10 Ways to Build Equity in Your Home

Home finances and residential equity symbol as a bird nest shaped as a family house with a gold egg inside as a metaphor for financial security planning and investing in real estate for retirement freedom.

1. Rising home prices – when home prices rise, you will gain equity simply because your home will be worth more. For example, if your home is currently worth $250,000, if it rises to $300,000 in five years, you’ll have $50,000 more equity. Unfortunately, the opposite can also occur.

2. Falling mortgage balance – as you pay off your mortgage each month, you pay a portion of interest and a portion of principal (assuming it’s not an interest-only home loan). Every time you make your mortgage payment you’ll gain some home equity.

3. Larger mortgage payments – if you make larger payments each month, with the extra portion going toward principal, you will pay off your mortgage faster and gain home equity a lot quicker.  (Stop to consider your long-term investment goals before doing this.  Oftentimes, if you put your money into a different investment vehicle like a mutual fund, you would receive larger returns from the mutual fund than you would from putting more money toward your mortgage.)

4. Biweekly mortgage payments – you can go with a biweekly mortgage payment, where you make 26 payments throughout the year. This will shave down your mortgage term, save you a ton in interest, and help you build home equity a lot faster.

5. Shorten your mortgage term – you can refinance into a shorter-term mortgage with a lower mortgage rate, such as a 15-year fixed, which will increase the size of your payments, but build equity much faster than a traditional 30-year mortgage.

6. Avoid refinancing – conversely, if you don’t refinance and pull cash out, you’ll retain all the equity in your home. During home value growth periods, many homeowners refinanced over and over until they sucked their equity dry – then when prices drop, as they tend to with any market, these homeowners found themselves upside down on their mortgages.

7. Home improvements – if you make smart home improvements, where the expected value exceeds the cost, you’ll increase your home equity by having a home that’s worth more. While it’s seemingly completely played out, granite countertops and stainless steel appliances still draw buyers in, and you can sell for more.  Or if you like to go the Conscious Group route – eco-friendly home upgrades can build equity, save you money on your energy bills, and make your home more attractive to future buyers.

8. Maintenance – keep your home in tip-top shape and you will be rewarded when it comes time to sell. If you can unload it for more as a result, you’ve essentially created more equity in your home.

9. Curb appeal – same goes for staging. Make your home look good when you list it and there’s a better chance it’ll sell, and sell for more. Simple things can make a big difference, such as new paint, carpet, bright lighting, cleanliness, plants, flowers, etc.

10. Bigger down payment – you can make a larger down payment when you purchase your home to automatically acquire home equity. While this may seem like you’re putting money in an illiquid investment, more equity means a lower loan-to-value ratio, which equates to a lower interest rate and easier-to-obtain financing. Over time, that lower rate will mean less interest paid and more equity accrued.

If you’re ready to refinance, Conscious Real Estate works with a great lender we can recommend, so give us a call!

Are Marijuana Stores Bad for Your Neighborhood?

The marijuana state, Colorado grunge rubber stamp, vector illustration

Many homeowners have feared that the introduction of marijuana dispensaries and stores would place neighborhoods at risk by contributing to higher crime rates and nuisance factors.  This is a valid concern – I notice everything in my neighborhood that could affect my home value, even if it’s as minute as a neighbor getting a new roof.  Homeowners SHOULD consider their home as an investment.

However, a study from the University of Colorado at Denver, one of my alma maters, has shown that pot shops do not negatively affect local neighborhoods, cause higher crime rates, or create other undesirable outcomes.  The study focused on 275 marijuana distribution facilities in 75 Denver area neighborhoods, comparing 2010 census data to data from the 2000 census before dispensaries were legal in Denver.  This study sought to discover whether dispensaries qualify as “locally undesirable land uses,” evaluating whether or not these types of businesses contributed to higher crime rates, economic injustice, etc.

