One of the most common questions we get from friends & clients about the real estate market (aside from what's the current interest rate!) is: "If I'm only living somewhere for a couple years, does it make sense to buy instead of rent?" And we always give every Realtor's favorite answer (to everything!): "It depends."
We wrestled with this question ourselves a few years ago when we knew we'd live in New Jersey for a short period of time. We looked at a lot of variables, and a lot of options, and in the end decided it was best for our family to buy a fixer-upper and build equity with strategic improvements. I won't lie: it was a lot of work, and there were days that we wished we could call a landlord, but in the end we increased the value of our home by 20% and helped us build significant equity to buy our next home.
If you're considering buying a home to build equity, here are some tips & tricks we've learned along the way to help you maximize your return:
WHEN YOU BUY
Diamond in the rough: Look for home with low curb appeal, ugly paint, wallpaper, and dated carpet. These are projects that will turn off most buyers, but add the most value when updated.
Leave large construction jobs to the pro's: Avoid opening up walls, adding bathrooms, foundation issues and large amounts of concrete work. These costly projects will add up fast and leave you with little return.
Location, Location, Location: Houses that sell quickly the first time will also sell quickly the second time. Look for a house on a street with sidewalks and front porches: this indicates a friendly and strong neighborhood that will likely appreciate well.
Set your budget: When you decide how much to spend on your home, don't forget to consider renovation costs into your monthly budget. Talk with your mortgage advisor and real estate agents about your budget & goals-- we can make sure you find the best loan product to keep your monthly payments low, and help you save as much cash as possible to build equity.
WHILE YOU OWN
Start outside: landscaping will take time to mature, and also increases home value the most. A bonus is that working in your yard is a great way to meet neighbors and get to know your community!
Save the walls for last: Nothing makes a home feel cleaner than freshly painted walls, so save painting for your last project, and don't forget the drop cloths!
Buy the good stuff: A well known saying in my family from my great-grandfather is "If you're going to do something yourself, make sure you buy the right tools to do it right." Buy good paintbrushes for painting, and remember whatever tools you buy for this home you'll be able to bring with you for projects in your forever home, so you're making an investment.
Shop sales: if you're upgrading your whole kitchen, IKEA has great promo's about twice a year, and Home Depot & Lowes will both send you 10% off coupons when you move in. Shop around and make sure you get the best price for supplies, and don't overlook resources like Goodwill or Construction Junction for well priced second-hand finds.
Talk to your agent! We are here to support you and answer your questions. We will help you prioritize which projects will add value to your specific home, and we're happy to share our experience along the way.
WHEN YOU SELL
Staging is the cherry on top: You've worked hard on renovating your house so that it can be a wonderful home for the next person who lives there. Make sure it stands out by getting rid of clutter and thoughtfully placing furniture and art.
The Price is Right: We understand you want to get the maximum return on all your hard work, so it can be tempting to list your house for sale above market value. This is risky because it can turn off potential buyers and lead you to reduce price lower than you would have needed to if you started at the right price. We will help you evaluate what comparable homes are selling for and make sure you get the most money for all your hard work.
If you'd like to take a look at how the numbers may work for you, we've put together a worksheet on Renting vs Buying that we'll be more than happy to share, just ask! We are also happy to help you evaluate your specific situation so you can decide if renting or buying is the best decision for you.
Cheers,
Julie & Ted