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Rules For Building Wealth With Home Ownership – Part III

By: Huntsville Real Estate Expert Mike Manosky On November 22, 2014

Parts 1 and 2 of this series explained building wealth is not about quick profits! It’s about steadily increasing your net worth over time.

building wealth with home ownershipHome ownership is one of the easiest ways of building wealth that’s available to the general public, non-investors, and average middle-class Americans. Part 1 and 2 contained Rules #1 thru #7…

Rule # 8: Be careful about the costs of home improvements.

Typically, most improvements do not increase your home’s value dollar for dollar. That does not mean they aren’t worthwhile. Just understand they are not always building wealth. There is a difference between making improvements to enhance living and enhancing property value. Most improvements are a combination of both.

Here’s an example. Let’s say you want to add carpet to a room. You can pay $12/sq.yd. for carpet, or pay $24/sq.yd. Will you get the difference in price back when you sell? Probably not, because a future buyer may not think the difference in the carpet is worth the price to them. So, you must decide if the difference in price is worth it for your own enjoyment. Watch here for a future article for more details.

Rule # 9: Understand the difference between appreciation and inflation.

Many people talk about homes as “investments,” and how they “appreciate” in value over time. True investments produce a return on money invested. That is not truly the case with private homes. Homes actually depreciate in value because structures deteriorate if not maintained properly, which costs money.

Typically, a home increases in value through inflation, not appreciation. As general economic inflation increases the cost of goods and services, it is also inflating the cost of housing. This increases your potential wealth because home ownership is a type of hedge against inflation. Paying attention to Rules 5,6, and 7 creates wealth.

Rule # 10: Know your financial position when it’s time to sell.

Stay in touch with your Realtor to keep current on local home values. Pay attention to economic inflation rates. Maintain your home with an eye toward cost of living. If you are careful and thoughtful you will be successful at building wealth.

Information provided by Huntsville Realtor Mike Manoksy.

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