In today’s competitive real estate environment, renovations or additions to a property can add value and give a homeowner an advantage over other sellers in a particular area, says Adrian Goslett, CEO of RE/MAX of Southern Africa.
He notes that some homeowners may have originally purchased a property with the initial intention of renovating or building on, while others may have bought a property that was perfect for them at the time, but now no longer meets the requirements of their growing family or changing circumstances.
“Whatever the situation may be,” says Goslett, “It is important that the renovations or additions are undertaken in the correct manner and homeowners do not attempt to complete the project themselves, unless qualified to do so. If corners are cut and the work is done cheaply it could have the opposite effect to the desired result. Badly completed renovations can cost far more to rectify, than if the job was completed in the right way from the start. On the other hand if the property owner over-capitalises on the renovations they undertake, they will run the risk of losing money rather than adding value to their investment. 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.
Determine the home’s current value
According to Goslett, when deciding whether the investment is worthwhile or not, the first step is 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 home and the home’s current value. Although there will be slight variations to the house prices in an area, most suburbs will 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,” says Goslett.
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% of the current value of the home. “When determining a project budget, the homeowner will want a cushioning of least 10% 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,” says Goslett. “The process may require a fair amount of planning and research with regard to the various costs involved and materials needed, however, it is far better to have a financial strategy before the project starts than to run out of money midway through.”
Research area trends
While there are general additions or renovations that will add value to a home in any area, such as security upgrades or kitchen and bathroom renovations, which remain the most popular rooms in a home to remodel, 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 also become important with many buyers looking for properties with covered patios and built-in-braai facilities. “Homes with lifestyle and entertainment areas can sell for around 10% to 15% more than homes without, depending on the area the home is situated in,” says Goslett. He notes that 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.
“While buying property should be viewed as a long term investment option, very few homeowners will 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,” concludes Goslett.