Before being swept away with big ideas you think will double the price of your home or make it the perfect living space, there are a few realities to take into account when renovating your home.
“Homes are only worth the amount someone is prepared to pay for them. This means that although a renovation may lift the general value of your home, you may not realise the full value of what you have spent and end up overcapitalising,” says Mngadi.This is according to Abel Mngadi, Head of Product Growth at FNB Home Loans who says you need to keep your feet firmly on the ground when you are considering renovations to your home.
“Not all renovations will automatically add to the value of your house, or if there is an increase in value, it may not necessarily cover the initial cost or hassle, so it is important to have a solid plan before you start out.”
Mngadi gives some tips to consider before embarking on renovations.
1. Understand the reason behind the renovations
If you are planning on renovating just to add financial value to your home, you need to understand what effect the additional investment will have on the value of your house.
“Homes are only worth the amount someone is prepared to pay for them,” says Mngadi.
“This means that although a renovation may lift the general value of your home, you may not realise the full value of what you have spent and end up overcapitalising.”
Overcapitalising is when the renovations and additions cost more than the price you would be able to sell your property at in the future without the alterations. This is typical of luxury fittings such as imported floor tiles, crystal chandeliers or additions such as lapas.
For example, a new pool may cost R50 000 to install, but only increase the value of your property by R20 000. Or buyers may not see the value in a pool at all because of the extra cost and maintenance.
“If you are renovating purely to add value to your property, rather look at improvements that will increase overall appeal and marketability as opposed to actual rand value,” says Mngadi.
This can include smaller jobs that don’t need planning permission or a large capital outlay, such as a professional paint job.
“If you are renovating purely to add value to your property, rather look at improvements that will increase overall appeal and marketability as opposed to actual rand value,” says Mngadi. This can include smaller jobs that don’t need planning permission or a large capital outlay, such as a professional paint job.If the decision to renovate is based on improving your lifestyle, he says it is a different type of investment.
“Homes are special places, and if you are planning on living in a space for a while, renovating cannot be measured in terms of the increase in value on the house, but rather how much enjoyment you will derive from the changes,” says Mngadi.
“In this case, if you have small children, the hours spent playing in an installed pool outweigh the monetary investment.”
2. Build a budget
“Budgeting for renovations is the key,” says Mngadi. “There are many stories of renovations that go hugely over budget and take months to complete.”
Before hiring anyone or buying anything, build a solid budget that not only consists of contractor and building material costs, but additional expenses such as rental costs if you are redoing your bedroom and need somewhere to stay, or eating out costs if renovating your kitchen.
3. Understand what permissions are required
Part of your planning stages should include an understanding of when you will need planning permission.
According to the City of Johannesburg, every single alteration that includes a change to a structure will require planning permission before you start, for example.
“You may feel like you want to ‘chance it’ and not go the planning route, but this will cause big problems down the line,” says Mngadi. “You will not be able to sell your house without the required building plans, so an understanding of what permissions you require is critical.”
Renovating can be rewarding and add value to your home, if you plan correctly, says Mngadi.
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