How to build instant equity into your home
Instant equity is the term that describes the value of your new home exceeding the cost of building the home. Of course, this is the goal of most homebuilders. After all, if you could buy the same house, already built, for the same price there wouldn't be much point in building would there?
The trick is that, although instant equity is often the goal it is not guaranteed. There are some tips to building instant equity into your home.
Owner/build-If you have the skills necessary to build your own home without using a general contractor then you can save money right up front. There are some stipulations to being an owner/builder, like you have to live in the house once it is constructed for some predetermined time. If you take the "instant" part of instant equity to mean that you can sell the house the minute it is done then owner building is not going to be an option for you.
Hire a great contractor-if you decide to let a contractor build your house, he will have more of an impact on what you pay than any other factor. Make your decision about your contractor very carefully. Be sure to find somebody that other homeowners have had previous good experiences with. Let your contractor know that your goal is instant equity. He may give you some good ideas about what to change to increase the resale value of your home.
Put in "sweat equity"-you might decide that you don't have the time or the skill to act as an owner builder. However, you can still be involved in the construction process. Everything you do will be something that you don't have to pay someone else to do. You may opt to take on some jobs yourself. Maybe you can do the landscaping or you have experience with drywall. Communicate with your builder and let him know which of the jobs you are willing to do yourself. You can build up 10s of 1000s of dollar through sweat equity.
Build in equitable features-some features that you can build into your house will cost much less to build than they will add to the price of the home. Including these features will give you instant equity. One such feature is a deck. A deck doesn't cost that much and it isn't that hard to construct. In fact, it is one thing that you will be able to do yourself. With the little bit of money that you invest in your deck, you will gain a big reward in the appraised value of your home. Other features that will improve your selling price are track lighting, radiant heating, and vaulted ceilings.
Go to a few home shows and find out what the "hot" features are in new homes. If kitchens are currently featuring islands, build an island. If master bedrooms all have his and hers walk in closets, include them. The time to build the equitable features into your home is when you are planning the home. Trying to add them later is extremely expensive. This is one of the driving forces behind instant equity. People will pay higher prices for what exists because of the much higher prices of remodeling.
Get the right loan-the final consideration for instant equity deals with the financing of your project. There are dozens of different kinds of building loans. Talk with your financial advisor and find out which type of loan is right for you. People who are planning to build a home and live in it for the next 30 years will need a completely different type of loan than people who are planning to build the house and then sell it. Get the loan that will help you make the maximum amount of money on your house.
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Tags: instant_equity equity swea_ equity construction home_construction construction_loans resale_value
