An old saying states that a rising tide raises all ships. While many homeowners aren’t concerned with the state of home equity, maybe they should pay more attention to it. Home equity isn’t just a metric to make real estate professionals more money. Instead, it’s also a measure of the buying power that your home commands.
Even if many homeowners usually don’t think about their house in terms of an asset, the truth is that a home is one of the most profitable assets a homeowner has and with rising equity, that profitability can grow quite a lot. Below, 10 experts from Forbes Real Estate Council offer advice to homeowners on how they could capitalize on the growing value of their home equity.
1. Be Strategic
Refinancing or a home equity line of credit are two common ways to gain, but it’s important to stay aware of current market conditions. Right now, lenders are stricter in these areas, so you can also look into trading up. If your home has appreciated in value, consider selling it and then buying two lower cost homes—one as a residence and one as an investment property to diversify your portfolio. – Jennifer Anderson, Anderson Coastal Group
2. Consider Refinance Options
If your house increased in value, find a local licensed mortgage broker and discuss a refinance of your property. Interest rates are historically low, so at the least, you can refinance your home and lower your interest rate, thus lowering your monthly as well. If you have excess equity you can refinance and take a line of credit to help keep you afloat until times return to normal. – Ari Rastegar, Rastegar Property Company
3. Get A Line Of Credit
With equity in your home and interest rates at an all time low, there is not a better time to get a HELOC (home equity line of credit) at very low rates. This can be used to pay down higher interest loans that you may have. Moreover, investment vehicles, specifically those in the multifamily investment world, can yield you returns of 15-20%. This is a fantastic way to diversify with a “brick-and-mortar” investment. – Kevin Palka, MVP Equities
4. Invest In Home Improvements
Keeping your property up to date and making smart choices when preparing your home for sale can greatly increase your profit margin. Neutral colors, refinished floors, new carpeting, upgraded appliances and fixtures all go a long way toward appealing to the current buyer demographic. Dated homes are not appealing and do not sell for nearly as much as homes with updates and staging. – Melinda Estridge, Estridge group
5. Embrace Sweat Equity
Don’t be afraid of buying a house that’s under budget and building in value through remodels and additions. Pay attention to builder construction signs because new houses will push up prices in the area. Watch where new houses are going and get in early. – Justin Pistorius, Local Life Realty
6. Add An Accessory Dwelling
Adding accessory dwelling is a simple way to use equity if you have the room. You can accommodate several different needs by building this type of addition. If you need more income, here is a way to make that happen. If you need to house a relative or friend, here’s your chance. Check with your local planning department for details as they apply to your property. – Michael J. Polk, Polk Properties / Matrix Properties
7. Invest In Other Real Estate
I would use equity for investing in other real estate. Leveraging your money is a good thing if you have the capabilities to analyze a real estate deal. Flips are an ideal investment vehicle for this. There will also likely be a number of vacant homes after this pandemic ends. Since flipping is a short-term investment, be sure to have a tax reserve since you will have a tax bill. – Amy Tiemann, TM1 Properties
8. Repurpose Equity
The simplest way to get equity is to sell, establish profit in a true “round trip” and repurpose this equity into the next investment. When an outright sale is not the preferred route, refinancing the mortgage at a higher amount or a second mortgage can free up equity for other investments. For commercial owners, residential owners and investors, this concept works at any level. – Damien Moore, Haüskey Inc.
9. Keep It For Emergencies
One way that homeowners can take advantage of growing equity is to consider it an emergency fund and only use it in cases of emergency. People too often use it as a piggy bank for items that don’t relate to the property, i.e., debt consolidation, college tuition, property acquisition, etc. Since equity fluctuates, be wise and stay tuned in to the market so you won’t be left holding the bag! – Cheryl Abrams, Re/Max United Real Estate
10. Liberate Equity Through Tokenization
With the emergence of property tokenization through blockchain-based smart contracts, we now can tokenize (fractionalize and securitize) a percentage of our ownership in real estate. This liberates our equity quickly, efficiently and transparently while eliminating the costs of refinancing, creating immediate liquidity which then can be invested in another property or capitalized as pre-sale profits. – Garratt Hasenstab, The Mountain Life Companies™