Renovating to increase the value of your home
Clever renovations can significantly increase the market value of one's home - and they don't need to break the bank.
Rhys Dyer, CEO of ooba, South Africa's leading mortgage originator, says, "There are various means to finance renovations, even if you don't have the available cash resources. You can apply for a re advance on your bond if a portion of the loan has already been paid off. For example, if you initially raised a bond of R500 000 and you have already paid off R200 000, you are able to take debt back up to the original amount of R500 000.
"Another option is to take out a second bond. This would normally only be possible where the value of your property has increased since purchase, as the second bond would have to be raised against any increase in the value of the property. Taking out a second bond does mean that additional registration fees associated with a new bond would be incurred, such as bond registration costs, conveyancing fees and the cost of valuing the property.
"To fund extensions or additions to an existing property, the proposed extensions must conform to national building regulations. This means that proposed plans will have to be approved and meet the municipal requirements, as these plans will need to be submitted with your application for the second bond."
According to ooba, renovations to kitchen and bathrooms 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.
"You don't necessarily need to spend a fortune on renovations. Replacing countertops and flooring with inexpensive tiles, re-enameling baths and basins and re-grouting existing tiles in a bathroom can all have a major impact on the aesthetics and thus the inherent value of the property. Replacing old taps, light fittings and towel rails and installing mirrors or even re-painting can make the room appear more spacious and clean. As long as there are no plumbing complications, aesthetic renovations shouldn't end up being too expensive.
"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 - you don't want to create a rabbit warren."
Dyer adds that it is important not to over capitalize; no one wants to buy a property that doesn't fit into an area and buyers will usually not pay R1 million when the area's going rate is R500 000, gold taps or no gold taps.
"You should keep your property value variation between 15% and 20% of others in your suburb. 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 will always influence the actual resale value of your property."