You CAN make cash on a home renovation – if you understand what actually provides worth and the way a lot to spend. Experts reveal their final information to  what works – from storage conversions to the reality about lofts

Millions of homeowners dream of a new, extended kitchen, or creating more space with an extra bedroom or loft conversion.

And taking on a home renovation project could look even more attractive this year as stamp duty costs rise once again, making staying put and adapting even more attractive when compared to moving.

At the moment, there is no stamp duty to pay on the first £250,000 of the price of a property, but from April 1 this will fall to just £125,000, pushing up the bill for most buyers.

But, the question is, will you make your money back on your home renovation when you come to sell up?

The answer may surprise you. That is because building costs have risen by 37 per cent since 2020, according to the Department for Business and Trade. It means what was viable even just a couple years ago may not make financial sense today. You will have to be much savvier to make a profit on home renovations than in the past.

Wealth & Personal Finance investigates the home improvements that could add value when you come to sell – and those that won’t.

Get to know your area before embarking on improvements

Alex Pope of property development firm VOZA suggests a rule of thumb to determine whether a project offers good value. ‘You shouldn’t spend more than 10 to 15 per cent of the value of your home on an extension,’ he says. ‘Spend more than this and you may not make the money back.’

Pope is currently working on a pricey £150,000 loft extension, which would not make financial sense for most homes. However, because the property is a studio flat that might be expected to sell for about £1.6 million, his rule of thumb still holds.

A loft extension can add more space than a loft conversion because a new room or rooms are added to a property’s existing structure.

Whether or not you’ll make your money back depends on where you live. In places where the value of property per square foot is far higher than the build cost per sq ft, the numbers are more likely to stack up.

London properties in particular are likely to fit the bill. Although the build cost may be greater than in other parts of the UK, higher house prices more than make up for it.

A simple way to work out whether to go ahead is to compare sold prices of similar properties in your area.

‘Look at the floor plans of five or six recently sold houses and work out the price per square foot,’ says Michael Holmes, an adviser at the Homebuilding & Renovating Show at the NEC in Birmingham. Find sold prices on property portals such as Rightmove and Zoopla. Once you have the price per sq ft, you can calculate how much value you could add by carrying out the renovation. ‘Is it more than the cost of the extension?’ he says.

And consider when you wish to move. if you plan to live in your home for some years after renovating, you are more likely to make your money back than if you move on quickly.

James Waight, head of sales at estate agents John D Wood, explains: ‘If you invest heavily and spend ten years in your home you will ride out price fluctuations and likely recoup costs. But do not ignore high acquisition costs – if you make £100,000 on a property it is often absorbed by stamp duty and buying costs – there is no net benefit.’

However, this assumes that prices go up in the long term and that the market values your improvements.

Waight adds: ‘Fewer are eager to do work these days so there’s a strong market for move-in ready homes.’

Create space, add money with a loft conversion

The home improvements that tend to add the most value are those that add square footage. As Waight explains: ‘Improving what you have makes it stand out from the competition but doesn’t always add value.’

The best-value way of creating more space is typically a loft conversion and this tends to add bedrooms and a bathroom, which buyers appreciate.

As a rule of thumb, loft conversions cost £1,350 to £1,950 per square metre (add VAT to all figures), depending on complexity and size, according to Holmes. 

A London premium of 10-15 per cent makes an average dormer loft extension in the capital at least £100,000. But not all added space is equal, says Amy Reynolds of Antony Roberts, an agent in Richmond-upon-Thames, south-west London. 

She compares adjacent houses on Amyand Park Road, both well presented with four bedrooms and two bathrooms, listed at £1,150,000.

‘One that converted the existing roof to make it a ‘useful’ spare bedroom completed at £1,080,000; the other, which had a dormer on the back with balcony to provide a ‘wow’ master bedroom suite, sold over the asking price,’ she says.

A home on the same street without a loft conversion is worth around £1 million.

As always, getting to know up-to-date prices in your locality is key. Harry Chennells of Cheffins, an estate agency in Cambridge, says the profit margin on a loft conversion has narrowed but owners are ‘likely to break even’.

He points to the recent sales of two Victorian terraced houses where a two-bedroom one sold for £520,000; but one with a loft conversion – adding an extra bedroom and bathroom which also had a kitchen revamp – sold for £690,000. The £170,000 difference would have easily covered the works.

How the numbers stack up will vary not just from region to region but even from street to street, so consult local estate agents.

For example, the price gap between immaculately finished properties and those requiring work in the last quarter was 31 per cent in prime central London, compared to just 5 per cent in prime outer London, says Savills.

Amelia and Adam did a loft conversion and kitchen extension when they bought a two-bedroom home – formerly two council flats – in Battersea, south-west London, for £800,000 in 2017. Now, with a 15-month-old daughter, they are selling up at £1,325,000 via John D Wood to move for schools.

