While it can be fun to daydream about your improved home, it can get surprisingly costly to execute - financially and emotionally. With increasing production and labor costs, people are spending 60% more on home renovations now than in 2020.

In this episode, Modearn™ advisors Joe Seetoo and Kevin Rex share their personal experiences with renovations and discuss strategies to mitigate remodeling costs (as well as the stress).

Here are some key takeaways from their conversation:

• COVID-19 and lifestyle changes have made homes more important as places of rest, work, and social hubs, increasing the desire for upgrades.

• Joe shares his experience with a major remodel that required moving his family out due to extensive structural work. Large-scale renovations can be an incredibly stressful process, both emotionally and financially. It is important for couples to prepare for the amount of time and energy remodeling can take, from interviewing contractors to making sure your vision aligns with your partner's and having to make quick decisions over the phone during the work day.

• Kevin and Joe discuss the importance of budgeting and planning, noting that remodeling often exceeds initial estimates by 20–30% or more.

• They explore various financing options, such as home equity lines of credit, 401k loans, and borrowing against securities. Joe also recommends being intentional with your short-term cash management; for example, he used money set aside for taxes to fund renovations and replenished that tax-paying account with income from his job.

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Watch previous episodes here:

Buying a Second Property: Smart Investment or Risky Move?

Smart Spending Strategies: Life, Family, Career & Investments

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Hi there. And welcome to another episode of Couchside Conversations. I'm Kevin Rex and I'm joined by my partner and colleague Joe Seetoo. If you're out there and you own a home, there's a really good chance that you've probably been through a home remodel. Or you've definitely looked around at a bathroom or a kitchen in a backyard and said, I think we need to update this or remodel it in the future.

And it could be windows, or it could be, you know, a big project like a bathroom. Why do we go through and do these remodels? And I think really the environment has led us to this place where home prices are expensive. Inventory's low interest rates are high. So many of us either have to buy a fixer-upper and put our time and energy into it, or we have to stay where we're at and say, well, let's just make this our own.

And I think one piece to Covid in lifestyle, many of us want our homes to reflect who we are. We wanted to be able to socialize with our friends and our family. It's expensive to travel and do other things, so our home has become more important, I think, than ever before. I'm excited because Joe and I have been through this, so I'm excited to share our experiences as well.

Whether it's $5,000, $100,000 up, there's emotional stress, there's financial stress. So hopefully we can give you some pearls of wisdom to help reduce that here in the future. So thank you for joining me, Joe.

Absolutely, Kevin, thank you for having me.

You just went through this like you were in the thick of it.

Yeah, I think everybody knows about it.

For 612, however long it was, we kept saying, Joe, how's it going? How's it going? So I'm excited to hear how it went for you. But I guess one question is why did you decide to tackle everything at once? You like, you did a massive project in kind of like soup to nuts everything.

Well, part of it was simply the fact that, you know, we were, you know, we moved my mother in law in with us. It was a big decision for our family. And Jen and I had wanted to upgrade our home for a little bit more space, and we moved to West Lake. But really in looking and we did it divided up into two parts.

So we did the inside and we still have the outside to do, but we did tackle everything inside together, but partially because I had to move Jan, myself and the kids out into a rental because we did such a heavy lift on structural changes to the infrastructure of the house that it really we couldn't have lived there and tackled it piece by piece, which is what we did in our first home, where we did kind of the kitchen at one point, different bathrooms, different bedrooms, sort of as we were able to do it in the first one.

For this one, it was really important that because we had to hire an engineer, had hired a general contractor, we were doing, again, such an extensive overhaul and we had to actually move ourselves out, that it was really important that we really tackled as much as we could all at one shot.

Yeah. Do you think was the decision to do that? Obviously, if you did the piece by piece, maybe you could have lived there. Do you think it saved you time? Did it save you money or like was there? It was just, I don't want to deal with in the future. Let's get it to a certain point.

I think it saved my marriage. Yeah. All joking aside, though, no, in the sense stressful. I really don't think that we would have been able to live there. I mean, truth be told, this house, which we love, the where, the location. But the kitchen had not been updated since the late 70s. So for the first, like 18 months while we were living there, we really didn't have a functioning kitchen.

