1. Overcapitalizing
Average loss: $40,000
Undertaking a renovation which gives you the best house in the street, is not always guaranteed to get you the best price. For example, if you are an owner occupier in an area where there are a lot of rental properties that have been neglected and not well-looked after, it doesn’t matter how much you spend to your house in terms of improvement, the rest of the neighbourhood is going to let the value down until such time as these properties are improved as well.
That’s because the streetscape and the neighbours’ houses influence re-sale value. Sensible renovations should take these factors into consideration.