Everything You Need To Know About Overcapitalisation

When you’re renovating your home, it can be easy to get carried away with dream home ideas and over-invest in the project.

While renovations can add value to your home, you could end up spending more than you should. Sticking to your reno budget can be difficult.

What is Overcapitalisation?

In business, overcapitalisation is when a company has more debt than the value of its assets. This means they have overinvested in the business.

For homeowners, overcapitalisation refers to spending money on renovations that do not add value to the home.

Not all renovations are helpful. Maybe you’ve just purchased a home and want to spruce it up by renovating the kitchen or adding a patio. If the overall cost of the renovation outweighs the value that it adds to your home, then you’ve overcapitalised.

It’s important to be selective when choosing renovation projects. Think about whether they will add value and make your home more attractive to a potential buyer or not.

How to Avoid Overcapitalisation

Avoiding overcapitalisation is key if you want to achieve a return on investment when your home sells. The best way to do this is to take a look at other properties in your area and compare them to the current value of your home and the market.

There are some simple ways you can improve your home without overinvesting. Try these ideas:

Renovating kitchen or bathrooms
Improving curb appeal or landscaping
Modifying floor plan
Updating outdoor entertainment areas

If you’re embarking on a renovation project, here are some tips to stay on track with your budget and avoid overcapitalisation:

Get a professional property valuation
Examine your suburb
Set a realistic budget
Make it personal
Be strategic

The good news is that you can increase your home’s value without overspending. Start with small things like a coat of paint, replacing curtains, or updating fixtures for a simple solution.

Looking To Start Your Home Renovation?

At JM Homes, we ensure we always take the time to listen, communicate and act with our clients interests at heart at every stage of the build.

If you have a renovation project in mind, we’re Brisbane’s building experts. Whether it’s a Queenslander, new build, house raise or extension, we can help you.