‘It was in a terrible state and took us nine months,’ says Amelia, 33. ‘We will have made around £150,000 [if it sells for close to the guide price] but we didn’t do it to make money; we couldn’t afford to buy a four-bedroom, three-bath house at the time.’

Loft conversions can be worth considering but be wary of kitchen diner extensions.

Properties with open plan kitchens are in high demand – especially with a separate utility room.

But think hard before replacing and extending a galley kitchen. At £2,500-£3,250 per sq m they are pricier than lofts, even if you limit the kitchen fit to £7,000-£12,000.

That puts the average 27-30 sq m extension (going out six metres with permitted development) at £90,000 to £98,400 in total. Adding a second floor generally adds another 60 per cent to the cost.

In areas where the property value per sq ft is similar to the build cost the margins for profit are smaller. In the West Midlands the property value is around £240 per sq ft, while the build cost is roughly £232 per sq ft.

Reynolds cautions about side-return extensions too. ‘Running along the length of the kitchen they are expensive for the space you gain. In London they can easily cost £150,000 – but worth doing if you go out at the back too.’

Convert the garage or remodel the layout

Garage conversions are often a cheaper way to add space than an extension – at £1,300 to £1,850. However, think carefully before doing this if it means you lose off-road parking as this could lower the value of your home.

It is worth considering remodelling your layout. It might not add square footage but can be cheaper and makes a home more sellable.

Advertising agency boss Del Manning and his wife Philippa bought a 1920s house in Farnham, Surrey, in 2018 for £805,000. After putting a small extension on the side, adding a bedroom, solar panels and updating the whole house, they sold it in February for £1,510,000 – £10,000 over the asking price.

Says Del, 57: ‘My dad was a builder, so I managed the project myself. We spent around £300,000 on it – but it would have been nearer £500,000 without my input – I also installed the kitchen and painted everything.’

Renovating their new house after downsizing he’s noticed costs jump. ‘In the old house the glazing cost £41,000, excluding installation – I just got a quote of £51,000 for half the number of windows and bifolds. The cost of glass has gone through the roof.’ He recommends Jewson’s Build Aviator estimating service: you submit plans and it gives you a build-cost estimate.

Henry Griffin of Winkworth in Farnham says a two-up, two-down house recently bought for £450,000 is on course to be remodelled.

‘The owner is moving the stairs to make a better sitting room and extend the small kitchen – with a £50,000 budget,’ he says. ‘Adding in capital growth, this should be made back in three or four years.’

Beware basements but consider garden rooms

Basements are an expensive way to extend at £3,000 to £4,250 per sq m – and £4,500-£5,000 in London. They can also affect the property’s saleability by taking a chunk out of the living room for stairs, or the garden for light wells.

The basements trend has slowed, but in high-value areas it’s still possible to make money back, says Russell White of Winkworth in Putney, south-west London.

He cites Hazlewell Road where five or six bedroom houses are worth about £3.8 million – £4 million. ‘One with a 1,000 sq ft basement would be worth around £5million,’ he says. The build cost would be £500,000-£550,000.

‘Adding a high-spec garden room is a far better way to add space, with less disruption. You might spend £50,000 to £70,000 but it will be included in the £800 per sq ft valuation [in Putney],’ he says.

But it’s harder to make back money spent on rural properties – especially when buildings are listed and planning restricted in protected areas, says Anthony Clay of Stacks Property Search in Chepstow, Monmouthshire.

‘People tend to overspend on a forever house. Often you only get back 50 per cent – I’ve seen £200,000 spent on making outbuildings into holiday lets, adding just £100,000 to the value,’ he says.

BuildPartner says the average (80 sq m) barn conversion costs £218,038, or £2,751 per sq m.

Be aware of price ceilings. In some areas there is a maximum amount buyers will spend on a property, no matter how nice.

It’s easy to check the highest prices paid for properties in suburban areas. It is less clear cut with rural homes. This was the case for Jennifer Mcnamara’s detached five-bedroom home in Bishop Monkton, North Yorkshire.

After buying it in 2015 for £725,000, Jennifer and her partner added an eye-catching open-plan/ indoor/outdoor extension, ideal for parties with family and friends.

‘We put in new everything and used an architect who produced the most fabulous but expensive plan,’ says Jennifer, 76, a psychotherapist, who says they spent £600,000 doing up the property.

It is now on sale at £1,250,000 with Strutt & Parker – £75,000 less than Jennifer paid for the property and renovations combined.

‘We are keen get back what we invested,’ she says. Detached houses nearby sell for about £800,000 but five-bedroom new-builds for much more. ‘It’s a bit of a lottery,’ she says of valuations.

Making your money back when renovating certainly seems so.