Your Home Is an Asset: Ways to Add Value to It:
You bought a home! You’ve just taken out tens of thousands of dollars’ worth of debt!
Wait, so how can you call that an asset? Well here’s the dictionary.com definition:
- A useful and desirable thing
- A single item of ownership having exchange value
- Item of ownership convertible into cash
A useful and desirable thing? Of course!
A single item of ownership having exchange value? Makes sense. You can sell it and be able to pay back the mortgage loan you took out on it.
An item of ownership convertible into cash? Wait, how’s that? And how do I make that happen?
We often hear it said that your home is an asset. Sometimes said to be your greatest financial asset. But I would clarify by saying that your home can be an asset. Whether or not it is an asset depends on a few factors. Here are a few:
- Maintenance – If a house is not properly maintained, it’s value will undoubtedly diminish over time. The property is a part of that too. Even basic things matter – cleaning the gutters, mowing the yard, cutting the weeds, power washing the siding. Inside the house – keeping things clean, touching up paint, patching up holes in the drywall from your kids 😊. Hey, it happens to the best of us.
- Be a good neighbor – This one is not something that most people consider as an opportunity to help build your home into an asset. But if your neighbor’s property is looking rough and the house next door to them isn’t looking so hot either, that will directly impact the value of your home. It’s understandable that we cannot prevent some of those instances where a neighbor isn’t responsible with their property; however, if your neighbor is a senior citizen or a person with a disability, lend a helping hand with maintenance! Not only will it make you feel good and help them out, but that could result in helping your home to hold its value.
- Make some improvements – This doesn’t have to be extravagant. It doesn’t have to be a bathroom remodel or a kitchen remodel. Just fixing the molding that was improperly done by the previous owner or treating the deck wood or installing hand rails wherever there are steps. Even just planting a tree or some shrubs or laying some nice rocks or mulch to liven up that curb appeal. Just be sure with any shrubs or trees to first, know before you dig (Call 811) and make sure you’re in compliance with your City’s planting rules. Some towns do not allow a new tree to be planted unless it’s a tree with roots that grow straight down (otherwise the roots could eventually tear up sidewalks). Small improvements like these are low cost but can really add appeal and value to your home.
- Pay extra each month – If you go to sell your home at some point, your buyer’s lender will order an appraisal to be done on your home. The difference between your appraised value of the home and the dollar amount you still owe on the home is called equity. The more equity you have the better. So, it’s important to add even minor improvements to your home to help build long-term equity. It can also be very beneficial to throw an added payment toward your mortgage if you’re able to do so. Even an extra $25-$30 per month is beneficial. Or maybe when you get your annual tax refund, put $600-$700 toward your mortgage. Every little bit over time adds up. The more distance in dollars you can put between what you owe and what your home is worth, the better.
These are just some basic tips and examples of ways to build equity, add value to your home and ultimately, make your home a financial asset.
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