to check the person/company more thoroughly. 

Missing pieces of information, like full contact details (including a physical address) on the website, are not such a good sign. If a company asks for a substantial advance payment, or presses you into making haste decisions, run away. Also, beware of contractors who accept only cash, suggest a loan from someone he guarantees for, or offer any kind of “special demonstration price, only today.”

The biggest red flag is if you are asked to sign something even before you hire. That is particularly common with fraudulent contractors. They will answer your inquiry with an estimation or “authorization” that will turn to be as binding as an actual contract.

For many reasons, these situations rarely happen with architects. You are free to choose how you want to start a renovation, but be careful. Avoid any offers that include shortcuts, sideways, and alternatives methods. There is a possibility that you’ll be lucky and hit the jackpot; however, with such a lottery, there’s a great chance to lose.

burnaby architect
Burnaby Architect

Right Steps and Wise Choices Will Save You the Most

Red flags may leave you with a feeling that finding an honest contractor is hard. However, there are many ethical professionals in the business, and if you take the right steps from the start, you will not face many issues. 

The cheap, fraudulent work is usually conducted by individuals who have never really learned their trade or took a deep interest in it. They had joined the industry with the idea of making fast money out of it. The contractor of this class will offer you plenty of promises, “secrets,” and unique opportunities to renovate for cheap. Trust the established professionals, hire an architect from the start, and save more than just money in the long run.