It's the Saturday Open Thread. This week's topic (not that you people ever follow it) is the 'renovation premium'.
Given a renovation that cost X how much more than X should you be expected to pay when buying a property that has been renovated by the previous owner.
11 comments:
If X = renovation cost and Y = amount you value the renovation, then:
If you really like the renovations then Y > X because time is money and you don't have to spend time doing the renovation's yourself before you can enjoy them.
If the renovations are not to your liking or have been done badly and need to be redone then Y < X. Y can become negative i.e. you are now prepared to pay less for the property becasue as far as you are concerned the property has been degraded.
How valuable your time is and the extent to which you value / enjoy them determines the extent to which Y exceeds X or vice versa.
In my book the renovations that tend to result in Y > X are simple maintenance work, e.g. paint, neat garden, working fixtures / pool / borehole, etc.
On the other extreme is where a property has been overcapitalised. I personally don't want or need a pool, jacuzzi, bar, 5 bedrooms, etc, in a home so adding those would incur cost but not increase the value (at least to me).
In the middle are things like redoing the kitchen and / or bathroom if it was really old. Sorting out the paving outside and the flooring inside can make a nice difference as can changing the light fittings and the cupboards.
This can easily be taken too far or not far enough. E.g. by using really expensive finishes you can increase the renovation cost but if the home is a lower end property then the selling price won't reflect the costs incurred. The counter example would be using cheap paint, tiles, light fittings, etc in an higher end property which result in the new owner having to redo the "renovation".
LS
This should be a good thread and extended to not just renovations (i.e. features). Fountains, koi ponds, jaccuzis, splash pools etc. In a water deprived region what's the point? Who wants a cherub pissing out water that costs electricity and water. Only fish I want are the ones served on a plate with chips. Again costing electricity (to keep your precious non indigenous species alive)as well as water.
Do people really buy these rubbish sales terms. I have a degree (in lets say matters of the brain(less)and am still amazed at the volume of punters who listen to this crap punted by home sellers/agents.
p.s. I am a home owner.Bought house with bar and bath tub sized jacuzzi, ripped them out, waste of space, bargained price down because of this - reason? have to make house and garden more family friendly (anyone with teenage kids (sic boys) know to get them to shower/bath you have to entice them - they want to swim - in something bigger than the toilet bowl)- also helped property ws on market for a year. Not The selling point agent wanted it to be! Now no crappy features. Lawn is lovely and green and fish for braai tonight for the Rugby - not the koi - flogged them to another plant.
It depends on your circumstances. I bought 2 years ago a house with 4 bedrooms, 2 bathrooms, large living room/dining room and huge garden, swimming pool, huge double garage, laundry room, store room, easy to maintain. I have 3 boys and the master bedroom is at the end of the house so my children can entertain their friends and my wife and i have our own privacy. I got rid of the jacuzzi, fountain etc... in the garden that must have cost a lot to the previous owners. But we wanted a practical house, a place to call "home" and my teenagers sons are very happy in our home. Our visitors always say that there is such a good feeling when coming to our home. So, spending money renovating with what is not necessary and expensive to run is a waste of money as you wont recuperate the costs
There should be a matrix (or ready reckoner) of best renovations to do v return. Kitchens and bathrooms must rank highest (Koi ponds lowest etc!). Then also an optimum spend on that type of renovation v house value.
With the focus squarely on improving fundamental value of houses as a home to live in for yourself or your tenants - this type of information would be really useful.
Anyone ever come across something like this?
I agree that you have to renovate the "basics" first to add real value to a property.
The things that people always notice are old or outdated bathrooms and kitchens. These are relatively expensive to renovate and are also a hassle if you have to live in the property while they are being updated. Potential buyers are put off by the cost and inconvenience - especially when there are a lot of properties on the market.
Once all the basics are covered, there is nothing wrong with decorative features like ponds or water features. Some people do like these but it all depends on your target market. Added features are expected in luxury housing and do add value.
In terms of building and renovation, who has an idea what per sq m cost of renovation is at the moment?
I'm finding it very hard to get an accurate gauge from someone that takes into account the current market price of steel, concrete, electricity and bricks.
I'm seeing prices from 6.5k all the way up to 14k.
Would this be a good renovation?
http://capetownbubble.blogspot.com/2010/12/camps-bay-nothing-says-class-like.html
That's an excellent renovation!
House Price South Africa recently posted an interesting typical bubble property curve
http://housepricesouthafrica.com/2011/03/07/a-closer-look-at-real-house-prices-reveals-a-scary-picture/
My question is thus, how would access to information affect this ‘typical’ curve?
In our IT age, never before have people been able to access as much information, as we do today.
In SA alone, which is technically a 3rd world country, 1 in 10 people have access to the internet.
What are they accessing on the internet Jim? House price graphs? A look at Google Zeitgeist will enlighten you as to the type of information being accessed.
I give you the fastest rising search terms in 2010
1. justin bieber
2. nicki minaj
3. toptv
4. locnville
5. die antwoord
6. yahoo sign in
7. powerball results
8. news24.com south africa
9. moshi monsters
10. afrihost
@Benny
Loved the BTL rant, spot on.
@ Goldilocks. People that can buy property represents only a fraction of internet users. People that can buy property only needs to spend a fraction of their time researching to be better informed.
I believe that bubbles will become increasingly more and more difficult to form as people become more and more informed.
According to the article. During the stealth phase " This category of investor tends to have better access to information and a higher capacity to understand it".
With internet access, information is right there with people desciminating it readily availble.
I believe, in our IT age, future bubbles will become smaller to the point where it becomes non existent, as the public get quicker information.
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