WWYD - home improvement ?

[telephus44]

Here's a question for you. Money related.

DH accepted a position in May to work from home. We had eventually planned on building him a room in the basement for an office. The basement right now is totally unfinished. Temporarily we ended up buying him a desk and set it up in the living room.

Last week DS managed to spray half a bottle of glass cleaner into his work station. We narrowly avoided paying a $1500 replacement charge for his work laptop (IT was able to get it working again, minus the track pad, so he's using a separate mouse). However, we were stuck paying $600 for a new docking station and monitor.

So we've decided to expedite the "build an office in the basement" plan, based on the above mentioned incident. Plus, I think it would be nice to have my living room back, and I'd like to take the home office deduction on taxes. I do realize the "correct" answer to wait and save the money, but we agreed to do this partly because we want to and partly as I want to stay married (this was a compromise issue, not a hill to die on).

We had a contractor in to look at it (same one as did our mini remodel last year, so I trust him and his pricing is reasonable). It'll cost about $5000. We're also having his redo the stairs in the basement. DH is going to do the wiring to save some money and because he's picky about that.

So my question is - where should I get the $5000 from? My initial plan was to wait and save it, but we've decided to just go ahead and start next week. The way I see it, I have these options:

1. Use a convenience check from one of our CC's. We don't have any balances currently, I use one for regular expenses and pay it off in full every month. I have two cards that I don't use - one regularly comes with check at 7% and no fee, and I don't remember what the other one offers. The one I do use regularly and pay off each month sends offers of 4% with a 3% fee.
2. Could take a 401K loan. This was DH's idea, I'm really set against it.
3. Cash out some XOM stock I have in a DRIP. I have about 10K in there, have been buying since 2003, would be subject to long term capital gains.

I don't have enough cash hanging around to cover it. We have about $2500 in savings, and I was planning on keeping it there. I'd ideally build it up to $5K. I can't take out a HELOC because we're probably pretty close to owing what it's worth.

More background if it helps - only debt is 2 cars loans ($5K total, these will pay off in the next year). We contribute 15% to retirement across 401K's and my ROTH. We also set aside some money into DRIP's and a 529 for my son. Sure, since DH works from home we might be able to sell a car, but it's a 2004 Honda Civic that runs well, is almost paid off, and occasionally DH has to do some field work.

I'm really leaning towards the CC option. We could probably pay it off in 6-8 months. Thoughts? Anything I'm missing?

[Mad Dawg Wiccan]

How much would it be if your husband did all the work himself? Also, the wiring is the one thing I would contract out. You could possibly void your homeowners insurance if it's not done by a licensed electrician.

[bring in the new year]

Telephus, who does your taxes?

Home office deduction used to be an audit trigger for the IRS BUT the tax person should be able to advise you. More importantly, if it's a true home office, I think the buildout itself may be deductible but that means no paying household bills in the basement.

I AM NOT A CPA. And this is a CPA's question.

Second question is how stable is DH's employment? I'm with you on not touching 401k or stock to pay for this, but before I put it on a cc I'd want to make sure that there wasn't a three month, six month trial period after which DH may find himself back in an office. you don't want to be paying off a cc for a job that went away.

Good luck.

[Apple]

Because it was worded as WWYD, I would move the desk to the basement and run a cord if needed for the computer and desk light. I would be happy enough getting to work from home that a few months of bare-bones "office" would be doable. Unfortunately my job is not one I can perform anywhere but at the jobsite (unless I'm doing some kind of programming or documentation, but my bosses would never go for it ) Then I'd save up the money to have it done. If I did get one of the 0% interest, 0% fee checks, I'd probably do that to speed up the process, but make do until that happened or I had the money saved. But I'm pretty low-maintenance and easy to please if I have what I consider priority (ie, working from home vs the "perfect" office).

[Deleted]

I would probably fall into the make-do until you have the $5k camp, but if you get a decent CC offer, that may be a good compromise. I definitely wouldn't ever pull from my 401k for a "want" rather than a "need."

If DH will be working from home in the long term, I might also look around for other places in your home. If there is a spare bedroom or play room above ground, I might consider using that space for the office and building out the basement for a playroom or another purpose. People are more productive if they have natural light and doesn't feel like he is headed down into a dungeon to work every day (even in a very nice, finished basement, it can be difficult to monitor the passage of time).

[❤ mollymouser ❤]

Wouldn't a roll-top desk do a lovely job of protecting the computer equipment when he's not working at the desk, and give you time to save up for this work? That's probably what we'd do. Then again, we just bought a nifty oak roll top desk off Craigslist for $100.

[qofcc]

Not knowing your house, I don't know if the basement is the best option, but if you're going to finance it, go with the credit card. Check for balance transfer offers with each of your cards except the ones you pay off in full every month and run the numbers and choose the best deal. Since your car will be paid off soon, you should be able to find a 0% offer with a low minimum payment, then divert the car payment to paying off this loan before the rate goes up.

