What you need to know. Are you considering extending your property this year?
Read about how this will affect your property value and sale potential.
When extending your property, the most important factor to keep in mind is not to overcapitalise for the area that you are living in and to understand what the price thresholds in the specific area are.
The best way to do this is by doing proper research and speaking to experienced estate agents that know the market well. You also need to be very perceptive about the type of extensions that are taking place where you live.
If home owners in your area are extending their properties to have an extra bedroom because increasingly more families are showing interest in the area, this could be a good idea for you to do as well, especially if you want your property to be able to compete with the ones that already have the desired amount of bedrooms.
What sort of selling prices do properties that have been extended fetch? Are these selling prices significantly higher that other property prices in the area or is it minor? These questions are important to ask because extending a property could potentially be a stressful and costly exercise and suffering a financial loss, breaking even or only making a slight profit could be devastating to you as a seller when you sell, both financially and emotionally.
Another important factor is to keep all costs to a minimum and to realise that good planning and using the right contractors can be vital in achieving your end goal. It is advisable to do and redo your costings and to always allow for possible delays due to weather or contractors’ delays. Also make sure that your plans are submitted to local Municipalities for final approval before you begin.
When considering which extensions to undertake it is wise to keep in mind that buyers look for a home that has a nice main bedroom, bathrooms, kitchen and entertainment areas. The lounge must be spacious and light and the kitchen and bathrooms preferably need to have been renovated or extended to be more modern.
According to Ooba clever extensions can significantly increase the market value of one's home - and they don't need to break the bank.
Renovations to kitchens and bathrooms for example can generate a return on investment of between 60-80%. If, for example, you spend R10 000 on your bathroom renovations, this could increase the total value of your home by up to R18 000.
Adding an additional room onto your property can produce up to a 70-80% return. However, it is important not to overdevelop a property - a third bedroom is more valuable than a fourth as you don't want to create a labyrinth.
Once again it is crucial not to over capitalise; no one wants to buy a property that doesn't fit into an area and buyers will usually not overpay for a property just because it has been extended.
Ooba adds that you should keep your property value variation between 15% and 20% of others in your suburb because buyers who can afford more expensive homes will invariably shop in more expensive areas.
You should always keep a record of your expenditure especially as this can be set-off against any capital gain made at the time of resale which exceeds the exemption amount, thus reducing your potential tax liability at the time. At the end of the day, you should also bear in mind that economic conditions could always influence the actual resale value of your property.