Buying for less and then fixing up your new home with renovations, may make sense but be sure not to underestimate what you’ve got yourself into
Right now, many homeowners are looking to sell their homes as fast as possible – either to get out of a financial squeeze or because they urgently want to relocate to another town, city or country. “Most of these sellers don’t want to spend the time or money it might take to get their homes into pristine condition, but are prepared to negotiate the sale price to get the deal done,” says Gerhard Kotzé, MD, RealNet estate agency group.
According to the latest FNB Property Barometer, homeowners selling due to financial pressure accounted for 21% of home sales in the second quarter of this year, and those who were selling to emigrate, relocate or move closer to work, accounted for another 22%. This situation means there are now some excellent purchase opportunities for buyers who are prepared to take on less than perfect properties and fix them up themselves. “Looking out for these opportunities could also help you gain entry to a preferred location for a lot less than you thought. And as we always say, it’s much better to purchase the worst home in a good neighbourhood than to buy the best home in a bad area,” Kotzé says.
The two key factors to consider when it comes to renovations remain unchanged, says Claude McKirby, co-principal for Lew Geffen Sotheby’s International Realty in Cape Town’s southern suburbs. “Determine what would make your home as comfortable as possible for the immediate future and which upgrades make the most financial sense for resale value. Certain projects are simply not worth the cost or the inconvenience unless they are purely for personal comfort or lifestyle and you plan on staying in the property for more than a couple of years.” “However, the relationship we have with our living spaces has changed significantly since March last year and we have all had time to reflect and re-evaluate how we live in our homes.” There are a number of pre-pandemic features that remain prominent, including open plan living areas, lots of natural light and energy saving features, but there are now also several trends which have emerged as a direct result of the pandemic. “It’s critical to take this into consideration to best capitalise on home renovations and upgrades,” McKirby says.
According to Kotzé, you do need to be especially careful when you consider buying a ‘fixer-upper’ because you could easily end up having to deal with much more renovations and repair work than you thought. “If the property is simply ‘tired’, it may take only superficial changes like a new coat of paint, some modern fixtures and fittings and some landscaping to bring it up to the standard of the surrounding homes and increase its value. “But if it appears really run-down, the property may well have more wrong with it than what is immediately visible, and our advice to sellers in such instances is always to get a professional opinion from a home inspector or registered builder before they sign an offer to purchase.” This does not necessarily mean that you should not buy the property, says Kotzé, “but once you have an inspector’s report, you will have a much better idea of what it would really cost to renovate the home properly, and be able to adjust your offer accordingly.
“For example, if the home needs any structural changes, you will need to include engineer’s and architect’s fees in your renovations budget, as well as those for the actual building, plumbing and electrical work that may be necessary. In addition, you may have to get plans for any alterations agreed to by the neighbours and then approved by the local authority, which is likely to take quite some time and could mean higher-than-usual holding costs before you could move in,” says Kotzé. The bottom line, he says, is that it is usually not worth taking on a major renovations if your plan is just to complete it and resell the property within two or three years. “Generally, you need to live in a renovated home for an extended period before property values in the area will rise enough to enable you to recoup both your original purchase price and your renovations expenditure when you do decide to sell. “So once again, price and location are key factors. If you’re going to buy a home that needs a lot of work, it must come at the right price and be somewhere you’ll be happy to live for many years.”