The biggest risk many renovators face is overcapitalising. This occurs when the cost of your renovations exceed the value they add to the property.
The problem with overcapitalising is that it leaves property owners with limited options. You can sell and recoup only part of the cost of the renovations – in other words, take a loss. Or you can hang onto your property and wait for inflation to bring market values to the point where they finally catch up with yours. This can take a long time in a slow market. Either way, overcapitalising could prove costly.
Make sure your renovation adds value
Popular renovations that almost always add value include kitchen and bathroom makeovers. However, opting for wall-to-wall Italian marble and gold plated taps is a sure way to overcapitalise, so aim for clean lines and understated fittings rather than over the top extras.
Period homes can be more costly to renovate as you need to ensure the improvements are sympathetic to the style of the original property. That can mean using more decorative cornicing or non-standard fittings like door handles and power points, but it’s worth the additional expense. Renovations that detract from your home’s character or spoil the façade may not be money well spent.
Outdoor living areas that provide alfresco entertaining are always popular and garden landscaping can be a low cost way to add extra value to your home. Pools can be a big trap, as many people dislike the cost and hassle of maintaining pools and it can eat into open garden space.
Get advice early
If you aren’t sure how much value your renovations will add to your property, get advice from one or two real estate agents or from a qualified valuer. Do this before you spend too much money – certainly before you start knocking down walls!
Continue to information about financing your renovation.