[phil5185]

and I'd like to take the home office deduction on taxes.

As someone else mentioned, I question this. Finished basement space doesn't count as added living space - ie, it doesn't add value to a home appraisal.

And I agree with sarah - it would be hard for me to go down to a basement each morning - you'd probably see me at the kitchen table going thru as many papers as I could before I headed downward. He'll need a TV, a coffee maker, a mini-fridge, and a bathroom.

The cars might be a good source of collateralized money - you could go to a credit union and get 5%, 4 yr money. That would be better than signature revolving loans with variable rates and unspecified payoff periods.

[debtheaven]

Is it (our would it be) a walk-out basement? Would it at least have natural light?

If yes, I would do it. If not, I'm not sure. I wouldn't want to be sent to a dark basement every day to work.

[resolution]

In that situation I would wait until I had the savings to pay for the remodel in cash. It sounds like this was triggered by DS spraying glass cleaner into the PC and wrecking it. Is he old enough to understand not to do it again? If not I would try to keep cleaning agents out of his reach, and put up some sort of gate to keep him out of the area with the computer. My sister had some sort of fence/gate type system when her kids were toddlers to keep them in certain rooms with her. If I absolutely had to finance it I would probably go the credit card balance transfer route, unless the stock was a dud that I wanted to get rid of anyway.

[Malarky]

Jul 4, 2011 16:20:26 GMT -5 phil5185 said:

and I'd like to take the home office deduction on taxes.

As someone else mentioned, I question this. Finished basement space doesn't count as added living space - ie, it doesn't add value to a home appraisal.

And I agree with sarah - it would be hard for me to go down to a basement each morning - you'd probably see me at the kitchen table going thru as many papers as I could before I headed downward. He'll need a TV, a coffee maker, a mini-fridge, and a bathroom.
quote][/b[/


I don't buy this. We carved out an office in the basement because DH worked primarily from home for a few years. It's just an office. The tv and the coffeemaker remain in the living room and kitchen respectively.

It has four walls, lighting and a bunch of computers. It's sole purpose is Dad's office. It's much larger than a cube, has it's own (tiny) window and door. During the years when DH worked primarily from home we paid an accountant to do our taxes so there would be little likelihood of being audited. Plus we managed to write the bulk of it off.

And I had to fight with the town to not have my taxes go up. My square footage hasn't changed and adding a few outlets isn't a reasonable excuse to raise my taxes. That being said, it I had to sell the house tomorrow, you better believe I would talk up that home office.

[telephus44]

Well, I did find that last CC offer, which is 0% until Nov 2012 with a 3% fee. I'm pretty sure that's the route we're going to take.

Honestly, I hadn't even considered whether it added to the value of the house - I'm of the mind that I make improvements to my house for me, not to increase resale value. I don't plan on selling it for a while, so I'm trying to recoup my costs when I sell. I know when we were looking, a lot of houses counted finished basements in the square footage of the house, so I assume that it would have some effect on house value.

I might make an appointment with a CPA to discuss deduction. That's also not a primary reason for doing it, I just figured it was a nice added bonus. Right now I do our taxes with Turbo Tax or Tax Cut.

DH has been "working" on the basement for 2 years, and honestly doesn't have much to show for it other than we've spent about $1k on materials at Home Depot. Outside of wiring, he's really not that big a DIY kind of guy. That's why I want to hire it out. And on the wiring - I trust our contractor to tell us if anything he does will invalidate our insurance (he did last time). DH is a network engineer and deals with wiring a lot, so he is very picky about it.

I'm not super concerned about going over budget, because of past experience. This guy did our bathroom and quote $7K. total was $7,117.

And yes, I would also be in the "make do" camp, but this is something DH has his heart set on. And for me, it's not a hill worth dying on. He needs a fairly large desk area since he has more equipment than most. He's got several monitors, wide format printer, and he's constantly working other equipment that takes up space. And for whatever reason, he's had his heart set on the basement ever since we bought the house. We have had it flood once due to the massive ice storm and losing power for 7 days, so I know that we're going to use greenboard for the walls and tile for the floor, just in case.

Wow, I just realized that this all sounds like excuses and justifications. But I'm going to do it anyways.

[zibazinski]

Then enough said, but I am of the same camp of using the living room and gating it off so toddler doesn't come in. Usually living rooms are wasted spaces anyway. I have seen them turned into more home offices, craft rooms, and even a MIL bedroom because she couldn't get upstairs. DON'T write this off, INSTANT IRS trigger. My old broker uses her LR as her office totally including a secretary and she still gets audited every year and they scrutinze everything. SO NOT WORTH IT.

