Question: We want to add value to a home by buying in a cheaper part of Birmingham than we'd usually consider, and then bring it up to a really high quality inside. However, my partner says we'll be in danger of making it almost impossible to sell on in a few years as all the other houses in the street won't be worth anything near ours – and nobody will want to buy it. Is he right? DI, Redditch
Answer: A financial penalty might seem a perverse punishment for making the best of a property but a very particular pitfall lies in wait for the unwary: the so-called 'ceiling price'.
This is the highest any buyer will pay to live in a given house – wherever it is – and is determined by key factors which, most critically, include the type and mix of properties in surrounding streets and your neighbourhood's broad 'desirability'.
For example, are you converting a two-bed upstairs downstairs in a row of terraced houses into an overly-ambitious four-bed family home?
And is it in a highly sought-after commuter satellite town or down-trodden slice of suburbia with shoddy transport links?
It all boils down to whether your property is likely to stick out like a sore thumb when finished, says Gavin Brazg of website theadvisory.co.uk.
"Your goal should be to bring your property up to the same standard as the rest of your street – maybe a little better but no more," he says.
"For example, you'll waste time, money and effort transforming your property into a six-bedroom palace if all around you are three-bed semi-detached properties."
However, there is a balance to be found: adding something new to your home that won't price out future buyers can give it a vital edge, says James Brooks at estate agent Kinleigh Folkard & Hayward.
"There's no reason you should be limited by the road you live in; if you have more accommodation – one bedroom and a study, say – than your neighbour, your house will simply be worth more."
But make sure you pay the right price initially to reflect the house's poor condition.
As a general rule, adds Richard Morea at broker London & Country, structural improvements and creating additional living space should add value.
"However, if the plan is to add value and sell the property quickly, you need to understand who your target buyer is and spend your budget accordingly."
A recent survey by UpMyStreet.com property price website suggested that three quarters of buyers would prefer a garden to an extra bedroom.
"In an average location, don't spend a fortune on kitchens, bathrooms and fittings if you're planning on selling your property for profit," adds Brazg.Reuse content