For most of us, property is a big investment, and one we seek to preserve and enhance in value.
When thinking about remodelling and renovation projects, there are several considerations. A good place to start is: How much more enjoyment will you and your guests get out of the property if you remodel or renovate? How long do you think you’ll keep the property?
If you are planning to keep the property for 10 years or more, your decision will be largely based on the increased enjoyment you will get from the property.
If the timeframe is shorter, uncertain, or the renovation project is substantial, an evaluation of the impact on the resale value is a must.
While every real estate market is different, the five D’s always apply:
▪ Distance
▪ Deficiency
▪ Distinctiveness
▪ Demand
▪ Degree
Distance, or kerb appeal, concerns a property’s appearance from the street. If a potential buyer doesn’t have any interest at first glance, you’ll never get them inside.
Therefore, things that increase a property’s kerb appeal have a high rate of return. Landscaping the front entrance, the condition of the exterior painting and front door are the biggest factors in kerb appeal.
Deficiency is all about whether your property appears to be flawed when compared to your neighbours. For example, if you have one bathroom, and a similar property next door has two, adding a bathroom will pay dividends.
Obvious deficiencies substantially reduce the value of a property, and by an amount greater than the actual cost of the renovation or addition.
Distinctiveness is the most talked about factor, it’s the details you use when describing your property to others.
Properties are often bought based on emotions, supported by rational considerations. The key to selling a property at a good price is to get the buyer emotionally interested.
Properties generally sell better if they have two or three distinctive features. A walk-in wardrobe, the Jacuzzi bath, a fireplace, a swimming pool with an attractive al-fresco dining area or BBQ cabana, all have the ability to make your property stand out from the crowd and generate interest from buyers. These special features become very important in a competitive real estate market where there are a lot of similar properties on the market.
Demand: while distinctiveness is important, special features add nothing if they are not in demand.
A Jacuzzi in the living room might seem like a good idea, but if potential buyers don’t see it that way, it could have an adverse effect. Be in keeping with the neighbourhood whilst adding distinctive features, and limit improvements to those with proven demand.
Degree: whatever you do, don’t overdo it. If the front entrance is already attractive, renovating it in a new colour will not be worth the cost.
In conclusion, whether enhancing your property’s appearance from a distance, adding distinctiveness, or tackling deficiencies, it is possible to achieve a good rate of return, up to a point.
For example, if your property is the only one in the street with just one bathroom, spending €4,000 adding another bathroom could yield a return of €8,000 to €10,000, in resale terms. However, adding a bathroom that costs €15,000 will probably only yield the same €8,000 to €10,000 return.
Similarly, if a property already has a number of distinctive features, adding more will have a diluted impact on the resale value.
Discuss the five D’s with your local professionals, and you will achieve the right result.
By Brett Hawkins
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Brett Hawkins is the managing director of GMT 24:7, a local expert in all areas of general building and property maintenance, with offices in Lagos and Almancil. | www.gmt247.eu
