I will give you short answers on how to build home equity faster:)
- Buy well: A good chunk of equity is made when you buy a property at a lower price than the current value.
- Do some fixes: Simple as adding new paint on a property can add value. Let’s say a property has been neglected for many years and removing wallpaper and adding a fresh coat of paint in and outside for around $10,000. After the paint, can this property sell for around $50,000 more? If so, you just made $40,000 equity the day you bought it. How about adding new countertops, cleaning up the yard and fixing the broken fence? You get the idea.
- Structure improvements: Do you have an unfinished basement that can be finished for around $20,000 while nearby homes with finished basements sell for $50,000 more? Then yes! Unfinished attic with potential to add a media room and a bathroom? How about an unused garage space that can be converted into living space? Big enough yard where you can build an ADU (additional dwelling unit–think of an independent studio/apartment building)? Or big enough yard that can be divided up?
- Zoning opportunity: Does it have a mixed use zoning that can be used as commercial and residential with good food traffic in an attractive area? Commercial property is typically in higher price ranges and can yield higher returns when it comes to cashflow or equity building.
So, I’d like you to think about the above opportunities when you are looking for a home. This applies to a first-time home, move-up home or downsize home. Unless you want just a turn-key home that you don’t have to do anything with. Which is fine, but you’ll have less equity building opportunities.
How about if you are thinking about selling and looking for equity return opportunities? If you have a budget that you can spend toward some of the above ideas, it might be worth looking into. Just be careful on improvement choices and don’t overdo it. It will be a good idea to talk to your realtor about what kind of updates/upgrades will be attractive to a majority of the buyers and the ROI potential before pulling the trigger.