Over Capitalising

There is a danger of spending large amounts of money for very little return. Works completed on a property rarely if ever increase the value of the property in line with the amount of money spent.

Repairs and maintenance are often needed and are sometimes essential for the sale of a property. Nevertheless, some larger works are simply an owner’s choice to improve their lifestyle. This lifestyle decision should not be confused with the necessities of a successful sale. There is a danger of spending large amounts of money for very little return.

Common examples of lifestyle improvements include a pool installation, adding a deck, or a house extension. These works require significant capital, as well as time and effort. If the property is sold soon after completion, the likelihood of recouping the full financial cost is low.

When considering works, owners should first reflect on the motive behind the decision. Two key factors are personal plans and ownership timeframes.

A pool can provide many years of enjoyment for a growing family. Cooling down on those sweltering summer days, kids’ parties and entertainment provide a sensible and legitimate reason for the expense.

However, if the motive is to improve the worth of the property, chances are that the added value will be eclipsed by the expense.

The longer a property is kept, the more likely it is that the full costs of an improvement can be recuperated. Works will depreciate, while the land value of the property will continue to appreciate over time.

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