
“Help us! We have an old and dated home that needs sprucing up." “My wife is having triplets and we need more space.” “Our parents have mobility and vision issues and are moving in, but we do not know how to finance our project.”
These and many other similar scenarios are not uncommon. Most professional remodelers and designers do not know how to offer their clients a knowledgeable answer. The smart and successful remodeler or designer always has an answer to their clients’ financing challenges. Those professionals who are informed on the multitude of options will be experts ready to help finance almost any size project.
Non-borrowing options are exactly that, not borrowing. Use of these options is limited to how much your client can comfortably deplete a reserve account and remain solvent. Life can throw a myriad of issues their way and it is important to maintain a liquidity cushion for those unexpected hurdles. It is also important to know that while non-borrowing options may be a blessing, there are tax consequences for each option. It is your responsibility to recommend that your clients work with both a qualified financing expert and a licensed certified public accountant to discuss and understand the ramifications of these options.
Cash - According to David Matejka, vice president of 1st Mortgages, “This is the easiest and fastest way to get started on a project. As we know, "cash is king." There are no requirements and work can start immediately. However, this may only allow them to pursue smaller-than-needed projects.”
Retirement Account Withdrawals - Continuing, Matejka states, “Whether an IRA or 401K, for some, a retirement account may be an important part of life after a career. Although the intent is to maintain a standard of income after retirement, these accounts can be used to fund home renovations. Depending on the age of your client, these accounts may be accessed without penalty. Prior to retirement age, they can be used under certain circumstances, such as hardship or loss of gainful employment. Although this option is included in the “non-borrowing” section, some retirement plans allow for a limited sum to be withdrawn, inclusive of repayment terms. Assuming this repayment occurs as specified by the retirement plan administrator, income tax liability may be lowered or removed entirely. It is very important that the use of these funds be decided only with the advice your client’s tax professional.”
Grants - Every housing grant program has its own requirements. Your client should be directed to contact the local Area on Aging, state housing authority, or local Department of Housing and Urban Development. Counties and cities may also offer grants for home modifications. Contacting them yourself would also be informative, and you may be surprised to find out how much they can help your clients.
There are usually long waiting lists for government housing grants. If your client expresses a desire to explore this option, it is best to encourage them to make contact early in their project planning. There are private companies that will assist in obtaining a grant, but be wary of companies that use terms like “guaranteed” and “100% certainty.” They may not act in your client’s best interest. Legitimate non-profit or government agencies may be the best direct source for grants.
Crowd Funding and Charitable Donations - With the popularity of services such as GoFundMe and Sheer Venture Solutions, accessing money through charitable donations on these online services is an option. There are always “angels” and philanthropists to fund human interest stories and projects. As per Matejka, “I have a good family friend whose father is suffering from an aggressive cancer. In teaming with GoFundMe, she and her family were able to raise $27,000 to assist in gaining much needed treatments. Be aware that there are specific requirements for obtaining funding using these methods."
This is the first article in part four-part series, published every Tuesday in May, where the co-founders of the Living in Place Institute detail different financing options contractors should be aware of when working with a living in place client.