The internet has plenty of information about how to increase the value of your property, but there’s a lot to be learnt from studying how people have managed to decrease the value of their property.
The world of home renovations is an area often plagued by overcapitalisation. Homeowners often get carried away and overdo their renovations, making it difficult for their home to sell and even decreasing the property’s value. If the neighbours don’t have a helicopter landing pad and mini golf course, chances are adding these features to your own home will not be adding commensurate value.
Recently at Clear Mountain in Brisbane’s north, a home handyman renovator actually decreased the retail value of his home by $30,000. How? The home owner sacrificed one feature to gain another, thereby adding cost but not value. Turning a bedroom into a dining room and a garage into a rumpus room, he failed to take into proper account the scale and age of the property when adding on. Not only were the extensions not seamlessly integrated with the original home, but the first thing a valuer looks at is the number of bedrooms and car accommodation. Usually when tackling a home renovation the first way to increase value is to add a bedroom (not take one away).
Many three bedroom homes don’t work once a fourth bedroom is added, particularly when there is only one bathroom between them. Adding a fourth bedroom only exacerbates the lack of bathroom facilities and morning arguments over the bathroom timetable. Most people would prefer a three bedroom/two bathroom house over a four bedroom/one bathroom layout.
Furthermore, bad design resulting in poor natural light, an inconvenient floor plan such as a living area that ends up a long way from the kitchen, or a badly positioned bathroom, will be reflected in the sale price of the property. Jonathan Millar, Director of WBP Property Consulting and Valuations says “The lack of at least one toilet and hand basin (powder room) on every level of a dwelling may impact on the property’s future saleability.”
Some renovators overcapitalise by deviating from their budget along the way. Many homes and locations don’t justify top-of-the-range appliances, fittings and ancillaries (eg. tennis court). If renovators run out of money before completing the work or have to skimp on the finishing touches, the overall effect can be disappointing and limit the ultimate selling price.
To avoid this overcapitalisation trap, home owners should always consider consulting a valuer before making improvements. A valuer can provide a written evaluation of the property’s value “as is” and “on completion” of renovations, before a cent is spent. This will indicate whether the intended alterations will improve the level of value enough to justify the proposed cost.
Here are the top seven ways to decrease the value of your property:
- Take away a bedroom in favour of another room
- Remove car accommodation
- Adding rooms haphazardly without taking into consideration the balance and flow of the dwelling
- Painting rooms in your favourite extreme colours, which may not appeal to the greater masses
- Adding five star features to an outer ring suburban home
- Getting your mate “who knows a guy” to add a questionable deck without the relevant building approvals
- Not correctly calculating the cost of the renovation and running out of money half way through – nobody wants to buy a half completed pool or renovation