The study authors expected to see inequalities especially with shops located in poorer neighborhoods.  However, the research showed no relationship between marijuana store locations with poverty rates or ethnicity, as recreational pot shops are dispersed widely throughout the Denver area.

“Everybody is saying that [marijuana stores] are undesirable.  If that’s the case, it’s certainly not showing up in the data,” said Paul Stretsky, co-author of the study and professor at University of Colorado at Denver’s School of Public Affairs.

How To Choose a Home That is Likely to Increase in Value

house and money on scales. Isolated 3D image

A lot of people have expressed concerns to me about buying a home in the Denver market, as the rapidly increasing prices have raised concerns about a housing market bubble.  If you would like to learn more about current economic trends affecting the Denver market, click here.  For now, let’s consider some good maxims for buying a home in any city and any market.

Your home is one of your greatest investments.  There is absolutely nothing wrong with buying the home you like, wherever you like, BUT if you prioritize your home increasing its value, consider these following tips:

1)  Seek homes in walkable neighborhoods.  Walkable neighborhoods are becoming a high priority for home-buyers.  With increases in gas prices, people are moving back in from the suburbs and finding that its often more pleasant to walk to work, to the store, and to dinner.  A home in a walkable neighborhood will be more likely to maintain and increase in value.

If you are looking for a home in a new city, check the walk score.  Neighborhoods are rated from 0-100, with 100 meaning that multiple neighborhood businesses and parks will be within a stone’s throw.  The Riverfront neighborhood in Denver boasts some of the higher home prices in Denver and has a walk score of 98.

2)  Look for homes near parks and public transportation.  Homes that are near parks and public transportation are more likely to maintain or increase in value.  Once again, it’s where people want to be.  Location, location, location.

In Denver, an area which will likely increase considerably in value in the future is near the future lightrail extension by 38th and Blake.  If one were to purchase a home in this area now, in 3-10 years after construction is completed, the home value would likely have increased significantly.  Note:  choosing a location based ONLY on projected increases can be risky.  I recommend that you appreciate the location you choose as it is, in case projected improvements to the area never happen.

3)  Stay abreast of new developments that will make a location more desirable.  Glendale is already a desirable neighborhood to many, but when the Riverwalk is completed, homes near this development will likely increase in value because the neighborhood will be even more enjoyable.

4)  Learn a bit about the rental market in your area.   If rents on comparable properties are going for equal to or higher than your mortgage, this is good. If the vacancy rate for rentals in your city is low, this is good.  So, if, in the words of Kurt Vonnegut, the excrement hits the air conditioning and you no longer can afford your mortgage, you could likely cover your mortgage (and maybe even make money) by renting out your home and keep yourself out of foreclosure.  This could also benefit you if you have a job transfer to another city, while your current city is in a down market.  You could cover the mortgage (and maybe even make money) by renting out your property until the market improves so you don’t lose money when you sell your home.

Renting out your home may not be for everyone… Being a landlord contains its share of headaches, but if remaining financially strong is your primary goal, the ability to rent out your home can be a major asset.  Real estate markets aren’t so different from stock markets, and the mistake a lot of people make in stocks is selling when the prices are dropping.  Sometimes this can save you, but most markets will rebound and make their way back up.  Do what you have to do to weather the storm and wait it out.

5)  The home that is generally the best investment is the worst or smallest one on the block.  The home that is generally the worst investment is the biggest and best one on the block.  There can be some wiggle room on this… If , for instance, someone famous once lived in the biggest home on the block, that will be intriguing to future buyers.  If the worst home on the block needs major foundation work, a roof, and windows and would cost a great deal to get it up to snuff, it might not be the best investment.  If you are savvy about finding good contractors and can do some work yourself, consider purchasing and renovating the icky house in a great neighborhood!

6)  Choose a home that has eco-friendly features and make eco-friendly renovations.  From the tree huggers to the penny pinchers, home-buyers are increasingly desiring green homes.  Green homes sell for more than conventional homes; they sell more quickly and closer to asking price.  So, if you view your home as an investment, greening your investment will likely get you more green (money) when you sell, as well as saving you money while you live in your home.

