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Can You Overcapitalise On Your Family Home?

Overcapitalising is one of the easiest home renovation mistakes to make. It’s when you spend too much money renovating your home and that spend isn’t recouped when you sell, leaving you with a money pit instead of a money-maker. 

Even if the project went exactly as planned, over capitalising will leave you out of pocket and you may feel ripped off, frustrated or taken advantage of, with an attitude of distrust towards the building industry.

Overcapitalising can be a scary term for some, but what many don’t know is that overcapitalising is only an issue if you are planning to sell a rental property, are in the business of ‘flipping’ houses or are moving and want to get top dollar for your home.

When you plan on renovating to improve your lifestyle, there’s no need to fear. It’s almost impossible to over capitalise on your family home and we’ll tell you why. 

Home is Where Love Resides and Memories are Created

You may worry that you will overcapitalise on the value of your home, but what about the increased value of your lifestyle? You can’t put a price on that. The value you’ll get out of renovating isn’t in the price of your home, it’s in the price of your lifestyle. It’s in the mornings spent showering in a luxurious ensuite… alone! It’s in the days spent by the pool watching the kids have fun. It’s in the evenings spent hosting a dinner party with your friends and it’s in the nights spent dancing away for all those birthday parties, New Years Eve parties and parties just to have parties!

What kind of lifestyle would you continue to live if you decide not to renovate? Would you entertain as much? Would you still be fighting for space in the one bathroom of the house? And how many days in Summer would you spend stuck inside without a pool? The type of lifestyle a renovation can facilitate is priceless. 

Your Best Investment = Your Family Home

Home values don’t go up every year. But they do go up every decade. When you look at home values over the decades there is a significant upwards-sloping trend.

Inflation alone runs at roughly 3% a year, so a $1,000,000 home in 2017 will be worth at least $4,384,000 in 2067 if it does nothing more than keep up with inflation.

With even more time spent at home due to current travel bans and work from home conditions, it’s no wonder more and more Australians are investing in their lifestyle, future and family home. So we’ve put together our top tips to make sure you get the best investment out of your home…

1. Know and understand the value of your property before renovating

Get your home valued by someone who is qualified. Knowing how much your property is worth is the first step in reducing your overcapitalisation risk. To help you further, know how much your property has increased in value since you bought it and take a look at the median selling price in your suburb. This can help you set a budget for your renovation.

2. Know what will help it sell in the future

Your priority is of course, renovating your home so it’s suitable to your current needs but knowing what will help it sell in the future can help reduce your risk of over capitalising. We all know that kitchens and bathrooms sell houses, so make sure you go with designs and selections that will stand the test of time and opt out of funky tile designs or oddly shaped floor plans. Outdoor living is another huge attraction in selling homes so easy landscaping and a seamless integration from indoor to outdoor is essential.

3. Learn to compromise

You may find that the budget you have set isn’t quite enough for what you really want, perform a needs analysis to help you decide what to keep and what to remove. This will help you stick to your budget and reduce your chances of over capitalising.

4. Hire a professional

This goes without saying, engaging in a professional builder who is experienced, fully licensed and qualified is critical. It will help you in the long run as poor workmanship from DIY projects or unqualified tradespeople will devalue your home and put you at risk of having to fix things before selling, costing you more money and therefore overcapitalising.

If you’re deciding to renovate so you can keep living in your home for years to come, don’t think about the value you’re adding to your home, think about the value you’re adding to your life. If you’re still worried about over capitalising, write down your must haves vs nice haves, reduce your risk as much as you can but at the end of the day, realise that not adding value is the same as taking it away.

Adding value to your home isn’t just in your paint colour or the tiles you lay, it begins in the preparation stages.  To find out the 6 Essential Things You Must Do For A Successful Home Renovation, download our FREE guide here.

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