pROpERTY

RENOvATING CAN ADD OR TAKE AWAY vALuE FROm YOuR pROpERTY

Most people who choose to renovate are happy where they live but either need more space or want to improve their property and its value.

Property Analyst at First National Bank, John Loos, says renovating could easily be more expensive than building a new home or selling your existing home and buying a bigger property. However, Loos says every cent spent on building, buying or renovating a home will probably be one of the best investments you’ll ever make. Head of Home Loans at Standard Bank, Steven Banker, says if you would like to extend your home, you should first consider practical issues such as building regulations for the area/complex that you are living in currently. Other considerations are whether you have the actual land space to extend, and whether you would be able to extend whilst living in the property. “So, deciding whether to sell your current property and buy what you want, or whether to renovate what you have to what you want, is a decision that the property owner would need to make with all information in hand.”

“If you are permitted to do the renovations under the municipal by-laws, complex or resident rules, then understand the extent of the renovations, including whether you will be able to live in the property while renovations are going on and if not where else you would live”, asks Banker.

He says in terms of the actual property changes, home owners must always use a builder approved by the National Home Builder Registration Council to do even the smallest renovations to their homes. “In addition, always use a certified electrician and plumber as using someone with little experience or no warranty on their workmanship could end up costing you more money in the end as you may need to repair the damages done to your property.” He says the building material prices could increase during the construction or your proposed plans to renovate could be met with unexpected problems that you need to work around. “Remember that this would have expense implications over and above the building and paying your existing loan.” Banker says as a home owner you should always ensure that whatever your budget is that you have a backup fund of at least 30% of the total building cost, just in case. If you do finish on time and within your original budget, you still have 30% savings towards something else in life.

He says some alterations could add to your property while others could take away value from your property. “For example you may live in a three-bedroom house with two small bedrooms; you decide you need a bigger second bedroom and because you hardly use the third room, you decide to break down the wall between both rooms and make a larger second bedroom. For your own living conditions this may be good now but when you try to sell the property, statistically a two-bedroom home fetches a lower price than a threebedroom, regardless of the room sizes. This means you may take value away from your property.”

Banker says home owners can apply for loans if they want to renovate their properties but it will be granted based on customer affordability, credit profile and risk assessment, the value of property and extent of the renovations. “If you are building an entire new home to replace your existing home or if the extensions are considered a large extension based on the property changes, the loan could be approved but as a full building loan facility. This means the bank will undertake site inspections and payments are based on a progress status report”, says Banker.

Building - The Pros

• You’ll have control over everything that will affect you on a daily basis. • You’ll get to learn useful things about home construction as you monitor the process, and you’ll get a sense of ownership that comes only from watching your house take shape. • If you choose correctly you’ll have the expertise of the builder, contractors and architect to guide you. • If you employ professionals they will handle the paperwork for approval with local authorities, sub contractors and suppliers.

Building - The Cons

• Be prepared for the unexpected costs that occur in most home construction projects, you will have to pay for them. • Building a house takes time; waiting for it to be completed can be disheartening. • Finding alternative accommodation during construction can be costly or if you can’t move out while you’re renovating, you’ll have to make peace with living on a construction site. • Whenever a decision has to be made or a problem arises you have to deal with it.

Buying - The Pros

• You get to shop around and become a critical customer. • You have the luxury of comparing different homes with different features until you find exactly the right combination at the right price. • It’s a buyers’ market at present so you can generally drive a tough bargain and get the best deal possible, especially in the case of a serious seller. • You can take your time house hunting. • You can move in straight away and pay occupational rent until the house has been registered in your name but only if the seller agrees.

Buying - The Cons

• If your needs are specific it could take quite a while to find a home that meets your criteria. • As you did not design the house yourself, you may never find your

‘perfect’ house and have to make concessions regarding certain features. • Be prepared to spend additional money on updates and repairs if the property needs some work. • Looking for a new home and making an offer once you’ve found what you want can be stressful. You might need to act fast or make an offer that’s more than the asking price if you get stuck in a bidding war.