Home can mean many things. A roof overhead, and four walls, protection from the elements. A place to feel safe and secure. Somewhere to gather with friends and family. A spot all your own, one where you live with roommates, raise a family, or share with a partner. It is also generally among your largest financial investments.
Most homebuyers enter into a real estate purchase hoping the property will grow in value over time. Whether the house is used a primary residence, vacation home, or simply as an investment, the equity can contribute significantly to the owner’s overall net worth.
Equity will likely increase over time simply due to increases in the overall cost of real estate. Though there is no guarantee that property value in a specific area or for a specific home will rise, historical trends show real estate prices tend to go up over the long term. Individual homeowners can also work to boost their equity positions through home renovations.
Here are some things to think about when considering improving a property with the intention of increasing its value:
Understanding Market Value
There’s an old saying that is very applicable when it comes to real estate pricing: Everything is worth what someone will pay for it. Determining how much a home means worth is coming up with what the house would likely sell for on the current market. Popular features that make a home more desirable may add a great deal to the value, while others that aren’t sought out by buyers, even if expensive to implement, may not.
Maintenance
The general condition of a home plays a very large role in its value. Keeping the property in good repair should be a high priority before tackling other renovations. If the front walk is cracked and the roof is missing shingles, it may be more important that those issues be addressed than updating a functional master bath.
Don’t Be The Joneses
In an area or neighborhood where most of the houses fall into the same general size and style there is often an upper limit to the value of properties located there. It is unlikely that any amount of upgrades and improvements will cause the value of one home to greatly surpass that of all its neighbors. For this reason it often makes financial sense to not have the largest or most upscale in the area, but to take on renovations that keep the home in line with those around it.
The inverse also tends to hold true. The smallest home in a high end neighborhood often has the potential to be worth more than a similar property in a more moderate area. These properties can offer an excellent investment opportunity when they come up for sale.
Choose the Right Renovations
Some projects will have a greater impact on property value than others. Landscaping improvements, for example, tend to offer a very high return on investment. This could mean reseeding the lawn or putting down new sod, planting trees, or adding hardscape features such as a retaining wall. The reasoning behind this is that the cost is often not very high, and the impact significant. Think of the difference in curb appeal for a home that has a front lawn with grass that is dry, filled with weeds, and missing in large patches, versus one with full, lush, green grass.
Apply this thinking to other areas of the home to determine where a big difference can be made relative to the cost. Rather than tear out a kitchen completely, replacing every element, it might make more sense to paint existing cabinets an updated color, swap out drawer and cabinet pulls, and upgrade the appliances. This mini-renovation might offer a great return on investment.
Choosing Contractors
Who you hire to renovate your home can have a big impact on the quality of the end result, which will affect property value. Working with a professional who does great work and is reliable will also make the project more enjoyable, and less likely to be plagued with delays, surprise costs, and other frustrations.
Find a great contractor by asking family and friends for referrals. Your real estate agent may have some good suggestions as well. Interview those you are considering and ask to see examples of recent work that is similar to what you are having done. Confirm their licensing and insurance coverage. Plan ahead, as in demand contractors are often booked out for several weeks or even months during the busy times of year such as spring and before the winter holidays.
Photography by [iriana88w] © 123rf.com
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Tags: home equity, home renovation
