How to increase your homes value without over-capitalising

Houses don’t come cheap.

We buy them, pay non-tax deductible interest [in the USA, residential mortgage interest is tax deductible; all part of the American dream around property ownership], maintain them and then add accessories, as I like to call them. This is the reason why Robert Kyosaki, of Rich Dad, Poor Dad fame, says houses are a liability and not an asset. Contrary to accounting, he calls any property that doesn’t give you an income, a liability, not an asset. In another section of his book, he talks about buying a Porsche – he buys a factory and then allows the net rental return buy the Porsche. Very good advice indeed!

Maintenance, first. You may be one of those people who don’t maintain your house to “save money”. Be careful, selling the house that “needs some tlc” is very expensive. Maintenance retains the value of your house in a suburb because first impressions count and because people buying your house are probably buying the best they can afford and they don’t necessarily have the money to fix a gutter or repaint just after they move in. The only way to do that is to cut the price and use the saving to fix your house. Take it from me, a lack of maintenance costs you dearly in the end. And by the way, Mow the Lawn Guys…..

But let’s talk about accessories. For example, paving, lean-to’s for a caravan, a pool, a jacuzzi, a replacement of a thatch roof with Harveytiles etc. How should we go about improving our home so as to add value?

A couple of things to consider generally:

  • Don’t over-capitalise. In an area the average price of a house may be R1m. Your 500m2 extension with a Jacuzzi on the upstairs bathroom may sound like a good idea and even be affordable BUT, you won’t get your money back when you sell, let alone, make a return on investment.
  • Think about the neighbours. Your Jacuzzi in the middle of the front lawn may be cool for you but a buyer would look at it and wonder about privacy. Remember to accessorise for the general person and not your own boisterous nature. By the way, those walls you want to paint black and those tiles you want to put in in black and white checks, just think about the buyer who will one day walk through your house – will the black be appealing to them? Will the tiles be outdated?
  • Value for money. An interesting topic really because it is your family home after all. [The same debate often applies to the return on investment for a holiday home at the coast; years of family memories but, often, at a cost.] Why not just do what you want and worry about the return on investment later? Of a truth, it’s your call – all we’re saying today is consider the alternatives and the potential return on investment.

Quality. I have friends who have tried to renovate at the least cost. Three builders later and several compromises along the way, they are not happy. Hopefully, a future buyer will be but suddenly, the jury is out and time will tell.

So let’s talk about how to accessorise sensibly.

Firstly, do your homework. There is not an estate agent in your suburb who would not pop in and give you some thoughts on what you’re proposing to do and their considered impact on the value of your home. They see 3-5 homes a day in the area and know exactly what sells and doesn’t; so why not ask them? Then, check out that pool company or the paver or the building contractor. Goedkoop kan duurkoop wees [Cheap can be expensive]. If you don’t have the money now, save more but get what you want and what adds value to your home. There are many places where you can get references – previous customers [ask for one where there was a complaint and find out how it was solved], the internet, Hello Peter! and the like. Drive around your suburb and ask people using a contractor if they would recommend. In short again, do your homework.

Secondly, it’s the little “extra” in extraordinary that makes it that. For instance, the surround of your pool should be coping tiles or a lovely wooden deck. The location of your pool should flow from a room with a view. Plunging in the pool on a hot summer’s evening is cool, but creating a WOW! effect for a buyer can just take a little more thought. Imagine if you could have all those memories and get a better price for your house – often it’s possible.  On the other hand, a Koi pond on the one end with a fountain could be really nice but two things need to be considered – fountains require maintenance and Koi are not everyone’s cup of tea. Why do them if you could lose the Koi pond and place your pool inlet a little higher to have a bubbler sound effect?

Thirdly, consider affordability. Pools are expensive to borrow on a bond. And they need care and maintenance every week thereafter. Rather save cash and do it.

Finally, choose your accessory. Pools take more people than a jacuzzi and frankly, you can cosy up on the champagne seat if you want to! Tiling a thatch roof can save thousands of Rands in maintenance and insurance. Painting your house cool, clean colours makes a great first impression as does re-doing your garden for effect. We all have budget constraints and so choosing the accessories that we focus on over the years can be beautiful, practical, money-saving and give you a good return on your hard-earned cash.

As with so many of these blogs, the thoughts expressed are my own. Some of them are born of experience and mistakes. All of them are given with care for our readers by Homeloan Junction. If you are thinking of making some improvements to your home, talk to us, we would be happy to help. If you have already taken these points into consideration and want to make some changes, have a look at our Further Loan options.