If you’ve ever been a renter, you may at some point declared “dang, our landlord is making a killing on us!” and concluded that being a landlord is the key to wealth and power. While it may not be as glamorous as it is sometimes made to seem on infomercials and seminars, owning a home as a rental can be a significant portion of your wealth late in life, and more importantly, an excellent source of retirement income.
A few tips toward adding value to your home (and a few things to avoid)
Whether you are selling, refinancing, or just renting, upgrading certain aspects of your home can be a boon toward raising it’s value, while others are just a money-sink with no real return. Here at Evergreen Mortgage, we took a look at some of the best (and worst) places to sink time, money, and effort into to get the best bang for your buck.
Image by Nancy Hugo, CKD
1.Remodeling your kitchen.
It is a well-known fact that the kitchen is among the most important rooms in the home. You will definitely want this looking nice before getting that appraisal.
Replacing outdated appliances, and repairing or replacing the counters or floors, if needed, will go a long way toward making your home feel modern and up-to-date. Try spending money on stainless steel appliances for that truly modern look and feel.
Also, adding a fresh coat of paint never hurts either. Upgrading the kitchen can even raise the value of your home between 3%-7% on average.
Photo of a finished basement by Sean Madden. License Labelled for Reuse
2. Finish your basement or attic.
Not only will this add usable square footage to your home, but allows for a flexible living space, that can serve a variety of purposes: an extra room, an office, a second living room, a playroom for the kids, or the adults, the possibilities are endless.
The bottom line is having the extra usable space never hurts. Doing this can raise the value of the home between 4%-6% on average.
Image by Todtanis
3. Freshen up the bathrooms.
Just like the kitchen, bathrooms should feel fresh and updated. Replacing your worn out linoleum floor, or possibly simply the faucets and fixtures, can go a long way toward improving the overall value of the home. You don’t have to go overboard, make the bathroom look nice. No one wants an old messy bathroom.
Some other things to consider:
Re-painting rooms that need it is an easy, cost effective way to add value to your home.
Update all of your energy-guzzling appliances to make your home energy efficient, replace single-pane windows with double-pane or triple-pane windows. For better heat retention and energy efficiency.
Maintain and fix any leaky faucets or drains, replace burnt out bulbs, and make sure the home is clean and presentable.
Doing these three things, is practically guaranteed to get some value, but let’s look at some of the things that won’t.
Image by Vic Brincat From Ontario Canada
1. Installing a pool.
While it is wonderful to be able to cool off during the summer time, adding a pool likely isn’t likely to raise the value of your home. That doesn't mean you shouldn't make the investment if you want a pool, just be aware that with maintenance costs it is more a liability than an asset. Whether you are simply refinancing, or trying to sell your home, a pool is an investment best left to those who really want one.
Image by Todtanis
2. Creating specialized spaces. While you may have always wanted to convert that bedroom into a personal sauna, it might not work out so well when it comes time to sell or refinance. Individuals looking at your home on Zillow or other websites will expect a certain number of rooms to be present. If the house no longer fits the description, they may look elsewhere.
Long story short, sometimes it is best to keep things simple.
Slight rise in interest rates
Interest rates have gone up ever so slightly this month, but are still pretty low.
Common Misconceptions: renting is cheaper than owning a home.
One idea that I often hear, especially from people my own age, is the statement “I couldn’t afford to own a home, whether due to the down-payment, or due to the amount of monthly payment.
For many, the prospect of owning that first home can be rather daunting. But is owning a home really more expensive than renting one? Let’s take a look at some comparisons.
Home Value Mortgage per month Rent per month
$150,000 (condo) $1023 $1150
$250,000 (house) $1500 $1600
(Both mortgage values were calculated using 3.5% down at a 3.375% fixed interest rate)
We can see in a side by side comparison that renting isn’t necessarily cheaper than owning a home, in this case, both the condo and the house were slightly cheaper to own than to rent. While this isn’t always the case, there are plenty of benefits to actually owning a home, such as consistently growing equity and value.
If owning a home is something that you are interested in, contact a mortgage broker, as they can point out price ranges in the area, present options, and outline the steps needed to be taken to actually accomplish the goal of moving into a home.
Debunking the Myth: “I should choose a home before talking to mortgage broker.”
I think this misconception stems from new buyer enthusiasm. People get excited about owning a home, not paying a mortgage, so they gravitate towards the shopping step and figure they’ll deal with the mortgage side when they have to.
In short, unless you plan on paying cash, looking at homes before consulting a mortgage broker puts the cart before the horse. If you don’t know how much you can afford, you won’t know what homes are even options. If you put an offer on a home without knowing that you can actually get a mortgage for it (or how much that mortgage payment will be), you risk losing your Earnest Money (the money you give the seller with your offer), not to mention the time and other costs associated with buying a home. In fact, most sellers will require that you show a Letter of Pre-Approval from a mortgage broker before they will even let you walk through the home!
It’s crucial to first know what your home-price range is before looking at homes.
At Evergreen, we do this in steps:
1. Step One: The “Quick and Dirty” Consultation – We’ll take a “verbal” of your income, monthly debt payments, estimated credit score, and availability of down payment funds. With that info, we will give you estimates of (a) The maximum home price you can afford, with the corresponding payment and; (b) How much home your maximum budgeted monthly housing payment will afford. This only takes about 15 minutes but gives you a reasonable price range to consider.
2. Step Two: The “Cursory Glance” Stage – With the info from Step One, you can go online and see what homes are your price range. Zillow.com, Trulia.com, and UtahRealEstate.com, will show you pretty much all of the homes for sale, including those listed on the MLS (a home-selling database for realtors).
3. Step Three: The “In-Depth Analysis” – If you like what you’re seeing from Step 2, then we do the in-depth analysis. This is a crucial step, because as they say, the devil is in the details, and that couldn’t be more true in mortgages and real estate. In this step, we will check your credit and review your tax returns, income documentation, and asset documentation (bank statements). We will even run an Automated Underwrite that will tell is with 99%+ certainty if the loan is going to be approved. During the process, we may change your maximum home purchase price, depending on the results. This is a crucial step, because it lets you shop with true confidence.
I should note as well that we encourage potential home-buyers to have a consultation 6+ months before they think they will actually buy a home. That’s because there may be items (like credit report issues) that will take a bit of time to remedy.
In short, unless you’re loaded, you can’t buy a home without a mortgage, so let us figure that out for you first.
