No matter what the reason is, you need to consider the cost of the renovation and compare that to the potential financial benefit.
This is important because over capitalising can be a risk. While most investors have a good understanding of what over capitalising is and how to avoid it, this is not always the case for owner–occupiers.
Over capitalising is spending money on renovating your house that you are unable to recoup because the value of your house did not increase as expected.
This is less of an issue if you never have the intention of leaving your home but if you want to sell at a later date you need to think it through carefully.
It can be a particular issue if you are considering selling soon and are weighing up the value of a new kitchen or bathroom.
When you are planning to renovate it is prudent to consult an estate agent and architect or building designer.
In the first instance you need to consider how much your property is currently worth and how this compares to the median price in your area. If you spend too much on your house you may put it out of reach of buyers in that area.
Also consider how your renovated property will fit into the area in which you live, as buyers are often attracted to a particular area because of a style of housing.
Finally, if you are looking to sell and move in the shorter term it is important to consider if the cost of the renovations will be recouped by an increased value; if not, renovating is not going to be worth the time, stress and cost.
Source REIV
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