If you are ready to buy a home and want to make sure you get the most bang for your buck and security in your financial future, let Conscious Real Estate guide you through the home-buying process. Call 303-908-9873 to reach one of our agents or email our owner, Allison Parks, at [email protected].

How To Make Money By Renting Your Home on Airbnb and VRBO

concept of making money from a house

Renting out a home may not be desirable for everyone, but homeowners can supplement their income by renting their home or a room in their home on the popular vacation websites, Airbnb and VRBO.  I first learned of these sites when a friend decided to try Airbnb in New York City as an alternative to a hotel room.  A decent hotel room in New York can easily cost at least $300, while she found a room in someone’s home for $100.  She said the homeowner made her a lovely breakfast and showed her some fun places around the neighborhood, making it a better experience than what she would have had in a hotel.

At Airbnb, trustworthiness and customer satisfaction are highly valued and maintained through a 24/7 call line and review postings.  Vanessa Grout, a contributor to Forbes, writes that the popularity and feedback of this service has led her to believe using Airbnb to earn extra revenue for her second home is a great idea.  Also, if you can only rent a room in your home, Airbnb has a feature where you can market the room to people who share the same interests as you, so you could choose to rent your home to hockey fans or people who practice yoga!

So, how could this work for you?  If you purchased a mountain property in a desirable destination as an additional home, you could rent it out when you are not using it to generate additional income.  If you own a home in Denver and travel often, you could make money by renting your home while you are away.  Or, if you simply don’t want a full-time roommate, but have a spare bedroom, you could rent your bedroom part-time for additional income.  Clients in Boulder and Fort Collins have told me that they have no problem renting their homes to the parents of students during graduation week, so they leave town and have their vacations paid for!

Be aware:  Controversy has begun in New York, Miami, and Chicago, with complaints that people offering their homes on Airbnb are pulling revenue away from hotels and not complying with tax and zoning regulations.  A few Airbnb users have been hit with fines in New York.  Thus far, similar problems have not arisen with Airbnb and VRBO users in Colorado.

A Few Tips For Renting Your Home on Airbnb: 

Get insured.  Airbnb provides up to $1,000,000 of insurance coverage to its homeowners for loss or damage due to theft or vandalism caused by an Airbnb guest – this does not take the place of homeowners or renters insurance. Review your policy with your insurance carrier to make sure you have adequate coverage. It would also be sensible to secure valuables in a safe and store clothing in a separate locked closet.

Find long-term guests. Set a minimum stay of two or three nights. One night is just not enough. You don’t want to be a hotelier, deal with transients, or frequent key coordination.

Leave instructions. Leave a detailed list of instructions for your guests. You’ll receive many fewer questions during the course of their visit. Guests need to understand things like how to turn on the television, pool heater, alarm system, or any other tricky device.  Also provide a list of safety instructions and useful telephone numbers.

Benefits of Green Real Estate Investments

     Graph made of green grass and blue sky

As a homeowner, adding green features to your home can quickly increase your home’s comfort and levels of health, while saving you money.  However, for real estate investors, there are also many benefits for adding green features to your properties.  Green real estate investments are quickly becoming popular due to their high profit ratings and are attractive to future renters and buyers.

Tenants or potential buyers of homes and commercial properties will save on their energy bills, so owners can justify increases in rent or the listing price.  Tenants who prefer energy-efficient homes and commercial spaces are likely to be more conscientious, so these folks may be better tenants – paying rent on time and taking better care of your property!

Many green improvements also require less maintenance.  Repairs and replacements that can be done less often will quickly lead to savings for the property owner.  Also, green homes and commercial properties create healthier environments, which sets green properties apart from others in the market.  The ability to market your property as healthy can result in quicker sales and rentals, which is a goal of investors.

So, help yourself while doing some good for the environment – Green up your investment real estate!