You Could Be Making Money On Your Home… And Not Even Know It
by Nick Warren
on Sunday, April 3rd, 2016 at 7:55pm.
Monopoly was one of my favorite board games to play as a kid. The bare bones concept was simple—when another player landed on your property, they had to pay rent. But $28 for rent when you paid $300 for Pacific Avenue isn’t going to give you the best (or fastest) return as an owner. You could quickly increase that rent to $1,100 by just adding a few houses. Rent would only have to be paid twice to get a massive return!
While owning a home in the Boston real estate market isn’t quite as simple as the classic board game, the concept stays the same. Each property is an investment—we hope to see a higher return on it by the time we decide to move.
In our active market, you’ll see a return on your investment in due time. But we all want the biggest bang for our buck, and your home could be making more for you right now.
Here’s what you need to know right now about the value of your property, and how to get maximum return on it:
Understanding Appreciation of Your Boston Real Estate
The very first step in understanding the appreciation of your property is to know its current value. The easiest and quickest way to do this is to get an instant home value report using Instant Boston Home Value.
For the last decade, Boston property values have increased an average of 5-7% each year. As a result, even if you only bought your home a few years ago, you may already see a significant increase in your property value. According to the rule of 72, with continued appreciation at these rates, property values in Boston real estate will double every 10-14 years.
Since Boston has several different neighborhoods, which all vary in property values, each neighborhood’s appreciation rate will vary slightly, as well. There are some neighborhoods where properties maintain consistent, gradual appreciation. Other neighborhoods, especially those that are going through gentrification (like Dorchester), should have a bigger range of property value swings both in appreciation and depreciation. Overall, however, the Boston real estate market tends towards continual appreciation as more and more people want to live in the city.
Using Your Equity
Home equity is determined by assessing your home’s fair market value and then subtracting the outstanding balance of your mortgage and/or liens on the property. When your home appreciates in value, the amount of equity in your home increases at the same time without you doing anything. As your home equity increases, you can access it in the form of a home equity loan.
There are a few different ways you can make use of your home equity, but the most common uses are renovating your property or wrapping in high-interest debt (like credit cards) at a lower rate.
By far, the most common use of home equity loans is to cover the cost of renovations. Adding on to your existing home or remodeling can increase the fair market value of your home! Whether you want to another bathroom or an entire room, adding on to your home adds value. Even just upgrading your kitchen appliances, cabinets, and countertops can make a surprising difference in the fair market value of a property. As a result, these upgrades can make it possible for you to sell your home at a higher price point in a few years.
Another way to make use of the equity in your home is to reduce your high-interest debt. You can do this by taking out a home equity line of credit and using it to pay off your credit card, student loan debt, or any other debt with an interest rate higher than 3.5%. Depending on the interest rates you are paying, you could save 10% or more in interest every single month. For some people, the savings can be tens of thousands of dollars per year.
Not sure if you will qualify for a home equity loan? According to a recent article, the continual rise in property values has contributed to an increased willingness of lenders to offer home equity loans. Real estate is appreciating across the country, not just in Boston, and previously reticent lenders are now ready to approve loans.
The Bottom Line
If you own Boston real estate, your home could already be making money for you through appreciation. While you can let the equity in your home continue to increase as it appreciates, you can also put your home equity to work for you now. Reinvesting your equity into your property through renovations can yield greater dividends in the future. Or you can save money on interest right away.
Whether you have dreams of renovating your kitchen or would like to decrease your high-interest debt, your home equity may be able to help you make it happen!
Are you ready to find out what your home equity can do for you? Find out how much your Boston property is worth today. Get your complete and accurate home value report using Instant Boston Home Value today.