In today’s real estate environment, renovations or additions to a property can add value and give the homeowner an advantage over other sellers in a particular area.
Renovating or additions can add value to your home, but it is important that they are done the right way and homeowners don't try to complete the project themselves, unless they are qualified to do so.
This is according to Adrian Goslett, CEO of RE/MAX of Southern Africa who says some homeowners may have purchased a property with the intention of renovating or building on, while others may have bought a property that was perfect for them at the time, but no longer meets the requirements of their growing family or changing circumstances.
Goslett says it is important that the renovations or additions are done the right way and homeowners don't try to complete the project themselves, unless they are qualified to do so. "If corners are cut and the work is done cheaply it could have the opposite effect to the desired result," he says, adding that badly completed renovations can cost more to rectify, than if the job was completed in the right way from the start.
However, if the property owner over-capitalises on the renovations, they run the risk of losing money rather than adding value to their investment. He says knowing which additions will add value and which won’t 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.
Determine the home’s current value
Homeowners need to decide whether the investment is worthwhile by determining what amount of money can be spent on the renovation or addition without the risk of over-capitalising. This figure will be determined by the location of the house and its current value.
Goslett advises homeowners to decide whether the investment is worthwhile or not, with the first step being to determine what amount of money can be spent on the renovation or addition without the risk of over-capitalising. He notes that this figure will largely be determined by the location of the house and its current value. Although there will be variations to the house prices in an area, most suburbs have an average price range. If the amount spent on the addition is close to or greater than the difference between what the property was bought for and what it can be sold for in the current market, then it may be better to leave the property as it is. “If homes in a particular neighbourhood are selling for R500 000 and the homeowner spends R200 000 on improvements, they may not be able to necessarily sell their home for R700 000,” Goslett says.
Stay within the set budget
Once the homeowner has determined the value of their property, they will be able to set a project budget bearing in mind that the cost of a renovation project should not exceed 25 percent of the current value of the home. Goslett says when determining a project budget, the homeowner will want a cushioning of at least 10 percent for any unexpected overruns in cost. "To ensure maximum investment benefit, the homeowner must set a budget and stay within the confines of that budget,” he says, noting that the process may require a fair amount of planning and research with regard to the costs involved and materials needed. However, he says it is better to have a financial strategy before the project starts than to run out of money halfway through.
Research the area trends
Homeowners should consult with a real estate professional with knowledge of the area to determine the area trends, so that any additions or renovations they do will appeal to the demographic of the buyer.
While general additions or renovations such as security upgrades or kitchen and bathroom renovations add value to a home, it is important to research trends that are specific to the area.
Certain additions will appeal to a different demographic of buyer, so it is important to determine the predominant buyer profile in the area and specific features they are attracted to. For example, family buyers in upmarket areas such as the Sandton suburbs are often looking for attractive homes with staff accommodation. Entertainment and living areas have become important with many buyers looking for properties with covered patios and built-in braai facilities. Goslett says homes with lifestyle and entertainment areas can sell for 10 percent to 15 percent more than homes without, depending on the area the home is situated in. He notes that consulting with a real estate professional with knowledge of the area is useful in gaining this type of information, along with gathering information from property websites and newspapers.
He says while buying property should be viewed as a long-term investment option, few homeowners remain in the same house for their entire lifetime. "It is for this reason that changes to a home and the affects these will have on the value of that home should be very carefully considered."