Mapgirl’s Fiscal Challenge

Contemplating things further, I think I can finance a bathroom remodel. Especially since the estimate I received is under $6K. Add on 10% for overruns, as most places advise, and it’s still slightly under the $6K mark.

Resources available:
1. The insurance company will pay me for the repairs ~$950.
2. My tax refund is ~$1400.
3. My stimulus payment is $600.
4. Liquidating my savings accounts ~$1300.
5. Cash I can raise from my next two paychecks, $1200.
6. Balance transfer at 1% APR till January 2009, $5000.

So that’s $10,450 in resources, not bad. Of course, I have debts to pay. And to get my apartment ready as a rental, I need to do a few more things to the plaster and the kitchen. The plaster work is only about $1000-1200. However kitchens are expensive and that’s what gives me pause. I’m not sure I should go as far as fixing the kitchen up really nice. Should I stick to something cut rate? Should I only update the kitchen appliances? At the moment, I am leaning towards replacing only the dishwasher.

Right now, in the aftermath of tax season, I think the only way I can take on all this cost is to sink it into my apartment as investment or improvement costs on a rental unit. Make it all a Schedule C line item.

Renting out my condo at market value will end up having negative cash flow for me each month unless I find a really sick cheap room for rent, which is possible in my neighborhood. I looked at a sublet for $575 a month last week. I could net about $300 in my pocket from positive monthly cash flow and put it towards debt repayment. Then I’d also be able to reduce my tax liability from a Schedule C net loss. But all of this makes me exceedingly uncomfortable. I am just not confident I can make it work out in my favor though.

I would have the hassle of finding a stable roommate situation and signing a lease. I’d have to move all my stuff out of my house and find storage for it. Having moved 7 times in 2 years during a transient period of my life, and recently reliving those times while filling out a security clearance form, I really hate the situation I’m in.

Of course, I could stay in the place. But then I’d want to remodel the kitchen, tear out the carpet and really spruce up the place.

At least I’ve freed up some resources and have a plan now.

Since the ceiling needs repair, I figure I should do the entire bathroom. I thought maybe it would cost $5K, but after talking with a few people, I need to budget closer to $7K. I suppose this is a very salient lesson that everyone needs an emergency fund. Say 3-6 months of take home pay, which of course would cover the repairs. Unfortunately, my emergency fund has only about $1.5K in it.

In desperation for cash, I looked at all my options here. I have credit available on my HELOC and on my credit cards. I have a few CD’s expiring, which I was going to liquidate anyway to pay down debt. But since there is an emergency here and now, I’m going to use them to fund the repair.

With construction, you usually have to pay a deposit of some sort to get the work started. In my case, the earliest construction can start is in another week. The work will take approximately 10 days, taking me to early May.

In looking at my cash flow and available credit, I decided, rather sadly that I cannot attend my friend’s wedding in Boston this month. There’s just no way I can find a hotel room under $200 a night anywhere near the festivities or near the hotel where my best friend and her husband are staying. I’m looking at $1000 for just hotel and rental car alone at a time where I need the $1000 for something else.

I have balance transfer checks coming to my house all the time for a promotional rate less than 2% APR. Unfortunately, these BT’s have a fee. A friend asked me if that fee was capped out but reading the fine print, I couldn’t find any mention of a cap. I called the customer service line and asked about a cap. However the representative said he couldn’t change the BT fee. Instead he offered to change the rate from 1.9% to 1% APR after looking at my sterling payment record. It’s the best he could do, but I’ll take it.

Now the trick here is that I’m sitting on $5K borrowed for 1% APR. Do I pay off my 11.99% APR credit card balance of $4K only to ring them up further as the construction work progresses, or do I hold onto this wad of cash and wait to pay it out to the contractor? (It’s going into an account that doesn’t bear interest so there’s no arbitrage going on here and there isn’t enough time to move it around and take advantage of that sort of thing unless I’m paying off the credit card.)

The last $2K I need, I figure can come from liquidating all of my savings accounts and my next two paychecks. The problem now is that I’ve shot my 2008 debt reduction goals to pieces.

I’ve been sighing a lot this week. Life. It’s what happens to you. Dealing with it can suck, but I look forward to having a shiny new bathroom with better lighting in the shower and for the mirror when I put on make up.

