While house lifting pictures & tales of critters are probably the more exciting parts of our renovation, there’s also a lot that goes on behind the scenes to keep the wheels in motion. Budgets, bills & permits are necessary for most renovations, but there are also extra requirements when doing a project that qualifies for historic tax credits.
The first step was to submit an extensive application with photographs & floor plans detailing the current state of the house, as well as outlining the renovation plans. To give you an idea of what the application process is like, there were 190 printed photos submitted with the application (no digital photos allowed). Each photo has to be labeled with a number & details, and the numbers correspond to categories of work in the application. This was submitted by our preservation specialist and approved by the Missouri State Historic Preservation Office (SHPO) last summer.
Now that work is underway, we are responsible for meticulously tracking all of the expenses. In addition to detailed invoices for all qualified expenses, SHPO also requires proof of payment – e.g. corresponding copies of cleared checks & credit card statements for each bill. There may very well be a template for this somewhere out there (other than the official form that has to be submitted to SHPO), but luckily I have some experience managing budgets & expenses through projects at work so I used that as a starting point to create my own system. After Woodside is finished, we will have to submit all of our invoices & backup to a CPA who specializes in historic tax credits. The CPA will review all the financials of the application before it is sent to SHPO, and my goal is for him to tell me I have the most organized renovation finances he’s ever seen. Stay tuned!
Here’s an overview of what I use:
- Binder – right now I have a three-inch binder and it’s almost full not even a year into the renovation, so this will probably end up being two or three binders
- Alphabetical Divider Tabs – dividers with one letter on each tab
- Spreadsheet – I prefer Google Docs because I can share it with Brendon in real time
To start, we created a master budget that is organized by categories in one column (e.g. Architecture, Drywall, Electric, Foundation, Plumbing, etc – right now we have 57 categories, and no, Inground Pool is not one of them … yet) with the overall estimate for that category in the next column. This was our starting point for the budget we submitted to SHPO. However, it’s important to note that only qualified expenses will be eligible for the tax credits. Generally speaking, this is work that is done to the structure itself that is permanent. For example, drywall in the house is eligible, but lumber for framing the garage is not because it’s an addition. I’ve mentioned it before and I will again – if you are planning to do a renovation that is eligible for historic tax credits, I highly recommend hiring a preservation specialist. He or she will guide you through the complicated process and liaise with the appropriate contacts on your behalf.
As bills come in, we have an “Actuals” column where I plug in the amounts and I also make notes about the payment details (i.e. was it a check or a credit card?) in an adjacent column so that I know where to go to get the backup. Although the spreadsheet is by category, the binder with the bills is by vendor name. I mostly did this because there are some vendors that have overlapping categories (e.g. we will buy lumber at Lowe’s, but also paint – see what I’m saying?) & I find it easier to keep the hard copy bills organized by vendor as opposed to by category. After the bill is plugged into the spreadsheet, I file it into the binder with its corresponding payment information (a copy of the cleared check or corresponding credit card statement) in chronological order. On average I update the spreadsheet & binder about once a week after I have a pile of new bills & receipts. And sometimes I get extra crazy and reconcile each category and make sure my receipt totals match my spreadsheet totals. Since there are no “check-ins” during the renovation process and it’s going to take an estimated three years, I’d rather find any discrepancies now instead of at the end (because then the CPA will definitely not tell me I did a great job organizing my financial records).
What are your tips for keeping finances organized during a renovation?