Of course
Not even a week into the new year, and just when I had finished congratulating myself on how well our finances were doing, my wife shared a thought with me.
We came across a small company that specialises in doing manshon renovations and house building. They do a lot of custom work, and build storage and kitchens from scratch, lay wood floors, etc. Very distinctive and my wife likes it very much.
The bombshell
To cut a long story short my wife wants to renovate our manshon this year. It looks like that is going to cost at least five million yen, but knowing us it will probably end up costing more (although hopefully not more than ten million).
To be fair, our manshon is somewhat old and has not been renovated since it was built. It also has some cosmetic damage (cracks, etc.) from the big earthquake nine years ago.
Now there is a wild card here. You may remember that we paid 60% of the cost of renovating my wife’s parents’ house a couple of years ago. That job turned out very well, and the idea is that we will inherit the house and live there eventually. My in-laws’ are in their 80s, but here in Japan that doesn’t really mean much π
If we’re going to move in the next few years any renovation will be a huge waste of money. We’re unlikely to get the cost back if we sell the manshon. On the other hand, if we’re going to be in our manshon for another 10-15 years, it would be worth spending some money to make it more comfortable.
The project
I think it is likely we will end up doing this project. My wife works very hard and seldom complains that the fruit of her labours disappears into my spreadsheet each month, never to be seen again. It’s only fair that we spend some money sometimes on things that she wants to do. Plus it would be nice to have a more pleasant home environment.
There are several moving pieces to consider. How are we going to pay for this?
We have a couple of options. We could sell some investments and pay cash. Or we could save the money we would have invested and use that. Or we could get a loan.
If we end up selling investments, when should we do that? Should we sell now to lock in profits or leave things for a while to see if prices rise further?
We’d also have to move out for a couple of months while they work on our flat (and find somewhere to store all our belongings). Not quite the relaxing 2020 I was hoping for.
Timing
If we go ahead with this, it won’t be before autumn or so. I’ll post again with more details if we actually do it.
What do you think? Any advice? What am I potentially missing here?
Ha, this is so similar to my 2019! We decided to buy a house which needed renovation before we could live in it, the cost estimate was about the same and we had the same choice: Loan (as part of the mortgage), sell investments, scrimp and save, etc.
In the end, I sold investments (which was painful!) leaving it relatively late to see how much we could scrape together in cash first, but still giving myself a month buffer or so before payment was due, in case of problems or bank delays (which did happen). On the plus side – from a finance point of view at least – the renovations went on longer than expected which meant each month delay was offset by another month of salary income and therefore fewer investments that needed to be sold.
In other words, you can’t predict investment performance so I wouldn’t try to time it based on that, but you may be able to hang on to more than you thought if you leave it longer.
I’m hoping to stall a bit, maybe spec things out this year and make a plan with the renovation company, then schedule the work for next year. That will give us a chance to build up a bit of a cash buffer π
FWIW, we have a big move scheduled this year and will thus be emptying the wife’s NISA account to send to the US. We’re planning on doing that at the end of January, with the thought that a bunch of the funds post their dividends this month.
If your reno won’t be immediate then maybe you’re not in that big of a hurry, but you could look at your portfolio stats from years past to see when you experienced jumps like that. (Assuming the bottom doesn’t fall out of the market from a Trump event or something)
Absolutely. Most of our holdings don’t pay dividends, but a few (VT especially) are definitely worth taking into consideration π
Given how low the interest rate is in Japan, I think it would be worth considering a loan if available to you at a decent rate (ie you meet the PR requirements etc). I imagine you would be making more than the interest rate (~1%) on your investments. I don’t know if the home loan tax deduction would be available to you as well.
We had a similar decision to make when we renovated my in-laws’ place a couple of years ago. For renovations we’d have to get a personal multi-purpose loan. It would not be eligible for the home loan deduction.
Last time I checked I found a loan for public servants that ended up being 1.4%, but the application fees took it a bit higher and I didn’t fancy doing the paperwork π
We ended up selling investments to pay our share of the costs.
it all depends on how much the cost is relative to what you can afford/your net worth.
Indeed π
Let’s just say I’d rather not spend it but it’s not going to affect our financial future much.
Thanks for giving me one more headache to think about. Renovation. Mine is 20 years old and we have replaced this and that but total renovation was something I thought I would never have to do. I look forward to more info on what you finally decide to do…….it may be in my future as well
Yeah, ours is 28 years old. We put in double windows so it’s warmer and quieter, but the entire place is looking a bit tired π
We spent a lot on our kitchen years ago, and have since again replaced/upgraded the stovetop/oven, and so on. Very much worth it–most recent was a Delicia combo by Rinnai.
For one loan option, ask personnel at work. I borrowed against my retirement a couple times. Good rate, and really no questions asked. Downside is that it took a couple months for the funds to come thru, and I think that depends on what time of month you begin the process, whether you get it in just before or just after a deadline.
If you are renovating your kitchen, I’d recommend looking at restaurant-grade equipment particular for gas range/oven which is a bargain if you look at the quality and performance compared to the consumer versions. This site is a good starting point, and then google ε¨ζΏζ₯θ for a restaurant supply store that actually sells them (often at 60-70% of list price): http://www.maruzen-kitchen.co.jp/product/search/gas_RTCS.htm
Thanks for the tip! Will definitely look into that as we’d love a proper oven π
This probably is a non-starter given prevailing attitudes to DIY in Japan, but have you considered (or able to do) a spot of painting yourself to tart up the place? Unless it’s structural work you are after, you’d be surprised what a lick of paint and new set of shelves etc can do. We paid something like 5 million for a refurb of our (then) 35-year-old house seven years ago and are still paying off the loan now. We were happy to pay for the roof and double glazing improvements that were out of our skill set but were a bit non-plussed by the decorating of three rooms which, although top quality, ended up costing in the region of a million yen. Compare that with 10 liters of paint from Unity and the fun you can have (if your wife is game) decorating the place yourself, and we wish we had done that ourselves. Still, life is not all about saving money.
This would be a great option if I had the time, the inclination, or the proficiency to DIY. I have tried in the past, and I hated it and the results were… poor.
So I’m happy to pay competent people to do it for me π
Unidy, the DIY chain, not “Unity”. Never mind.
I’ve been there too 2 years ago… We ended up redoing the kitchen and bathroom in our 27 years old manshon. For having spend hours investigating and comparing quality / costs and user-friendliness of kitchen manufacturers, I highly recommend this one: http://cleanup.jp/ weird name but after 2 years we’re extremely happy with the built quality and it was competitive vs. the other big brands out there.