Although you may consider your home to be your castle, it’s highly unlikely to be on a scale of Buckingham Palace and anyone who is considering renovating a property needs to bear this in mind. Over-capitalising on an investment is asking to fail, at least in the short term.
The demographics of an area dictate who buys what within a certain price bracket. Trying to transform a normal suburban three bedroom home into a mansion, while perhaps physically possible, is financial suicide.
Certain areas tend to attract certain age groups. Although not an exact science, communities where older inhabitants choose to retire are more likely to attract others in the same boat. Likewise an area that is close to schools and shopping centres is more likely to appeal to those with young families. There are exceptions, but generally speaking anyone who wants to revamp a property with a view to selling needs to take these factors into consideration before embarking on renovations or improvements.
Remodelling your home to suit your family’s long-term needs is one thing; adding improvements in order to increase the value of the home is another. Anyone who is considering investing more money in their home needs to ask themselves: who would buy this home? Putting in an Olympic pool in the hope that Ryk Neethling is going to come a knocking is unrealistic, but surprisingly many South Africans have similar unrealistic expectations.
Knowing what sells in a community often proves to be a huge advantage. If you live in an area that attracts older people, it is unlikely that a pool is going to be seen as added value. Similarly young families are not particularly concerned about a small ornate landscaped garden preferring a larger area in which there children can play. Different age groups value different things. Older people will consider living on a bus route a major drawcard. Younger families with children, however, may consider this as a hindrance because they prefer to live on quieter roads.
You can’t please everyone all of the time, but knowing what is going to add value to your home and what isn’t will improve your chances of selling at a profit or at least recouping your investment. If the suburb in which you live primarily comprises starter homes, over-improving could price you out of the typical market range, leaving you with little option but to sell for a far lower price than expected. Similarly, Rome wasn’t built in a day and making expensive improvements months before you place the property on the market – could result in disappointment. As with any commodity, property values increase over time and anyone who assumes that they are going to recoup the full value of the improvements over a short time period may find that this is not the case and end up losing money on the deal.
Another area that property owners should consider is how much they spend. Humans are generally an optimistic bunch, however, assuming that the pool that cost you R50 000 to install is going to add R150 000 value to the home is unrealistic. Eventually, of course, homeowners will recoup the rewards that renovations and additions bring, but property has and always will be regarded as a mid- to long-term investment and as such takes time to appreciate.
Although many would balk at the idea of putting a R65 000 sound system into a clapped-out old rust bucket of a car, strangely enough, the same ideology does not appear to apply to property. Some properties mainly because of their location are never going to match the homes of Clifton and spending money trying to transform something into something it is never going to be is a waste of time. Investing money into an existing property is always recommended. Get it right and you will recoup your money with interest. Get it wrong, however, and you may well sit with a property whose owner has completely out-priced the property on the market.