In the popular TV show The Block, contestants Adam and Fiona turned a rundown ground-floor unit in Bondi into a glamorous beachside hideaway that fetched $751,000. But this is where reality splits from TV.

Buying your fist home is a grown-up decision and the beginning of what you hope will be a string of smart investments. But spending too much on renovations can be a big mistake.

It’s known in the industry as overcapitalising — when you spend more money on your home than you’re likely to get back if you sell the property. So, if you’re planning renovations, don’t spend money you may never recoup.

Top-selling Australian realtor John McGrath, of McGrath Estate Agents, recommends against any major renovation works if you’re considering selling in the near future.

“At this stage you would be better sticking to presentation and decoration,” he explains.

The most common forms of overcapitalisation?

“Adding a pool, especially to properties in areas where buyers don’t want pools or high maintenance, and over-building or creating a house that offers more accommodation than is required for the area.”

John says additional rooms and unwanted features can actually make a property harder to sell.

“I once sold a house in Paddington [in Sydney] where the owner had added a pool that took up the entire back garden, leaving only a thin cement surround and no garden. Needless to say, it took a long time to sell and they ended up losing money on their renovations.”

“It’s important in a flat or falling market not to overcapitalise,” John cautions. “If you make a mistake in a hot market, the increasing values will save your hide, but when the market has plateaued, it could be years before your value is restored.”

If you are going to carry out renovations, make sure you do it right. Don’t cut corners on quality. “Unless you’re highly skilled in design or building, I’d leave it to the experts,” John says. “Don’t mess around with homespun building works unless you know what you’re doing. A few thousand dollars saved on professional fees could come back to bite you if the quality of the work ends up being substandard.”

Bathrooms and kitchens are often the areas most in need of a facelift so renovations can be worthwhile. The trick is not to plough too much into either. But at the same time, you should avoid the cheap-and-nasty.

“There’s no standard rule, but I’d suggest installing a good-quality kitchen for no less than $10,000. Adding a cheap kitchen can de-value your property, so go for an appropriate level of quality,” John says.

Ideas to smarten up your place add value

DO

• Polish the floorboards or lay new carpet for an instant home facelift
• Use paint and/or wallpaper. Do it yourself or convince a mate to give you a hand to save on painting costs.
• Renovate your kitchen and/or bathroom. But don’t overdo it — for example, if your home cost $300,000, don’t spend more than $20,000 on each room.
• Add a skylight. It opens up dark areas and floods rooms with natural light.
• Landscape your garden. It will give buyers a good first impression.

DON’T

• Buy art. It won’t raise the perceived value of your home.
• Knock out a wall and make a two-bedroom a one-bedroom. It will instantly lower the value of your property.
• Splurge on outrageously big-ticket items. Instead, shop around for affordable furnishings or chic vintage pieces at second-hand stores and furniture auctions. Buy overly expensive fittings, such as door handles and tiles. Keep it simple and relatively cheap.

For more great ideas and practical solutions for your home see http://www.reallivingmag.com.au/