We build equity by either increasing our home’s value, or decreasing the amount we owe on it. (Or both!) Of course, making your monthly mortgage payment and naturally increasing home values will increase your equity over time, but you may be looking at something a bit *faster.*
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Let’s do this. The five main factors that influence your home’s value are location, size and layout, local market conditions, home condition, and select special improvements. That last one is a little bit vague, but we’ll clear it up quickly.
Square footage is a big deal, but adding square footage alone isn’t a guaranteed increase in your home value. When appraisers are looking at your property, they’re considering, amongst many things, what people want in a home. And people aren’t just looking for square footage, but also a practical and appealing layout. For example, you can have a 1500 square foot house, but if the kitchen is closed off, the entryway is cramped, and you need to walk through one bedroom to get to the next, the value of that square footage is much less than a well-designed layout.
Open floor plans and flexible spaces that can adapt to different needs (like home offices) are also increasingly desirable. This allows people to make the space their own without doing major renovations. Don’t break out the sledgehammer quite yet, though—it’s always best to consult with a trusted real estate agent before you begin any major renovations meant to increase your home’s value. A good agent will have a firm grasp on the local market and what’s most effective for your area.
One might attribute a home’s age with its condition, but it’s completely within reason to see a well-maintained older home appraise for more than a poorly kept new one. How you take care of your home shows to the appraiser. Are upgrades done DIY style in a haphazard way? Those upgrades are going to have less value than ones done the right way.
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Well-chosen upgrades and renovations can substantially increase a home’s value. But remember, not all improvements provide an equal return on investment. For instance, kitchen and bathroom updates usually offer higher returns than most other types of improvements. The quality and style of the work you do in those spaces matters, too.
Quick Tips
Most Impactful Renovations
These are typically the most valuable renovations to increase a home’s value and, in turn, your equity.
Of course, there are additional factors that impact your home value and equity. These are items you may not be able to control, but are good to know about when looking to buy your next home.
Barring the idea that you could pick up your home and place it on different land, you probably can’t change your current home’s location. But, hear us out. Knowing how location contributes to the value is important to your overall understanding, as well as any future home purchases you may make. Being in a “good” neighborhood is open to interpretation—but what does “good” even mean? Things like safety (a low crime rate) and access to amenities like hospitals and parks are important, of course. Future development plans for the area, and school ratings are important, too.
Numerous factors contribute to the fluctuations and trends observed within a specific area, including interest rates, employment statistics, and the delicate equilibrium between supply and demand. By monitoring key indicators such as the average duration that homes spend on the market, the historical changes in asking prices, and the ratio of buyers to available homes, valuable insights into the state of the local market can be gained. If buying a new home, your real estate agent can help you understand local market conditions.
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