Renovation Revelations

Renovations can add value to a property, but only if they are done in the right way, says Adrian Goslett, CEO of RE/MAX of Southern Africa.

He notes that many homeowners may undertake a home renovation that could cost them a lot of money but add very little or no value to their property when they decide to sell. This is why it is important for homeowners to research certain aspects before venturing down the renovation path, especially if the renovation is specifically for investment and resale purposes.

Don’t over-capitalise

Goslett says that one of these elements is the general value of property in the area in which the home is situated. Although property prices can vary from street to street, most suburbs will have an average sale price.  The homeowner can risk over-capitalising if the cost of renovation vastly outweighs the profit that can be made, if the property is sold at a later stage. Over-capitalising can actually have the opposite desired effect and devalue a property. The value of a home is largely dictated by its location and condition, especially in comparison to other nearby properties. This means that before they break ground, homeowners should have an idea of property value in the area and the current real estate market.

Look at market trends

“If a homeowner is thinking about renovation, especially if the renovation is costly or largely changes the structure of the home, such as making a single storey home a double storey one, it is advisable that they first look at the current property market trends in the area,” says Goslett. “Property websites and newspapers will give the homeowner some idea of the market trends and prices, however, consulting with a real estate professional specialising in that area will give the homeowner a clearer picture of the market.  An agent will know what current buyers are looking for and at what price.”

Different features appeal to different buyers

Different kinds of renovations could appeal to a different demographic of buyer that is attracted to the area. Knowing the particular area’s general buyer profile and features they look for is essential to undertaking a renovation project that will add the most value.  If the predominant type of buyer in an area is a business executive wanting low maintenance and lock-up-and-go features, a swimming pool could prove to be more of a hindrance than a value adding element, while a family buyer could see this as a draw card.

Have a budget and stick to it

Due to the fact that renovation is often an emotional decision, Goslett advises homeowners to have a set budget before starting and to try stick to it as much as possible. As a rule of thumb, the renovation cost should not be more that 25% of the estimated value of the home. “Setting a renovation budget will also require the homeowner to do some research regarding the associated costs. Certain elements may cost more than expected, so this will need to be planned for ahead of time. A lack of financial planning could result in a poorly completed or half-finished project, either of which could affect the value of the property negatively,” says Goslett. “Some homeowners may be tempted to undertake the renovations themselves to mitigate costs. However, this is generally not recommended practice unless the homeowner is qualified to do so. Badly completed DIY renovations can cost far more to rectify, than if the job was done professionally from the start.”

Although purchasing property should be considered as a long term investment, it is very seldom that a homeowner will stay in the same home for their entire lives. Goslett says that this is why it is important to carefully consider renovation plans and how they could affect the value of the home and the homeowner’s financial well being.

“Often circumstances change and a property no longer meets the homeowner’s requirements, so perhaps the most important question is whether it is wise to renovate an existing property, or if it  would make more financial sense to invest in another home that meets all of their needs,” concludes Goslett.

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