Luckily for you, this week, several PF bloggers have Emergency Fund posts.
Five Cent Nickel: On building an emergency fund
Get Rich Slowly: Learning to love his emergency fund
Plonkee: On why they’re no fun

As of Monday, the leak in the wall was found and repaired. The plumbing company my HOA uses sent two different plumbers onsite to fix the drainage pipe from the kitchen of a unit two floors up and one unit over. Absolutely nothing was going down the drainpipe and all of it was going out the hole and down the walls for 4 floors. EEK.

What does this mean? This means my HOA’s insurance policy for the entire building can pony up the entire cost of the problem, or else split it with the unit directly above mine. And they can cover the moisture abatement problem that I can tell is an issue from the yucky smell in my apartment.

I have decided that someone is going to pay me the $1450 claim amount written up by my claims adjuster. Either way, the damage to my ceiling is the worst of any unit that I have heard so far.

All I am waiting for now is a full written estimate from the contractor I would like to use. I did ask the handyman belonging to the landlady upstairs who came in and also did a repair estimate. He gave me a ballpark $6-7K for the entire job and a repair cost close to that of my claims adjuster, but I got a shady feeling from him for two reasons. 1. He didn’t really want to commit himself to a paper estimate of any kind. BAD. 2. He was pretty reticent. I wasn’t sure if he was really listening to what I was saying about my desire to balance value with decor. This is my permanent home and I would like it to be nicer than your basic cut-rate rental unit. But maybe one day, I will rent it out.

I asked a friend of mine about a bathroom remodel he did and the cost. He gave me a figure in line with with the handyman’s verbal quote. Too bad it’s all more than I want to spend. But alas, I don’t get a choice here. It means that I need to adjust my budget and expectations.

SIGH. Where to find $6-7K?

The ceiling caved in on my bathroom about a week ago. My friend had been staying there and she didn’t notice anything funny. I never got a call that there was something going on. Instead, on April 1st, I went to my apartment to do my taxes from home on my Quicken installed desktop. All was well when I left the house to go stay at my boyfriend’s house that evening.

Later that week, I come home and there is a note on the door dated April 2nd from the unit below mine. There’s water damage coming from my apartment and he wants to talk to my insurance company. Well I check the kitchen first since that was the source of some prior water problems when I first moved into my house 3+ years ago. Nope. Nothing. It’s dry as a bone.

Then I walk into the bathroom, and my jaw drops. I see the ceiling has caved in completely onto my toilet. Not good. I have a 2 foot square hole in the ceiling. There are about 3 layers of drywall and plaster fallen everywhere. I can tell that the floor has been soaked and dried up already because the bathmat has some staining on it and feels slightly damp, but isn’t wet.

Over the last week, I’ve been struggling to deal with it. I am now imposing myself on my boyfriend’s hospitality and it’s bugging the crap out of me. I really just want to be at my own house. I love my place, but this is a little too much for me. The landlady upstairs is taking care of the ceiling repair, but get this, there is another leak in the building that is still causing a problem!

Because of my asthma, I don’t clean up dusty stuff. I just avoid it and pay someone to do it. That’s always cheaper than an ER visit. My boyfriend did the clean up for me and while he was taking stuff to the dumpster, he left the toilet lid down and then I heard drips coming from the hole in the ceiling! YIKES! The leak was supposed to be fixed!

So now it’s being all referred back to the HOA to find the damage. It’s in multiple units and the origin is still not found.

At this point, I think the landlady upstairs will reimburse me for the ceiling repair for my unit, but I’m going to tear up the whole bathroom and remodel it just in case I want to rent it out. And if I’m going to do that, then I have some other things I’d like to do as well to the unit.

I’m going to have to stare at my cash flow for a while and figure some stuff out. UGH. Who needs this?

PS - I ran into Debt Hater this morning on the way to work!

I feel kind of bad. One of my friends is a mortgage broker and I told him I would give him a call after he got back from vacation about possibly refinancing.

That was a month ago. I feel like a jerk for dangling some business in front of him and then not calling.

