Does a renovation add value to your home?

With our home being our most valuable asset, many people will complete renovations to their home at some stage. Have you considered if your renovation will add value, or do you worry about over capitalising? Renovations are intended to make your property more attractive, comfortable and valuable.

The right renovations can ensure your family home is comfortable and improve your lifestyle and has an improved chance of pricing your home to sell for more than what you paid for it, or they can assist with increasing your rental return for an investment property and maintaining your investment property. However, there is a fine line between spending money to make the home more desirable and over-capitalising on the renovations. Learn more in this video, where Joanne Danckwardt of One Agency JD Property Agents discusses this topic further.

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Overcapitalisation

Overcapitalisation occurs when a property is improved beyond its resale value. In other words, too much money is spent on the renovation, and the owner is unable to recoup the money spent on the renovations, or when the cost of the renovation outweighs how much value it will add to a property. An example is if a home owner spends $200,000 on a home renovation, and then decided to sell the property, only to realise that the value of the property has only increased by $100,000. Overcapitalisation has occurred by $100,000. When renovating, simply by spending $200,000 on your renovation will not necessarily mean your property value increases by $200,000. The property is worth what the market is prepared to pay. Prior to your renovations, find out the value of your property in the current market by obtaining a market appraisal, where you can then discuss the current and future home value with a good real estate agent, who should be answer your real estate questions.

Plan for the future

If you are renovating your home to live in, it is important to make it comfortable and suit your current and future needs, but you should also ensure that the renovations will appeal to a wide range of buyers if you were to sell it at some stage in the future. The renovation should make for a comfortable and solid home for you and your family, it is important to think about whether the renovation makes financial sense and whether it will appeal to a wide range of people, being future buyers.

There are certain rooms that will bring value to your home.  The kitchen, bathroom, and outdoor living areas are always popular with buyers, and in more recent times, renovations that make homes greener by increasing efficiency and reducing energy bills are becoming increasingly well-liked.

Design and layout

Having a poor layout and design can impact on the resale value of your home. Making use of experts such as architects or drafts person to help draw up your plans will ensure that the layout remains functional, as an ideal floorplan is valuable. If the layout and design is poor the chances of losing money on the renovations is high.

Budget

Create a budget and stick to it. Having a clearly documented budget will help you to not over spend.  Don’t have the renovation half finished, and the budget run out, forcing you to sell the property half completed.

If you're ready to discover the secrets to being ready to sell your home, download our free insider secrets to being ready to sell checklist.

YES, DOWNLOAD MY CHECKLIST

If you feel you could benefit from our experience with buying and selling, we’d love to hear from you. Simply reach out.  We hope that has helped you today. If you have any questions, or you know of anyone who may benefit from our real estate services, we’d love to chat. Our number is 0426 264 771. We look forward to talking to you soon.