Are you overcapitalising?

If you spend too much money on improving your property you run the risk of not getting the return when you sell, as VICKI HOLDER explains.

Many home-owners want to put their individual stamp on a home by making improvements. But you must take care not to overcapitalise your home by spending money that you'll never be able to recoup in capital value when you sell.

If you want to improve your home, and you may possibly move in the next two or three years, think carefully about whether it is worth the investment. If you intend living in a home for a longer time, the renovation cost is more likely to be absorbed by the ongoing capital growth over that period.

Prudent home-owners should check their anticipated renovations with a valuer or experienced real estate consultant before beginning the work. They can advise whether or not the work will add value to your home, and you may decide to reconsider.

Winston Kidd, of Harcourts, says to look at other properties for sale in your area. If the average sale price is around $500,000 and you're looking to spend another $200,000 on your home, check if there's evidence of any other $700,000 properties around you, he says. However, if you're looking to gain the benefit of this expense in the long term, then eventually the market will catch up with you and you'll have the enjoyment of using it.

Personal pleasure gained from improvements must also be considered when assessing the viability of proposed work. Value does not have to be just a financial measure.

If you can add another room you can push yourself into another price bracket, providing it doesn't compromise the liveability of the home or reduce the working area, he says.

Make sure that your improvements are in line with the buyer who is likely to come along after you. Consider what people look for when they move into your area. You want the home to appeal to as broad a base as possible when selling. If families gravitate to the area, then a swimming pool may make the property more liveable and appealing to buyers.

Generally speaking, it is work that you can see that has a direct, positive impact and tangibly adds value. Paint is the cheapest way to add value to a home.

Usually you will find that in a family situation the woman plays a major role in deciding to buy the home. She is more likely to be influenced by the condition of the kitchen and bathroom, so devote a good share of the renovation budget to these rooms. Choose contemporary looks when upgrading or replacing outdated ones, or go for relatively timeless designs with quality appliances.

Kidd says that replacing light fittings, wallcoverings and floor coverings is a good place to start when you want to add value quickly to move a property on the market.

Architecture is a key consideration when contemplating renovations. Particularly in period homes, it's critical to ensure that any changes to the house facade are in keeping with the original architecture.

Unsympathetic changes to the outside will almost certainly have a detrimental effect on value. Extensions must blend in flawlessly so that they don't look like add-ons, and using appropriate joinery, windows, cornices, skirtings and doors can make the difference.

Using an experienced design professional, such as an architect, interior designer or landscape designer, to make changes will enhance the look of the property, make it more functional and give it appeal to future buyers.

Positioned correctly and in keeping with the home, decks, terraces and paving can be relatively inexpensive and can add value by providing bigger living areas.

Gardens can significantly lift the value of a property. A well-landscaped garden with carefully chosen plants will set the home off to its best advantage. Research proves that a well-planned garden can account for 5-10 per cent of a property's value.

Seek advice before you subdivide, as it may devalue the existing house site. Subdividing incurs many unforeseen costs, such as putting in drainage and making a reserve contribution. Make a list of all the costs to work out whether you gain from the exercise.