Over-capitalising is a common term used in the real estate industry, but what exactly does it mean? - Basically, the homeowner has spent more money on renovating their house than they’ll ever get back in return.
To avoid over capitalising, here are 4 things to think about before you start any renovations:
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What is an achievable price for your home? This is where you call your agent and ask for an appraisal, you want to know what your home is worth before you start spending more money on it. You can also use this as an opportunity to ask your agent for advice on what improvements they believe might actually add value. If you don’t understand the market first then you could very easily end up spending more money than is necessary.
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DIY or hire a professional? It’s tempting to save money by completing the work yourself but let’s be honest, the quality just won’t be the same. If you are going to spend money updating then make sure it’s done right, you want to attract potential buyers not turn them away.
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Cater to the market! Aim your renovations towards the mid-market by selecting finishes that are cost effective but still look good. It’s easy to get caught up buying top of the range luxury finishes but remember you won’t be there to enjoy them. If you select finishes that cost too much, you might limit the number of potential buyers and you’ll most likely end up taking a loss on those improvements. If you are catering to the vast majority of the market then you’re going to find more buyers who are willing to pay a competitive asking price.
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Think strategically. The most common areas to over-capitalise are in the kitchen and bathrooms. Rather than renovating the entire kitchen maybe you can look at repainting cabinet doors and updating handles. Or if your bathroom is looking a bit tired, try adding a new mirror or replacing the toilet seat. Sometimes small updates can make a huge impression!
