Wise Investment Approaches: Best Home Upgrades for Maximum Returns

Homeowners aiming for the best returns on their property investments should consider switching their geyser to solar energy—this change can lower monthly electricity expenses by 40-50%. As hot water is one of the highest costs for the average South African household, this is an excellent area to target.

While many homeowners might prioritize kitchen renovations or adding extra cottages to boost property value, such investments may not be the most financially savvy choices.

Switching to a solar geyser is advantageous due to its relatively low cost—around R23,000 for an average-sized family home. Though it may not substantially increase overall property value, it offers immediate savings.

After completing this transition, you might consider converting your entire home to solar, according to Marc du Plessis, Standard Bank’s executive head of LookSee, the bank’s platform for home efficiency.

“Maximizing your home investment returns depends on whether you plan to stay for several years or sell soon,” he notes.

“If you intend to sell within the next 12 months, investing in a complete solar power system may not be the ideal choice. However, converting your electric geyser to solar can provide quick returns with minimal upfront costs, especially since financing options are available through your home loan or a Standard Bank Energy Loan.”

The chart below displays the potential savings. In many cases, the transition to a solar geyser can offset its costs from the outset, with Cape Town seeing more significant savings compared to Johannesburg.

Estimated Savings from Solar Geysers

It’s important to remember that these conversions can be financed via an Energy Loan or a home loan at an assumed average interest rate of 10.5%. The longer the repayment term, the greater the monthly savings, which can be redirected towards repaying the home loan.

“For most people, a home is one of their largest investments, and its value is typically evaluated only when buying or selling,” notes Du Plessis.

“Common investment advice often aims at enhancing property value, which may take years, if ever, to yield returns.”

Key Considerations Before Investing in Your Home

The timing and scope of home investment will hinge on several factors:

• If you plan to sell;
• If you need to address damage or deterioration;
• When your lifestyle needs change (like needing an office space); or
• When specific aesthetics are desired (such as a kitchen renovation).

Full Solar Solutions

Next, evaluate whether to convert the rest of your home to solar energy.

During the peak of load shedding in 2023, reports suggested that properties with solar energy could see their values rise by up to 20%. However, subsequent research on this matter has been sparse, urging homeowners to maintain more conservative expectations (3-8%).

Recently, real estate agents have informed Lightstone that even in a challenging market, “green features” like solar power and alternative water sources remain attractive (16%) to buyers.

“The advantage of solar installations is that they can provide returns on your investment without waiting for the home sale,” points out Du Plessis.

While solar installations can come with hefty costs, they offer immediate benefits that extend beyond just safeguarding against outages. They serve as a productive asset by generating immediate savings on electricity costs, which increase annually with rising utility rates.

For those planning to remain in their home for an additional five to ten years, a solar installation is likely to yield significant returns through both electricity savings and increased resale value.

Don’t Neglect Home Maintenance

Calculating the return on investment for home maintenance is more complex, but neglect can lead to substantial expenses.

The latest annual report from the Ombud for Short-Term Insurance indicates that 25% of complaints involved homeowners’ claims being denied due to policy exclusions.

“Most of these claims related to damage from natural events and were rejected due to gradual wear, lack of upkeep, and other wear and tear issues, followed closely by design or construction flaws,” explains Du Plessis.

Regular maintenance provides various financial advantages:

• It protects against significant damage;
• It lowers repair costs;
• It can dramatically enhance water and energy efficiency, leading to savings on household bills; and
• Well-kept properties are more attractive to potential buyers and can command higher prices in the market.

Brought to you by LookSee.

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