But since that call I had dinner with another mortgage broker. We had a casual chat about refinancing and the current mortgage situation. Turns out this guy is doing about 1 mortgage or refi a month right now, whereas a year ago he was doing 5 or 6. Because of this, he’s going back into telecommunications on a short-term contract to bump up his income this year. I didn’t ask the other broker at dinner how he’s doing, but I am sure he’s also doing a lot less business as well this year.

I mentioned that I was going to call this friend of mine about a refinance, but the guy at dinner asked me about my current rates and stuff. He told me that my primary 7/1 ARM at 5.75% with a fixed 7.18% HELOC is still pretty good. He basically advised me that it’s not worth it to refi now since I would have appraisal, closing costs, and opportunity costs of my free time to do this. He told me to wait till rates fall another full percent before trying to refinance. Before I told him about how much equity I had, he told me the HELOC was quite high at current rates of 1% above prime. Then I told him I have less than 20% equity and he backed off that position.

Since I have 3 years left before my mortgage adjusts, I think I’ll just wait out the current situation. Per my earlier post about my goals and HELOC, while not upside down on my mortgage, I certainly do not have enough equity built up in this declining housing market to make up 20% equity in my condo. I’d still have to have a 2nd trust to avoid PMI. (And I’m one of the lucky ones. Because my condo shot up 25% at the peak of the Northern VA housing market, my valuation had room to fall. I’m still valued much higher than my purchase price.)

So for right now, unless Ben Bernanke makes a slew of cuts again with the FOMC in Q2 2008, I think I will hold steady and focus on paying back my credit cards for now.

I think I’m going to be lucky if I reach the peak of my 2007 net worth.

The reason is two-fold.

1. I am taking a bath in the markets lately in my retirement accounts. Coupled with my low contribution rate in 2008, I think I’ll be lucky to be flat and not lose anything in the funds I hold. I have shifted some money around to re-allocate to a heavier international portion, but honestly, I think things aren’t look too good globally either.

2. I just got my 2008 real estate assessment and I’m taking a $4k hit on the value of my condo. No worries though, I’m still up 14% on my original purchase price from 3 years ago. Unlike other people who bought at the top of the market, I bought an undervalued property and am still enjoying a positive increase in valuation. With the way regional planning is being done, I actually am primed for a huge increase in value in my property in the next 5-10 years. (They’re putting a new trolley/lightrail system a few blocks away, which they want ready in less than 10 years.)

Add on all that some changes in cash flow with my job transition and I’m holding onto cash as much as I can right now, but it’s been tough since I know I have to upgrade my wardrobe and I cannot submit my eye surgery to my new Medical FSA account just yet.

So, how many foreclosures are you on your block?

My knitter friends and I were talking and one of them has pulled her house off the market. They were going to relocate, with with a baby on the way, they decided to stay put since the house was so hard to sell. This snowballs into another conversation about mortgages and what people could afford.

One of my friends tells me that there are 6 foreclosures on her block! SIX!

*smacks forehead*

Whoa!

This turns into a revealing conversations about mortgages and money management. I learned a lot from her. She just turned 50 and on her last refinance signed a 15 year mortgage refinance for a sickly low rate under 5%. She wasn’t going to do the refinance till her mortgage company offered to do it for a dollar because they wanted to retain her and her good bill paying habits. Imagine that!

I don’t know if I have any foreclosures on my block, but the creepy guy and his mom moved out of my building this past year. Their place was sold at auction. I think they couldn’t afford it. I feel bad for them, but not really. He used to sneak up on people thinking that it was his mom coming around the corner and scared the bejesus out of me once. One time of that happening and I avoided him always.

I love the Washington City Paper. I was at the Yarn Harlot book signing event last night. As I waited for my friends to get their books signed, and deliver her a beer, I flipped through the paper and found a lovely ad on page 49.

Financial and Credit Literacy Day
Hosted by the Washington Area Community Investment Fund

Saturday, September 29th
9am-4pm
Kellogg Conference Hotel
Galludet University
800 Florida Avenue, NE
Washington, DC

RSVP: 202-529-5505

FREE ADMISSION and FREE PARKING!!!

The financial literacy seminar/workshop list looks very good. (link goes direct to an Adobe PDF file) There are seminars on targeted to teens/youth and women. Topics include Small Business Management (including federal contracting), Homeownership, Selecting a Mortgage, Managing Foreclosure, Credit Scores, Budgeting and Consumer Rights.

