Property Upgrades: Don’t Over-Capitalise

The information in this article is courtesy of iAfrica (Don’t over-capitalise – 17 April 2009).

A large number of homeowners are opting to improve their current properties as oppose to trying to sell in these tough economic times not to mention the weak property market. This in itself is not a bad investment, but risks of over-capitalisation are much higher now with the house price deflation currently felt by South Africans and around the world.

Rob Stefanutto of Lew Greffen Sotheby’s International Realty says that the years of whirlwind growth in house prices have allowed people to overspend on finishes for investment homes and get away with it. These days it is vital to assess the value of the property in terms of the suburb in which it is located before making decisions on where within the house to spend their money.

He adds that it might take several years to be recouped for the investment so it is essential to make sure that upgrades are well considered and well executed.

Stefanutto explains that the best return on investment is often “invisible” improvements, which includes wiring, plumbing, roofing and other structural upgrades. These improvements are vastly more expensive than visible upgrades like Italian kitchens and creative décor but it will add to the longevity of the property.

If you are planning on structural upgrades it is important to keep in mind that you investment might take around 5 years to show return – so be prepared to stay put.

Installing proper security systems, according to Stefanutto, is another way to add value to your property. Carports and good plumbing are also on his list of ways to improve the value of your house. Good quality paint that can maintain its look over 7 years is also a sound investment.

Stefanutto concludes by warning that the time where expensive home decorating can be made up thanks to price escalation, is over. He warned homeowners that the time it takes these days to make a return has lengthened considerably.