Finance

ALWAYS ADD VALUE BEFORE YOU SELL

There are three irresistible reasons why you must add value to your home before selling it. The clue lies in the dynamite words: “money”, “equity” and “tax”.

Adding value may not be quick or easy, and usually it is not cheap. However, if you don’t do it, you will probably end up kicking yourself.

Here are some of the things you can do to add value to your home:

  • Add an extension
  • Convert loft
  • Convert cellar
  • Convert into two or more living units
  • Put in new kitchen
  • Put in new bathroom
  • Add conservatory
  • Add a garden building such as a summerhouse or office
  • Landscape the outside space to “wow” level. 

1. Ease of raising funds

The good news about carrying out building works to your home is that you will probably find it relatively easy to raise funds – assuming you have a reasonable credit record.

Lenders know home improvements usually add value to a property and so they are usually more than happy to lend.

Compare that to the situation where you are an investor and need money to do up your investment property. In that situation you are likely to find lenders to be much more risk-adverse, much less willing to lend to you.

Funding the improvement of your home can therefore be an easy goal moneywise…so why would you not want to roll the ball into the back of the net?

A related advantage is the opportunity to carry out the work piecemeal over a period of time – at times convenient or financially appropriate for you and your family.

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2. Adds equity

The equity in your home is the difference between its value and what you owe to your mortgage lender. 

Ultimately it is money available to you to do as you wish.

The big plus of carrying out value-adding works is that they will increase the value of your home, increase your equity – perhaps greatly, if you carry out major works.

A larger equity will allow you to borrow less and possibly pay less in mortgage payments if you sell up and buy a new property.

If you grow your equity and then downsize to a smaller cheaper home, you may be able to free up a larger than otherwise amount of equity to live on, save, invest, subsidise your pension or bequeath in your will. 


TIPS FOR SELLERS
When is the best time to sell? (timing your sale for maximum advantage)
8 fab ways to add value to your home (especially before selling it)
Show off your home for zero cost! (make your home irresistible on the cheap)

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3. Tax efficient

Perhaps the best thing about carrying out value-adding works is that any gains you make are unlikely to be liable to capital gains tax.

As a homeowner you benefit from Private Residence Relief when it comes to capital gains.

Normally if you sell a property for more than you bought it for, you are liable to pay capital gains tax on the difference or gain.

That does not apply to your home provide certain conditions are met, including:

  • You have lived in it as your main home for all the time you have owned it
  • You have not let part of it out (doesn’t include renting to a single lodger)
  • You have not used part of it as your business.

Adding value to your home is therefore “tax efficient”. If you have a choice between adding value to an investment property and adding value to your home, you may find adding value to your home leaves more money in your pocket.

4. Conclusion

It is not always possible to add value to a home by building works.

For instance, if you are a flat owner with leasehold title you may not be able to carry out works because of  the physical layout of your flat or the unwillingness of your freeholder to give you permission.

Where however you have the opportunity and capability to carry out  value-adding works – as profitable and tax efficient as they could be – it seems perverse not to do so. 

Have you carried out any value-adding works to your home? What did you do and did everything run smoothly? Please leave your comments below.


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Dalton Barrett
Rebel Property Coach

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My website is: www.rebelpropertycoach.com


 

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