"Improvements that pay" first appeared on iafrica.com on 26 October 2010. It is the second most read "Property" article of the past year. Liked it? Find more articles like this on http://property.iafrica.com/.
Some luxurious but costly improvements that are commonly viewed as value-builders are actually losers when it's time to sell.
The real dogs in terms of payback at resale are luxury items that are highly individual to the owner's taste. Things like Jacuzzis and tennis courts are very low on the payback scale. Saunas are a complete waste of money as are Koi ponds and water features.
The most definite way to recoup costs
Kitchen improvements are perhaps the most definite way to recoup your revamping costs, depending on the nature of the changes and assuming that you don't spend too much relative to the value of the home.
In the "Cost vs. Value Report," an annual survey of remodelling costs payback at resale, experts say that even a minor kitchen renovation exercise can return as much as 102 percent of costs at resale. Moreover, a renovated kitchen can make a house sell faster.
Attitudes about kitchens have undergone enormous changes in the last 30 years, so it's not surprising that renovating a kitchen has the best return. Kitchens are now much more integral to the house and the whole family is often involved in food preparation. Any changes that make it lighter, brighter and a more useful room add a lot to a home's value.
Good move to add a bathroom
Another good move is to add a bathroom. On average, this will bring back over 90 percent percent of the costs. Viewed in the right context, this is actually a bountiful return on investment. For one thing, you get a valuable intangible ? the use of the improvements in the years that you remain in the house.
You can't compare renovating a home to financial investments, like unit trusts. This is disposable income we're talking about. People add a bathroom rather than going on a cruise or buying a new car. There may be better investments out there, but your new kitchen won't lose half its value the minute you make your first meal in it, the way a new car will lose a huge chunk of its value the minute you drive it off the showroom floor.
One way to avoid taking a similar hit on your renovation is to think cosmetically. Spending R20 000 to R30 000 on an outdated kitchen with improvements like new flooring, new countertops and new cabinet facings is one thing. But knocking out walls is quite another.
It's when you start altering the floor plan that the costs won't equal the payback. When the same kitchen gets a R60 000 renovation, that's when your return starts to get much lower. You just don't get the same payback on a full project.
A good idea to keep up with the Joneses
Home improvements are one instance where it's a good idea to keep up with the Joneses. The projects that have the highest resale potential are those that make the house similar to other houses in the neighbourhood. If all the other houses in your neighbourhood have two and a half bathrooms, and yours has one and a half, then adding a full bathroom is probably going to pay off for you.