There are a number of things to consider before deciding to renovate your home, not least of all whether or not it will prove a wise investment.
Most suburbs have a median sale price and homeowners can actually devalue their homes by over-capitalising on renovations. A good way to check out area trends is to get a property valuation report showing latest sold prices of similar homes in your street, complex or suburb.
Although renovations can add value to a property, if undertaken correctly, homeowners should have a sound knowledge of property values in the area and the costs involved before embarking on improvements to avoid over-capitalising on their homes, says Adrian Goslett, the CEO of RE/MAX of Southern Africa.
“One of the most important factors that should be taken into consideration is the area in which the property is situated,” he says. Anyone who invests in property needs to keep their wits about them. It may seem like a good idea to add another bedroom or to install a large pool, turning a mundane home into a palace, but owners need to literally keep their fingers on the pulse of current property market trends in the area in which they live before they decide to undertake any costly renovations.
“Keeping an eye on property pages in newspapers, or chatting to an estate agent who is familiar with local conditions is an excellent way of gathering important information on the area in which the property is situated. Agents know what is selling and more importantly, at what price,” says Goslett.
Different areas appeal to different people. Knowing what features are sought after by the buyer profile in any particular area is vital. Pools for example may appeal to those buying in a family oriented suburb, but could be viewed as a hindrance in a retirement environment, where buyers are more interested in the lock-up-and-go, low maintenance option.
Goslett says that it is important to remember that property prices can differ from street to street in different suburbs. Most suburbs have a median sale price and homeowners can actually devalue their homes by over-capitalising. Prices in any given area tend to be based on a number of issues, but generally include the condition of other nearby properties.
An easy way for homeowners to check property values in their street is to get an online property valuation report, which shows what homes in that street or complex have actually sold for. By looking at sold prices of similar homes, it is possible to get a fairly accurate idea of what your home would be worth and the area trend.
Buying a home, says Goslett, is often an emotional decision and homeowners frequently experience similar emotions when they renovate or extend. “Unfortunately, homeowners often under estimate the costs associated with renovating. A new bathroom or kitchen in particular, can prove to be far more expensive than originally anticipated.”
Goslett also warns against going the DIY route in an attempt to save costs. “Simply put, there is no cheap way to renovate and trying to do the job yourself, unless you are qualified to do so, can end up costing far more and can affect the resale price. Homeowners also need to remember that buyers notice shoddy workmanship and the costs of repairing mistakes can be more than the actual build itself.
Once homeowners have established that the renovation will add value to the property, it is vital that they stick to the original budget. Financially overburdening yourself through a lack of good planning could affect the sale price if the project is only half-finished.
Generally speaking, says Goslett, homeowners should never spend more than 25% of the value of the home on renovations. Fitting a R120 000 kitchen in a property that has been valued at R400 000 for example makes no financial sense as it is unlikely that this money will be recuperated when the property is sold.
He says that homeowners often make the mistake of thinking that a house purchase is a lifelong decision. Today this is seldom the case. Family circumstances and needs change and finances also play an important role. “What you deem important when you buy you first home, changes as time goes by and the dream bathroom you thought was a must-have, can become a costly white elephant when it comes time to sell if the project was not property thought through.”
“Perhaps the most important question homeowners should be asking is whether it is wise to renovate an existing property, or does it make more financial sense to invest in another home that meets all of their needs,” says Goslett.
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