I mean, we were using like a microwave and crock pots and like, you know, one of those air fryers for, for our meals. And so, just the, the, the scope of the work of what we needed to do, really didn't lend itself to us living there.

Yeah. And I know you're joking about the marriage thing. I mean, we did our backyard, and my wife and I are pretty aligned, but I was joking. Our designer and our contractor, they were also therapists. Right? Where it's like, you don't necessarily know what you care about until you start getting into it. And the differences of opinion and how you settle that out.

And so I know we'll talk about that a little bit later. But there is there's something to it. It is not easy on a relationship.

Well, and actually, I mean that's a great pivot point too. You know, my question for you is like, you've gone through this, what sort of emotional impact did it have on you, the kids? Nicole, what were the unexpected challenges that you guys went through?

Yeah. So as I mentioned, we did our backyard. And it just so happened that we broke ground at the end of January in 2020 and so tore the backyard up. Covid hit. And so not only were we stuck at home, we didn't have a backyard. The irony of it all is when the backyard was finished and it was beautiful, our kids were like, we liked it better when there were holes in the dirt.

Yeah. So it did all work out. But from an emotional stress standpoint, like we had all of that on top of it. And we wanted it to go as quickly as we possibly could. What I wasn't prepared for, because we did have a general contractor who was incredible, handled so much of it, taking using a designer to take, you know, when you open a book and there's 7000 colors, like to narrow it down to make our decisions a little bit easier?

It did narrow that scope. But I still wasn't prepared for how much we still were going to have to do. Like we were working our full time jobs and it was, hey, we need this decision today. Hey, we need this by tomorrow. And there was still so much work that went into it. So that that caused a lot of stress.

I'm in a meeting. She's in a meeting. We're trying to get Ahold of each other. So it did take its toll.

I agree with you. I mean, the I don't think I appreciated the decision fatigue factor that sets in as you're going through this process, how organized you have to be, not only on your finances, right, but around your time, like you're saying, with setting up dedicated time to make those decisions as a couple, or whatever situation you're finding yourself in, it just takes a lot of resources, to ultimately get to the finished product.

Yeah. So I think the planning is important. I mean, you guys, how much planning does it take to move out and then say, okay, I know we you're joking ahead of time, but like drawing the line because what I find it's I always refer to like like starting. You're planning a wedding, you have a budget of $50,000. And as you approach that wedding date, you're, let's just say you're in a budget, but you've already spent so much money and you want that day to be perfect that all of a sudden it's like, well, let's just spend $5,000 and throw in upgraded this or an additional that.

It's so easy to get caught up in it because it's just a small amount relative to what you've already spent. Yeah. So tell me a little bit about how that works. I know you did. You said you split it up into two parts, but yeah. Where do you draw that line? Because one thing adds like leads to the next in the next.

I mean, originally we were trying to do the entire scope of the project together. And as we interviewed general contractors, looked at the scope of it, I realized that, we were going to have to chunk it up. And so the logical place was, because I'm permitting our place to have an exterior deck, was to essentially stop it there and focus on because I was renting another home, how can I essentially get us back into the house more quickly?

And so scoping it so that we could essentially move back in and focus everything on the inside? Was obviously it just made the most sense, both from the contractor standpoint, our standpoint. I think one rule of thumb, I would say that I've heard that I would put our own spin on was we've heard, you know, budget an extra 20%.

I honestly don't think that that's enough. What I have my own experience. What I've heard from many other friends and clients is probably more like a third, realistically. And maybe you're shooting for that 20 or 25% overage. But when the extra costs come in, you know the change orders, it ends up probably being closer to one third. That's just kind of my experience.

Yeah, I think that's a great point. I don't I've never heard of a project where they didn't open a wall and say, we didn't know that this electrical wire ran here, there was this post or that there was this additional issue. So it's that and then it's, you know, that the tile that you want is just a little bit more expensive than you budgeted.

And that's where it's like, oh, but we're already doing it. So that's where those costs, I think add up.

We had the same thing when we had to trench the sewer line, like we didn't know what we were getting into until we actually got down into that. Coupled with, basically when we opened up a wall, we found that the piping literally was wearing away and it was causing mold. So things that weren't necessarily visible at the onset, like you said, when you actually get in there, there's more work.

Typically that has to be done.

Okay. So 20 to 30% more. How do we finance this? How do we pay for this? I mean, other than just, you know, I talked to Nicole all the time is like, let's save X amount of dollars. Then we'll do the bathroom X amount of dollars and we'll do the kitchen. It's really hard.

I want to talk a little bit about with our financial advisory, how do we advise clients. How have we done it personally?

Yeah. So there's a there's a couple of options we can talk about. Obviously, you know a home equity line of credit can be one option. You know, make sure you set up, you know, as much excess cash as you can. And we'll talk a little bit about if you're a business owner or you're paying your own estimated taxes, how that could help, you know, leveraging, your margin on your securities can be an option borrowing from your for one k.

So, let's just start there. Right. I'll start with the 4YK because that actually is something most for one k plans, you can borrow up to $50,000 out of your plan, to use. And unlike where you have an IRA rollover, you have to put it back within 60 days. You have a much longer period of time to essentially repay yourself.

So that was the $100,000 worth of cash that Jen and I were able to tap.

And you're paying your self-interest, right? So yes, there's a cost to it. But okay, so rather than paying a bank or.

Someone else exact because you're paying yourself back, the interest for most of us were contributing to our for one k. So there's a trade off of being out of the market for that piece of the investments, but you're building it back up, I would say not only to the loan repayment, but the, you know, your payroll deferrals that are going in for your contributions as well.

The one thing I think about that is using that is that's that's the Conservative Party. Or for one case, you can almost increase your risk a little bit knowing that you're out of the market. I mean, there's ways to think through that, but you're not necessary having too much downside.

So that's definitely one I actually found a great credit union in Ventura County that gave us a teaser rate. Now I didn't use it for this initial remodel. It's going to be for the, for the second half, but for the for the first 12 months, that line of credits of 4%. So that's given where rates are today, it's a really attractive rate.

Right. So and that was for, I think, upwards of 250 to $300,000. Now the challenge there is you have to provide quite a bit of documentation where with like the 41K, that's relatively easy to set up in a form. So those are, those are a couple. One of the other you see pretty commonly is with our clients who many of us have a portfolio of assets.

If we have a margin that's set up on it, this is a way you can essentially not have to liquidate your securities, incur capital gains, but you can borrow against those securities. The interest is tax deductible. Right. So that's another way. And the great thing there again is it's relatively easy. You're not submitting a lot of paperwork or documentation.

It's typically one form to get margin set up on the under account. You can prepay it. There's no prepayment penalties. You can draw it down, repay it. So it's incredibly flexible. That's great. Yeah. So those are a couple of the ways that I think. But oh the one other that I would mention this is one I did for myself personally was the money that I typically pay on a quarterly basis for taxes.

I use that right. I almost borrowed from myself to make some of the payments, and then I withheld other cash payments that were coming in for my income to then replenish it. So again, some of that is just short term cash management.

Yeah. So I think the the takeaway from this is there are multiple options. And I know we get phone calls all the time where it's like I'm redoing my backyard, send me $300,000. And it's not always the most efficient to just sell securities send $300,000. So finding ways to access capital. Yeah. The one thing I just want to note on the margin line, because that's something that we do frequently because it can it can definitely be beneficial.

It's only on a taxable account. Right. So people know you can't do it on your retirement assets. They you know, Schwab or Fidelity. They'll lend a certain percentage depending on how the portfolio is designed. So they'll lend less on stocks because it's more volatile and they'll land more on cash or bonds type positions. We can negotiate really favorable rates.

We can. Right? The size of our relationship, the size of clients, relationship. And I just want to touch on the, the deductibility part. So the tax cut and Jobs Act back in 18 lowered the deductibility of mortgage interest. So 750,000 of interest is deductible. Anything above that is no longer deductible. And that's including a helocs. So the second mortgage on the home.