The ad says, “Bankers and housing counselors available all day.”

I do not know very much about this organization, but they do have an impressive list of sponsors. They were formed out of Arlington with the help of the local Catholic diocese, which if you don’t know, has one of the craziest liberal parishes in the US, St. Charles Borromeo. I actually have worshiped there because one of my closest friends used to attend. If you know their ministry, they’re very into social justice, often to the chagrin of the archbishop. I mention this because St. Charles is very active in low income housing initiatives in Arlington County and I could definitely see them supporting an organization like this.

It’s technically a non-profit loan fund, with 501(c)(3) status. I’m going to look into investing in it.

Hat tip to Rob for pointing this article out. It’s been a work-focused week for me and I’m not generating enough story ideas on my own.

The Wall Street Journal Online has a short story about American Home Mortgage Investment Corp. and Freddie Mac.

In documents filed with the U.S. Bankruptcy Court in Wilmington, Del., Freddie Mac said it seized $7 million that homeowners sent to American Home to cover principal and interest payments, property taxes and insurance just before the company’s Aug. 6 collapse. American Home quit making payments to tax authorities and insurance companies Aug. 24….In an interview last week, Ginnie Mae’s senior vice president, Theodore B. Foster, said Ginnie Mae had seized from American Home some of the insurance and tax payments collected from homeowners. “What’s occurred is that we have the money, but AHM hasn’t been able to or willing to pay the taxes and insurance, and they have the loan records,” Mr. Foster said. “Therefore, we don’t know who to pay, and we don’t know how much.”

This is very bad.

1) If you are a borrower of AHM, you may be delinquent on your property taxes because they aren’t paying them through your escrow account. Try to find out what you owe the county by going directly to your Tax Assessor’s office and paying the bill. Same goes for your home insurance or PMI. (I couldn’t figure out what kind of ‘insurance’ was meant by the article.)

2) If you don’t, your local government may seize your property and auction it off at a tax foreclosure sale, even if you are paying your mortgage on time. It’s better here to actually over pay your taxes because at least the county can’t come and get you.

When Rob first sent me this, all I could think was that this doesn’t effect me directly. I don’t have AHM. I don’t own stock in Freddie Mac. (I digress for a deep irony, my friend works for Freddie and he lives out of his van! He’s literally homeless! LOL! By choice. “Strictly by choice.” - Say Anything)

However, the greater implications really frighten me. County governments could have short falls in revenue. It could be a sign of a recession coming. Rising homelessness. Not fun. I have vague memories of the recession of the early ’80’s and I don’t relish the thought of tough times ahead.

Free Money Finance has the latest Carnival of Personal Finance available. It’s edition #115!

While he’s got his editor’s choice picks, I am skipping them in favor of what else is out there that caught my eye.

Pinyo at Moolanomy asks what money wasters do you do? I do 1, 2, 6, and 10. But I definitely don’t do 3, 8, 9.

Saving Explained with the contrarian advice on emergency funds. I’m a big advocate of them, but I like to keep an open mind. Read the companion article he references about keeping small savings subaccounts assigned for specific financial goals. What do you think? Good idea? Crazy idea? I still think emergency funds are a great idea for anyone with a home, car, or unpredictable job market. I know that I just covered like 90% of the people out there, but that’s why I think an emergency fund is worthwhile for nearly everyone. It’s really only a question of how much, not if.

Clever Dude with the skinny on Carfax used car reports. Read to the bottom and follow the Consumer Affairs link from Super Saver as well.

Make Your Nut has advice on how to have a big party on a small budget. I don’t think 20 is really a big party, but the advice is still great for entertaining on a shoestring. The main thing is, your friends will bring you more beer than you will ever drink if you don’t stop them and assign them something else to bring. ‘Bring chips!’ ‘Bring salsa!’ ‘Bring a salad!’ ‘Bring some bread!’ ‘Bring some dessert!’

Grad Money Matters on the Joys of Homeownership. HAHAHA. Damn if I haven’t been there, cursing myself at buying a condo. “What was I thinking?!” is an unfortunate thing to say to yourself after the mortgage is signed.