Is the equity in your home making you money?
Building equity means you can increase the amount of money you could potentially profit if you sold your home. Equity is simply the difference between the current market value of your home, minus what you owe. For example, say you owe $200,000 on your home, and you believe your home is worth $380,000. Subtract $200,000 from $380,000, and you have an estimated $180,000 in equity in your home. However, there are expenses that would bring that $180,000 down. Including, real estate commissions, title and escrow fees, taxes, etc.
The equity in your home can help you build personal wealth over time. “How?” you might ask. Some experts have explained that equity grew by an average of $81,000 in the Las Vegas area between 2020 and 2021. So, if you have owned your home for even a few years, chances are really good that you’ve built equity in your home. If that money is sitting in your home – and you are not using it – you are not making money. Equity is great but, while it sits in this unusable state between residing in your home and selling it, then it really isn’t doing you any good.
Instead, it can be advantageous to begin using your home equity to continue building income. A recent client experience I had is a perfect example of how to do just that.
Recently, I had a client who came to me to talk about the properties he owns in Las Vegas. One of those properties is his primary residence, and he wanted to know what to do with the equity in that property. We started brainstorming what he could do and came up with some fantastic plans. As an investor, he already understood that if you have equity in a home, and if it continues to just sit there – you can’t necessarily access it or do much with it at all. My team and I are employing three key strategies to help his current equity position and increase his financial wealth.
3 Ways to Use Your Home Equity to Improve Your Financial Wealth
#1 Paying Down Debt
This is a big one. Use your equity to help with paying down existing credit card debts, especially those credit cards with 11% up to 30% interest. Or another option, is using the equity to put away college funds for your children. Both of these options allow you access to your equity without selling your home and give you the ability to reduce your debt. Even though interest rates to buy a home are around 7% – that is still much less than most interest rates on credit cards. So, being able to pay down debt can alleviate some financial stress, letting you keep more money in your pocket every month. Plus, as a bonus, your credit score is likely to go up.
#2 Rental Properties
Many aspiring investors can take the equity from their home and use it as a down payment for either a local rental property or even an Airbnb. You and your family can find a location where you enjoy vacationing and invest in a rental property in that location. Plus, renting it out long-term or short-term will earn you passive income. Do your homework if planning to rent out an investment property. There could be repairs, vacancy costs, taxes, etc., that will require you to have reserves on hand just in case. And if you are planning to go out of Las Vegas to find properties, let me know. I have connections with amazing agents throughout the country that can help.
#3 Home Improvements
Whether that means tearing out the old kitchen that’s been there since the eighties. Or, putting in that pool and jacuzzi you always wanted in your backyard. The right home improvements could add equity to your home and I have a team of contractors who are ready when you are. And don’t forget the great lenders who will walk you through the process of using your equity in a way that will work for you and your family to achieve your wealth-building goals.
Start Making Money Today!
Let’s chat about how to start making you some money from your home equity. The experts in my circle are ready to help get you through the process and support you in your equity strategies. Schedule a call to start talking equity today!