But if you do a margin line you borrow from your portfolio. It's all deemed interest from investments. And so there's no limit. And so that's another benefit that if somebody already has $1 million mortgage and they put a lock on, they're not going to get to be able to deduct that interest. So that margin line can be beneficial.

So if we get a 6 or 7% rate you're really depending on your marginal bracket. You're paying, you know, four or 5 or 5. So it is attractive. So we really like that option. You can sell positions along the way to pay it down. The income generated can pay it down. So yeah definitely something that you know if you have have questions reach out to your advisor on that.

And flipping back to you, Kevin, I mean we you know, we talked to the the audience a lot about throwing a lot at them to consider. How do you think through sort of how to tackle this, you know, project. You know, whether it's all at once and what are the financing options available that we've gone through, in terms of how to evaluate contractors and things of that nature as well?

Yeah, I love and I actually learn from you. We didn't do this completely. We did it a little bit. But planning the full scope of the project, because you had mentioned you got permits for things that you weren't necessarily going to do. Yeah. But rather than go backwards and have to do things, you got it done at the same time.

So I know that you had kind of laid out what you wanted to do. Having a long-term plan is something that I'd really recommend, rather than getting to a certain point and being like, do we keep going or stop? And oh, we should have done this when the walls were open or the floor was taken out or whatnot.

Yeah. So having that plan is important, even if you're only going to do a piece of it interviewing at least two general contractors would be my recommendation. Personality matters more than I thought. It was like in my way, like I wanted the best. I wanted somebody who I love their work and it's incredible. Oh, of course that's natural.

That's what we think of. But if we didn't get along, if I wasn't able to talk to them five times a day or have disagreements or challenge them, also knowing that they're going to be your voice with the subcontractors, because in today's world, unfortunately, they say they're going to be there. And I'm sure you saw this. They are not always there on time.

They're not always, you know, you leave work, be here at noon and then it's like two of talk and you're like, where are they? So having someone who's your voice, your advocate, making sure that you talk to references. So I think that's a really big thing because you people are pretty good at putting up a front. But, you know, hearing from someone who went through it with them, how did they handle conflict?

How were they in communication? What happened when something went wrong? Because inevitably, something will and probably went wrong with their project.

I think that's probably one of the most critical issues that you touched on, and it was something we did. It sounds like you did, which is getting the client's perspective on how that general contractor handled something that didn't go right. And because we know it's not going to be perfect, but were they upfront about it and were they, communicative and how they ultimately resolved it?

It sounds like that was one of the critical, you know, decision points for you in terms of who you hired.

Yeah. Again, communication is big. And then the other one, I said we did hire designer, which is an additional cost. But personally, I can tell you what I don't like. If you give me 100, 100 samples of something, I am so overwhelmed. So for us, that use of contractor calls and says, hey, we need color on the grout fast forwarded to the designer and say, can you come back with three options?

And then you say, I don't like that, I like these two. And then the wife makes the final decision because if she's happy, we're happy.

I agree with you. For the busy professionals, you know, I don't hold back on having getting a designer involved. It's going to ultimately I think save you time, energy, headaches in the long run. And the same thing with Jen and I, you know, we asked them to scope it down to three, three options. They knew. And that actually got easier right as the projects went along because it sort of took shape in terms of how things fit together.

What would work, what colors would work, what features would work. But having that designer, I think was invaluable. Yeah, that's.

A great point because you might like something further down the line, but it doesn't fit in, so you can rule it out. So I agreed to get easier. And then also we keep saying planning but planning for the financial piece. So yeah, whether you're going to tap into the key lock or tap into the margin line, putting those in place early is important because you're usually you're writing how many checks where you write it for.

So I don't even have checks. I had to go and get checkbook to pay these things. But how many are you writing where cash flow in and out of your account with other bills? So it was nice. At least we used a key lock at the time, and so we could just write it from there, and then we could, you know, pay that down or sell assets.

Other places would give us flexibility.

And I think having backup sources of capital so that, you know, if things are going over, you're running dry on one line, you know, you have other sources to tap into. So it's not just one.