[Deleted]

Telephus, I think to count a finished basement in your square footage you need to have egress windows or another means of escaping should there be a fire. That might be a way to make the space more hospitable for DH and add value to the remodel. I don't want to suggest adding to the total price tag on this project, but depending on the added costs, digging out for bigger windows may be a worthy investment. Certainly something to ask the contractor about.

[telephus44]

Yeah, eventually the plan is to have a fully finished basement with a home theatre setup in a large rec room, plus a workshop and office area, and I would definitely put bigger windows in. Currently it only has a few of those tiny windows at the top of the walls. But right now we're really just trying to solve the work from home problem, not turn it into a major renovation project.

[Deleted]

If it were me, I'd make do with just sticking a desk in a finished basement and call it a day. I don't know why you'd a coffee maker, fridge, and a bathroom. Just because you started working at home doesn't mean you suddenly lose the ability to walk to places. I'm sure he had to walk a farther distance to get to all those things in his old work office. It's not ideal, but I'd rather do that than spend $5K in money that you don't have.

But personally, I'd just save up until I could finish the whole basement. I don't know....I don't think it'd be that big of a deal to work in an unfinished basement. It's better than commuting to work.

[thyme4change]

I would do the work myself.

[Tiny]

I'd shop around for a balance transfer card - Chase Slate (an old Balance Transfer Card) offered me 0% for 12 months with no fee AND up to $7500 can be utilitized (I've got a 12K limit on this card). the fine print sez I could transfer a balance OR write myself a check
Chase Freedom also offered 0% for 12 months no fee but with a lower cap on how much I could take. I have a lower credit limit on this card.

The Slate card has a 2% minimum payment each month and the Freedom has a 1% minimum.


FWIW: Before I did the remodel, I'd probably find $250 in my monthly budget and start dumping that into savings (it's eventually gonna be your loan repayment amount). Yeah, your minimum payment may be about $125.00 but do you really want to pay off this loan over 15 years??
I'd also probably tough out at least 2 or 3 months (accumulate $500 or $750 in savings) before starting on the parts of the project that require dollars...
I'd also seriously consider the area of the basement you will be using... if you've got an unfinished basement and a sump pump - I'd seriously look at making sure you've got a good back up system (battery, etc) on it BEFORE you start doing basement construction. I'd also consider the humidity level down there - and if there are any cracks in the foundation (letting in moisture) BEFORE you start basement construction. I'd also think about how you will get air flow (heat/ac whatever) to the new space. Moisture/water is your enemy... and while a wide open basement space might not feel like there's a moisture problem - dividing up the space may aggravate one...

[telephus44]

Yes, we have a battery backup sump pump - got that after the basement flooded in the huge ice storm of 2008.

We currently set aside $200 a month in plain savings, and have about $3K in there already. I'll have a car loan paid off in Dec that will free up another $250 a month. If worse comes to worst, we also save $1600 a month for retirement (across various different investments) that I could cut back on.

[Deleted]

Is your husband a W-2 employee or a do they give him a 1099? Because if he's not filing a schedule c (1099 employee), then not sure how he could even take the deduction in the first place.

[bean29]

Telephus,

Just some thoughts. Price - looks low, but as you had them do work for you before, I guess it is ok to take a chance on them. But, I would price out how much lumber/drywall they need and decide what type of flooring and get an estimate on that. We are finishing a room in our basement it is about 13.5 x13.5 with a closet that is 7.5 x 6.5 and my carpeting estimates are $900-1,000 (Includes moisture resistant pad and tack strips). DH did the electrical himself and the plumbing in other parts of the basement. We have been paying as we go over several years, and I have not added it all up. DH has also laid tile in some rooms in the basement and plans to tile all but 2 rooms down there. We have a partial exposure and we have a door from the basement to the yard.

My brother added a bedroom in the basement when he bought his ranch several years ago. They put in a egress window. He did part of the work, and I think it cost him about $1,000. He also has an office in the basement, and he works from home - Midwest employee with a home office on the east coast. I have never heard him voice an opinion that he needs light in his office. His concerns are more along the lines of what technology his company is providing to enable him to do his job and how it is working for him. But having said that, I know that when I go down in my basement in the AM, the light is pouring in my office window. I really think if you can afford it, it would be a worth wile addition.

Living in the Midwest, finished basements are really common. I have never agreed with those that claim a finished basement does not add any value at all. I actually believe that finished basements are a positive selling point as long as they are done well and not dated. I know the city I live in calls the finished basement with egress windows or partial/full exposure FBLA (Finished basement living area) and they have a formula for valuing it. It is less than above ground but it is definitely not 0.

My DH is a 1099 employee, he has his own office, I do not take a home office deduction because even though the room is pretty big it is a small fraction of my whole house. I took a home office deduction in our first house, and ended up recapturing part of it when I sold the house. I just don't think it is worthwhile.