1. How much did you pay for the property and what is its current value? Renovation costs should not exceed 25% of its current market value.
2. What are other houses in your street and neighbourhood like? How many bedrooms and bathrooms do they have?
3. What is the average selling price of houses that changed owners? If you spend too much on renovations, you may improve the house beyond its true value, making it too expensive for the price you can raise in the area.
Talk to estate agents or check the property ads in newspapers: if you don't find anything in your post-renovation price range, you may be overcapitalising.
4. What are your long-term plans for the property? If you're letting or reselling it, improvements you make should appeal to all tastes, so use neutral colours and finishes.
Even if you're planning to live there, don't ignore the possibility of unforseen financial problems or even divorce.
5. How much money can you borrow and, more importantly, can you afford the repayments? You can apply for a pre-approved loan before making detailed plans: you'll need to use a registered builder and submit a detailed building plan with a complete renovation schedule.
Remember expenses such as increasing building costs, new furniture and fittings. Also factor in water, electricity and insurance costs. If you need to move out during renovations, you may also need to rent elsewhere.
And, once the builder has finally left, your garden will look like a battlefield.
6. What exactly do you want to alter? Remember, in 30% of cases, it's financially more sensible to find another house rather than renovate.
• Live in a house for at least six months before renovating, and never allow your emotions to dictate your financial decisions.
• All renovations must meet real needs and improve your standard of living, not simply improve the appearance of your home.
• Spending too much on the wrong things is one of the biggest mistakes people make. Focus on good design and whether you'll have enough light and space, rather than on designer kitchens or gigantic swimming pools.
• Installing a pool may improve your lifestyle but, in a developing suburb, may not add value to your house: maintenance costs, labour and potential dangers connected with pools may even put off potential buyers.
• An alarm system and secure fencing, however, will add value in a neighbourhood with a high crime rate.
• Ask professional builders, architects and suppliers for advice and quotes.
Are you a home owner? What other advice can you impart? Share your comments below.