Yeah. The decision to remodel, I think comes down to two things. Right. And this determines how much you're going to spend. This determines how much time you're going to put into it, where you're going to where are you going to focus your finances? Is it for you or is it for an investment. Right. And I think, you know, when you and I were talking about yours and what we did for ours like this was for us, and so it was easy to make decisions that aligned with our values and what we were trying to do.

So I think when people go into these projects, are you going to live there a long time? Because if so, maybe spending a little bit more on things like the bathroom that you spend every day in the kitchen you're cooking every day is more important. But if it's, hey, this is a 2 to 3 year home, maybe you can change the product or the materials you utilize and cut corners here or there that maybe you wouldn't want for.

Yeah, I think you got to be a little more cost-conscious. You're not over-investing in that. You're not over-allocating resources for that investment. If you're trying to get a positive return on your investment in that short window, where for you and for us, I mean, this is the home that my you know, my daughters are full of memories for their childhood and their teenage years to come.

And that I'm hoping Jen and I and for our and for years.

And I want memories too, because the view is spectacular. So wine and coffee. Here we go.

Absolutely.

Joe, thank you so much for the conversation. That was a lot of fun. Yeah, I enjoyed it. We're now going to move into, I think, the audience's favorite segment. We like to do a little thing called this or that. Joe and I have prepared some questions that neither of us has seen, and we're going to try to stump one another or get heartfelt answers on where we go.

So I'm going to take the liberty to go first. Okay. You did a huge project. Yes, but let's just say you had a smaller project. Would you go DIY and do it yourself, or are you always hiring a professional?

At this stage in my life, I'm hiring a professional. Okay. My time is still born. I think, you know, maybe when I get older, when I retire and I want to have a hobby, maybe I'll become, a do it yourself. Or again, I once remodeled a condo many years ago, but, again, at this stage in my life, I'm going to be hiring a professional.

You still hang the pictures.

Yeah, I hang the pictures. I mean, I can handle that, so, Okay. Remodel bathroom or kitchen?

Can't pick both. You got this or that? This or that. I would go with bathroom. I know my wife's going to hate that answer. I don't cook, I don't spend a lot of time in the kitchen. I spend more time in the bathroom. That sounds kind of weird, but we have we have three kids and we have four bathrooms and some, for some reason, every morning there's five of us in our bathroom.

And it just feels so small in the way that it's laid out. And, I mean, and we could put five sinks and it's just it's a mess of the bathroom immediately would add value and joy to my life. All right. So you're doing a remodel and you have the choice of putting the money into style or function.

I think it depends on the room.

You just said I can't go both. So you can't go both. You got to pick. You got to pick one.

I think it does depend on the room. So the kitchen, that's a really hard one. But that I probably have to go for function. So you're a style guide, am I? Maybe. I probably go for style, but other rooms. Other rooms, like the bathroom for me, feels like functionality. Yeah. Partially because at least in our master, it's going to be Jen and I.

Yeah, I agree, I think function's more important than style.

Yeah. Okay. Current housing market is really challenging. If it were more attractive, would you want to buy new or would you want to improve the house that you're in?

I, I would stay where I'm at. Yeah. I just think we're at an age now with our kids, like we're we're settled in to the community. We have incredible neighbors because that's the one thing I always worry about. You can get a great home, but if you have bad neighbors, it's terrible. So we have a pretty good situation.

I wish I had a nicer bathroom. Nicer. Okay. There's a lot that I would remodel. I basically tear down everything and rebuild the house. But our location, the community. So I'm staying put. Yes. Well, thank you so much. A lot of fun. Hope you enjoyed watching. And, check out other episodes of Couchside Conversations.

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Disclosures: Information presented herein is for educational purposes only and is not intended to constitute financial, tax or legal advice. This information should not be taken as a representation that the strategies described are suitable or appropriate for any specific person. The views and opinions expressed by the speakers are as of the date of the recording and are subject to change. It should not be assumed that Morton will make recommendations in the future that are consistent with the views expressed herein. Information contained herein is not written or intended as tax advice and may not be relied on for purposes of avoiding any federal tax penalties under the Internal Revenue Code. You should consult with your finance professional, accountant, insurance professional or tax professional before implementing any transactions and/or strategies concerning your finances or insurance coverage.