select
|

Should you renovate your property or buy a new home?

"Once a bond is fully paid, the question often arises whether to buy a bigger, better home, or renovate the present one to suit your needs," says Lanice Steward, managing director of Knight Frank Anne Porter.

There are always hidden costs to moving house that subtract from your capital investment, she said. The transfer duty on the new home, agent's commission on the one sold, the move itself, transfers of phone and internet connection lines, new curtains and other incidentals, are all "sunk" costs - they do not add value to your assets, she said.

"Unless you are able to add a substantial amount of capital or qualify for a bigger bond you might be better off renovating your present home instead of buying a new one," said Steward.

This is assuming you have the space available to build an extension on the plot your existing home is on, but when renovating a home, one must be careful not to overcapitalise in certain areas. When the time comes to sell that home, you might not get the same value for your property.

Check the values of the current property, how much it will cost to add on to the home and compare these to similar homes in the area (ones that have been renovated or have similar numbers of rooms and features).

"If you can keep your present home to rent it out, and still afford to purchase another home that will meet your needs while obtaining the necessary finance, it is an excellent way to grow your property portfolio," she said.

It might be advisable in this case to take a bond on the first property to enjoy the tax benefits there. That bond interest could be offset against the rental income you will earn, reducing the tax paid. However, in order to be sure that this is the right thing for the buyer, he should consult a tax consultant to be sure of all the tax deductions or tax implications.


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 17 Nov 2017
      FWJK has announced the launch of its latest residential brand, the Lil’ Apple, which will be launched simultaneously in two developments in Cape Town and Umhlanga totaling 600 apartments. The Lil’ Apple is set to be a brand of FWJK’s New York style apartments which will be rolled out nationally.
    • 17 Nov 2017
      It’s been a tumultuous year on many fronts, with socio-political uncertainty setting the tone for much of South Africa’s economic activity yet despite this and seemingly counter-intuitively, the residential property market has held up well.
    • 17 Nov 2017
      The EAAB (the Estate Agency Affairs Board) recently claimed that around 50,000 illegal estate agents could currently be operating illegally.
    • 16 Nov 2017
      Penthouses are synonymous with New York – characterised by high-rise living that is decidedly luxurious and spacious. While exclusivity comes at a price, you can still create a “penthouse” look and feel in your existing apartment or even the upstairs bedroom of a double storey house with some clever design changes and styling touches.
    • 16 Nov 2017
      The area has long been popular with kite surfers and, with escalating property prices in Cape Town itself, is increasingly in demand with home owners who work in town, but are looking to invest in more affordable properties.
    • 16 Nov 2017
      Cape Town’s popularity as a world-class tourist destination has resulted in a spike in the number of homes available for holiday lets and fuelled investor demand for sectional title units with short term rental potential.
    • 15 Nov 2017
      Sappi, one of South Africa’s oldest global companies and a leading global supplier of sustainable woodfibre products, has moved its global and regional headquarters to a new site on the corner of Oxford and 14th Avenue in Rosebank.
    • 15 Nov 2017
      There’s an old saying in real estate that you should seek to make a profit when you buy, not only when you sell – and a large part of succeeding at that endeavour is buying a home in an area with desirable features that will enhance the resale value of your property.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK