How to Renovate a Small House Without Going Broke

We have two kids about to turn 10 in less than a year. One is a girl, the other a boy (twins – no, not identical.)

Having one of each is amazing. Disparate gender kids widen the scope of our parental responsibilities in myriad ways. We wouldn’t trade it.

As frugal-minded parents, of course we recognized the benefit of having either two girls or two boys. In that scenario, the kids could share a bedroom until 18, saving us the trouble of figuring out how to carve another bedroom out of a small 1,400 square foot home.

As easy as same-sex twins would be on the pocketbook (and our minimalist disposition), the renovation investment we’re about to make to accommodate growing kids will be more than worth it.

Our Current Layout

The Cubert Family lives in a modest home in a great neighborhood of Minneapolis. The 1940s rambler was build as a post-war starter home. Beautiful hard wood floors and coved plaster ceilings reflect the attention to quality from “back in the day”.

There are no hollow core doors to be found in this generation of homes.

There are two bedrooms separated by the full bathroom in the original finished space. There’s a nice sized living room and adjacent, dedicated dining room too. Even the kitchen is a manageable size for modern needs (and traffic flow to and from the basement).

The basement was finished about 20 years ago and is where I currently hold court as a telecommuter (in a shared living room area with our Peloton, home theater, and hide-a-bed for guests). A 3/4 bathroom was put in by the previous owner.

A walled-off separate room serves as our Lego and vintage NES room (oh, and our rowing machine). Honestly, we could get away with putting one of the kids in the “Lego room”, if push came to shove, but there could be objections to the rower being in the way.

The Lego room has the same dimensions as their current shared bedroom directly above. And it has a dedicated closet. The drawbacks are 1.) no egress window for safety and 2.) the insulation is not good from the reno 20 years ago. But it is perfect for Lego mayhem and frugal Star Wars set creation!

How to Renovate a Small House Without Going Broke

At the beginning of the year, we took a cash-out refinance on our house that freed up just over $120K at a super low rate. Talk about good timing with where today’s rates are…

This cash is dedicated to a renovation of our modest rambler with the main goal of creating a dedicated bedroom for each of the kids, and secondary goals of a more comfortable home office and home gym space.

The question is: what kind of renovation would we pursue? We could build out an addition into the back, maintaining single floor living (double if you count the basement). We could build up and add a full second story (which would make ours the first such house on the block). Or we could keep the footprint as-is, and put all our focus on creating the best damned basement you ever saw.

Where will Cubert and Mrs. Cubert land on this decision? The pandemic created some challenging headwinds for homeowners looking to get reno work done. First, COVID-19 itself knocked down a lot of contractors and skilled workers. One couple we know lost their head contractor to the disease right as their 2nd story addition got underway.

Second, the supply chains got clogged up, which only compounded the third dynamic: soaring costs of lumber due to high demand (and said supply chain FUBAR). What would have been a $150K to $200K renovation menu quickly and seemingly overnight became a $250K to $350K one.

Our first stop was to find a contractor with a solid reputation. If we were going to invest a mountain of cash to renovate a small house, the job had to be done right.

Option 1: The Bump-out Addition Renovation

Fortunately we have a neighbor who just completed an addition. Her original contractor was lousy and aside from stretching out the schedule and doing poor work, the bozos managed to damage her neighbor’s garage. Her second contractor was a breath of fresh air. His crew got the job back on track and finished on schedule.

We knew we wanted this “rescue crew” for our project, even as we planned to do our diligence and bid the work out.

Our architect was referred to us by the same neighbor. Now we had an architect and design team on contract to help give us the reality check on what would and wouldn’t work with our addition project. A few onsite visits to measure and several Zoom calls later, we had plans ready to bid out.

Our design team felt that an addition would be less costly than a second story addition, so we stuck with this option.

Until…

I had a conversation with ANOTHER neighbor who said his contractor friend could do a second story for a lot less than a “bump out” addition. Something to do with foundation work? SIGH…

With this information in hand and a rough estimate of $275K for the bump-out addition we went back to our architect and had her draw up plans for a second story addition. What could it hurt to pursue all of the options before the first shovel of dirt got dug?

Cost of Option 1: $275K

Option 2: The Second Story Renovation

This is perhaps the most admired of our options. Adding a second story would almost double our square footage. We’d get the master bedroom of our dreams and the kids would have nice living quarters too.

The perks of two-story living: Additional bathrooms. We’d get our super nice master bathroom and the kids would get their bathroom to share. Here’s the plan that I drew up on a whiteboard, which, incidentally, was pretty much what the architect drew up too (with a bit more precision of course):

We eventually got so far into this option that we were reviewing design elements for the exterior. A second story addition is tricky to pull off aesthetically. Many of these retrofits are unattractive “boxes”. Design is important for getting the mix of materials and sightlines just right. We wanted our box to look pretty!

