Renovating or building onto a home can add value and give the seller an advantage over other sellers in a particular area. “However,” says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, “it is important to remember that while renovations can add value, there are several factors that should be considered before undertaking any renovation project.”
He notes that whether a homeowner purchased the property with the intention of renovating it or the decision was made as a result of the home no longer fitting the owner’s needs, renovations or additions to the home need to be considered carefully and approached in the correct manner. “Regardless of why the homeowner has decided to renovate, it is important that the project is completed in a professional manner. The homeowner should not attempt to complete the project themselves unless they are qualified to do so. If corners are cut and the project is done cheaply, it can sometimes have the opposite effect and impact negatively on the property’s value,” advises Goslett. “In some cases it can be very costly to have a professional rectify badly completed renovation projects - in fact it could even be more expensive than if the job was completed by the professional right from the start.”
According to Goslett, it is important to have a balance between completing the project on the cheap and spending too much. “If a homeowner spends too much money they run the risk of over-capitalising and losing money on their investment. The renovation may add value to the property, but not enough to cover the cost of the project,” says Goslett. “Knowing which additions will add value and which won’t also plays a vital role in deciding whether or not to look at renovation options. A homeowner will need to do their research before they spend money unnecessarily on costly upgrades, especially if the reason for the renovation is specifically for resale purposes.”’
Goslett provides a few aspects to take into account when considering a renovation project:
Calculate the home’s value
The only way a homeowner will be able to avoid the risk of over-capitalising is by knowing their home’s current value as well as the projected value of the home after the renovation project. The homeowner should not spend more than the difference between the two values. Goslett says that the projected value of the home will largely be determined by the property’s location. “While there will be marginal variations to the house prices in an area, most suburbs will have an average price range. If the renovation will push the price of the home way above what it can be sold for in the current market, then it may be better to leave the property as it is,” says Goslett.
Don’t go over budget
Once the projected value of the property has been calculated, the homeowner will be able to set a renovation project budget. As a general rule, the cost of the renovation project should not exceed 25% of the current value of the home. According to Goslett, homeowners should ensure that they have a cushion of least 10% worked into the budget for unexpected overruns in cost – it is best to be prepared as possible for any surprises. “In order to ensure maximum investment benefit, the homeowner should keep within the confines of their set budget. While this may require extensive research and discipline, it will be financially beneficial in the long run,” says Goslett.
Take area trends into account
There are certain renovations that will add value regardless of where the home is situated, such as security upgrades or kitchen and bathroom updates, which remain the most popular rooms in a home to remodel. However, Goslett says that if the renovation is outside of this scope it is important to research trends that are specific to the area.
Not all additions or renovation ideas will appeal to every demographic of buyer, so it is essential to determine the predominant buyer profile in the area and specific features they are attracted to. For example, family buyers in upmarket suburbs are often looking for aesthetically pleasing homes with staff accommodation. Entertainment and living areas have also become important with many buyers looking for properties with covered patios and built-in-braai facilities. “Consulting with a real estate professional with working knowledge of the area will be very useful in gaining this type of information, along with gathering information from property websites and newspapers,” Goslett concludes.
