Renovations and home additions are all about making the house you love perfect. It is all about creating a cozy atmosphere and increasing the value of the home for when you consider selling it. However, there is one consideration that is often overlooked: overcapitalization. Overcapitalization is improving the value of a property beyond its resale value. That is, you spend so much money on additions, extensions, and renovations that you cannot recoup the entire amount should you decide to sell. While often there is a long-term benefit of renovating, here are some strategies to help you avoid over-capitalizing pitfalls.
Start with a Valuation
If it has been a while since you bought the house, then you can be sure that the valuation has changed. If it is still in its pristine condition, you can expect the value to have increased. However, if it has deteriorated, the price has decreased. You also need to understand how much homes are selling in the immediate area so that you can calculate your wiggle room. As a general rule of thumb, only spend 10% of your property value on renovation if you are hoping to sell the house soon. However, you can risk spending more if you will be staying in it longer.
Create a Budget and Stick to It
If you start without a budget, you are most likely to slip into overspending. As highlighted above, only spend more than 10% if you are looking to stay in the home longer. Moreover, a firm budget will keep you on the straight and narrow as experts in buying homes in Kansas City will tell you. Once you have the budget, you can focus on organizing your renovations within the confines of the budget.
Don’t Make It Personal
You are renovating your home, and you can easily get attached to the changes you are making. However, you have to be strategic and consider what will appeal to future homeowners. You don’t want to push buyers away with high-maintenance features. You also have to pay close attention to the simple details, such as wall colors and garnish. By and large, keep spaces as multi-functional as you can, and be thoughtful of which renovations add value to your home.
As pointed above, it is best to consider renovations that will increase your home value over your personal preferences. However, this begs the question of which improvements increase home value. Reports on people looking for homes to buy indicate that upgraded kitchens and bathrooms are favorites among home buyers. There is also an emerging trend of home buyers preferring renovations that make homes greener, such as having features that benefit the environment, increase energy efficiency, and reduce energy bills.
The idea of transforming your spare bedroom into a library is noble and might tickle your fancy, but you think the herd of potential buyers as all prospects have to share your interests. Otherwise, you are forcing them to pay for renovations of their own. However, by following these strategies you make decisions with your eyes wide open so that you understand their impact.