The Myth: Renovating a Property Will Always Add Value
Not all renovations generate a return. Over-improving beyond the 'ceiling price' of a street wastes money. Understanding your market before spending on refurbishment is critical.
Home renovation shows have created a widespread belief that spending money on a property always results in a proportional — or greater — increase in its value. In property investment, this is frequently wrong.
Every street and every area has a 'ceiling price' — the maximum that buyers or appraisers will accept regardless of how beautifully a property is finished. In a street where similar houses sell for £250,000, fitting a £40,000 kitchen and £20,000 bathroom suite will not push a value to £310,000. You will simply own the nicest house on the street that still sells for £250,000.
The 'adding value' principle works specifically when you are bringing a sub-standard property up to the area's expected standard. A tatty, damp-smelling property in a street of well-maintained homes bought 20% below market value and refurbished to the area standard — that is where the value is created. The refurbishment cost should always be validated against comparable sold prices before a single penny is spent.