Don't overcapitalise on home improvements
Before you get swept away with big ideas that you think will double the price of your home, or renovations to make it the perfect living space, there are a few realities to take into account when improving a home.
Home loan and property experts will tell you that not all renovations automatically add to the value of your house. In fact, even if there is an increase in value, it may not necessarily cover the initial cost or hassle of renovations. That's why It is important to have a solid plan before you start out.
Herewith some tips to consider before embarking on renovations:
Understand the reason behind the renovations. If, for example, you are planning on renovating just to add financial value to your home, consider what the effect this additional investment will have on the value of your property.
Properties 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. For example, a new pool may cost R50 000 to install, but only increase the value of your property by R20,000. Or, buyers don’t 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, it is better to look at improvements that will increase overall appeal and marketability as opposed to actual rand value. This can include smaller jobs that don’t need planning permission or a large capital outlay such as a professional paint job and keeping on top of regular maintenance projects.
If the decision to renovate is based on improving your lifestyle it is a different type of investment. Because a home is a special place where you might be planning to live for a while, renovating cannot be counted in terms of increase in value on the house, but rather how much enjoyment you will derive from the changes. In this case, if you have small children, the hours spent playing in an installed pool outweighs the investment.
Set a budget
There are many stories of renovations that exceed budget and take longer than anticipated to complete. Before hiring anyone or buying anything, set a budget that not only covers the cost 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 dining out costs if renovating your kitchen.
Know what permissions are required by law
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. You may feel like you want to ‘chance it’ and not go the planning route, but this will cause big problems down the line such as not being able to sell your house without the required building plans.
Adapted from an article posted on the FNB blog.