Every smart investor, whether first time home buyer or veteran wonders when buying a home, what upgrades should I do that will ACTUALLY increase the value of my home?
There are so many options that can instantly increase the value of your home, and most importantly, create instant equity that can be re-invested back into your mortgage to reduce your monthly payments OR be refinanced and cashed out using a HELOC (Home equity line of credit) to finance other real estate investments or provide funding for other plans of your own like starting a business!
So what exactly is Equity?
According to Freddie Mac Home Loans: “In the simplest terms, your home’s equity is the difference between how much your home is worth and how much you owe on your mortgage.”
So what can I do to build equity besides paying down my mortgage?
If you are not afraid of buying a home that needs a little work, or if you have had plans to do some upgrades on your existing home to increase the value of your home before selling it, here are some items you should consider upgrading first that will generate more value in your home.
If you have a pre 1980’s home that does not have central air conditioning, this is one item that is very important to consider upgrading. The difference in value between a home with central air and no central air is pretty significant, sometimes varying $30,000-$50,000! Depending on the size of your home- let’s use a 3 Bedroom 1 full bath 1,200 sqft Ranch as an example- the estimated cost of a new gas furnace and AC system is between $15,000-$17,000 dollars. It is proven that a home that already has this energy efficient upgrade reflects a near doubling value increase in sale price than what you pay to upgrade it. A worthwhile investment that definitely builds equity and the good news is, most HVAC contractors do offer financing options and sometimes interest free rates for up to 5 years!
2. Adding a full bathroom or half bathroom
Although this can be pretty costly to put in, the benefits of adding a bathroom to your home definitely outweighs the negatives.
Whether Adding New or Just Updating to Full Bathroom
A full bath refers to a bathroom that has a sink, a toilet, a bathtub, and or shower. A full bathroom can increase your home’s value by as high as 20% depending on the style and quality of your bathroom. Of course, this percentage can fluctuate between 5-20% depending on the area you live in and the market, but generally, full baths are always in demand and with proper investment, you can look at a $40-50,000 increase to your home’s value at least.
A half bath is a bathroom that has a sink and a toilet but not a shower or bathtub. In general, a half bath can raise your home’s value by around 10% at the highest, depending on the style and quality of your bathroom. This percentage can fluctuate between 5-10% depending on the area you live in and the market, but half baths are seen as valuable additions and worthwhile investments. In many cases, you are likely to recoup at least 60% of the investment placed in your half bath with an estimate of around a $20-25,000 increase to your home’s value.
This is another option for instant equity and especially important if you own a home that only has one full bathroom for resale purposes.(Source:https://www.badeloftusa.com/buying-guides/how-much-value-does-a-bathroom-add/#steps-popup)
There are so many other ways to build instant equity and increase your home’s value. If you are interested in hearing more about these tips please reach out to Melissa Montagno or visit our future investment division page “InvestBlue” to learn more! Stay tuned for Part 2 coming in just a few weeks!