But what are necessary upgrades and which ones can be classified as imprudent upgrades? Put differently, how much should you spend to increase the value of your home when you sell?
On the one hand, the reasons for this are general and apply to all properties, but they are also area-specific.
Jonathan Davies, manager for Pam Golding Properties (PGP) Hyde Park, says unnecessary upgrades would be upgrades where the value is often hidden to the buyer. “For example, very expensive sound systems are often overlooked by buyers as they do not understand or see the amount of work and costs that go into them. They simply see a sound system but struggle to attach the value to it.
“The same can be said of very expensive paint. The seller feels the expense and loads the price but the buyer only sees paint.”
Jason Rohde, CEO of Sotheby’s International Realty (South Africa), says some renovations are likely to even actually decrease the value of a property and make it more difficult to sell. “For instance, adding a swimming pool to a small property in a cluster development adds little value because many people who buy cluster homes buy them for the lock-up-and-go convenience and do not want the extra responsibility that comes with owning a pool.”
“The general rule is that you should not spend more than 25% of the value of your home on renovations.”
On the other hand, Davies advises homeowners to ensure their houses’ kitchens and bathrooms are in tip-top shape. “Kitchens and bathrooms are always the most expensive when it comes to renovation and having them in reasonable shape will assist in selling. At the end of the day everything boils down to price. A run-down home at the right price will sell faster than a super modern neat home at the wrong price.”
“However, a home that is fairly modern would probably not benefit from a substantial upgrade as the existing structure to the home has an existing value. For example, upgrading a neutral kitchen to a super modern kitchen, although increasing the saleability of the home, may not increase the value in the direct ratio to what was spent. The existing kitchen still has a value.”
Rohde says when undertaking upgrades, it is always important to survey your neighbourhood for clues about where it’s heading.
“There is a growing trend towards the establishment of mini business districts in the suburbs, so if your home is located on a main road or an area where a lot of houses are being converted into small business premises, extending and upgrading a family home isn’t sensible.
“On the other hand, if you know that your neighbourhood is zoned to become a secure, gated community in the near future, you’re more likely to get your return on investment in upgrades when you sell as homes in secure enclosures are in demand and generally fetch higher prices,” Rohde says.
So when should you upgrade with a view to selling at a certain point in future?
Davies says it is generally recommended that one renovates some time before selling. “Building costs are high and time is often needed to recoup the expense. If the property was purchased at a very competitive price it may be safe to renovate and sell soon thereafter, but it is advisable to make sure you have done your sums correctly and that the home will still be competitively priced for the market once complete.
“Many people make the mistake of renovating and then expecting the market to cover the cost with profit. Prior to selling it is good advice to do the minimal. Make sure everything works and is in good order. Buyers often have their own ideas when it comes to changing a home and the work and expense you have incurred as a seller may not add value to a buyer.”
Rohde agrees wholeheartedly and says homeowners should avoid large-scale upgrades shortly before selling.
“Sure, if your plans are to remain in your house for the next 20 years and the purpose of the upgrade is for your own personal gain, then you are more likely to get a return on what you’ve invested. But, if your plans are to move in the near future, you should scale back your revamp plans to ensure that you do not improve your property beyond its resale value.” – Eugene Brink
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The bathrooms and kitchen should be 100% neat and modern. One bathroom and another one please!! – Francina
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