The kicker? After all of the design work on Option 2 completed, we got the rough estimate from the builder. It was actually MORE than Option 1.

By this point we were starting to feel played by the whole process. Maybe we were too hopeful that avoiding foundation work would somehow spare us $50K or more in renovation work. Alas…

Cost of Option 2: $295K

Option 3: The Ultimate Small House Basement

By this point in the process, four four months since hiring our architect and design firm, we had no appealing options to work with. The cost of each renovation option was more than the cost of the house back in 2004.

Granted, housing has appreciated a lot since then, but still, almost $300K is a massive amount of money for a family that plans for the future.

So, I did what Cubert does when money dilemmas pop up. I stewed. And I stewed. And I stewed some more. We sat on these two options for nearly a month, contemplating a possible “option 3” or even moving into a different, bigger house.

Moving seemed the most logical choice. Living through construction is challenging, especially with kids.

However, we love our neighborhood. And we weren’t the only ones. Home prices have continued to soar in our part of town, as people learn that suburbs are ridiculous.

Economics 101: Demand keeps rising, while constrained supplies of housing stock diminish.

That handsome rambler with 3 bedrooms and 2 baths and 1,750 square feet of finished living space? Be ready to finance $450K. A 4 bedroom 3 bath house in our area now requires $800K. Uff-duh…

I finally proposed Option 3 to Mrs. Cubert. We would keep our existing footprint, and simply reconfigure the basement. It would be a complete renovation of a basement that was already finished 20 years ago. However, this time, we would do it RIGHT.

The new basement would have two nicely sized bedrooms for the the kids, with egress and slider windows, and their own dedicated bathroom. The bathroom plans call for a dual sink vanity, heated floors and walk in shower.

Our kids are going to love it (as will we, when they move off to college!)

To make this option appealing to my wife, I suggested that my current office space become a dedicated home gym. We’d open up the ceiling to allow jump and press based exercises. The flooring will have the fancy rubber matting you find at commercial gyms. So far, so good.

I’ll also have some mechanical and structural things corrected. The walls and ceilings will have spray foam and sound proofing insulation. We will use Marmoleum instead of carpeting. Although our basement is dry thanks to the radon mitigation system put in years ago, it’s still a good idea to avoid carpeting in basements.

We’ll also have the HVAC ductwork redone correctly for the main floor. New supply runs (currently on interior walls) will be swapped with new returns (currently on exterior walls). Might as well get a little more love for the main floor while the basement ceiling is opened up.

Cost of Option 3: $170K

The Pros and Cons of a Basement Renovation

We are moving full steam ahead with Option 3. The construction kicks off in December and will likely last 3 months. Here are the aspects we weighed in our final decision:

Pros

1.) We cut our renovation costs in half by simply thinking more deeply about what our space needs are (and will be) and how to optimize for them.

2.) We can now consider this modest house a potential “forever” home, as two older people can better manage 2 vs. 3 stories.

3.) Building on Pro #2, with very little new finished square footage, our cleaning chores will be no worse than they are today.

4.) We avoided spikes to property tax, maintenance, heating, cooling, and electric costs. These should all be factored into renovations where new space is added.

5.) Our backyard and trees remain intact, and so does the character of our block. Turns out, we won’t be the first to add a 2nd story.

Cons

1.) Space will be tighter when out of town guests visit. I’ll have to vacate my new office (FKA the kids’ bedroom) when friends or family stay overnight. That means I’m heading into the office for a few days. But that’s not the worst thing in the world (especially if I wind up retiring at some point. Har!)

2.) My movie room! My beloved movie room is GONE! Noooo!!!

Yeah, this was a big sacrifice for me. At least we got to screen the full Star Wars and Marvel catalog these past few years thanks to COVID.

Still, this sucks. We’ll have to see how the minimalist home theater hook up performs in my new office / guest room (office / guest room / movie room??) upstairs.

Geez. Packing a lot in there.

I’ll get over the movie room situation. In fact, it might just spur me to put some effort into making that combination office/theater box a thing of beauty (wall to wall shag carpeting, Baby).

Maybe I could sort through work emails while having Mad Max Fury Road playing in the background…

First thing’s first. Let’s see how construction pans out this winter. That should be “fun”.

I am still convinced that in the battle of the small house vs. the big house, our decision to renovate a small house wins for all of the Pros listed above. And for sustainability reasons as well.