How Real Estate Can Increase Your Net Worth
Net Worth
To calculate your net worth, you can use this formula:
Assets - Liabilities = Net Worth
Essentially, you are taking what you own and subtracting what you owe.
The rising home prices have driven net worth up a notch for many homeowners. Currently the market value of homes (or what consumers are willing to pay) has considerably gone up. And many homeowners have decided to cash out during this time, and choose to invest in other ways- the stock market, another home, downsizing or investment property (more on that below).
You can see the rising median and average sold price has gone up since 2020 (green & red) to 2021 (blue & yellow).
Investment In Real Estate To Increase Your Net Worth
These are two types of investment opportunities:
- Traditional Investment Property - this can be a condo, a single-family home or a 2-4 unit, that is rented out for a long term (i.e. a year). If the property owner doesn’t want to handle managing the property (collecting rents, renting the units themselves, taking care of any repairs needed, etc), they can hire a property manager. The property should steadily appreciate year after year, and along with paying down the mortgage on the investment, leaves residual monthly income when fully occupied.
- Short Term or Vacation Rental - These properties are usually located in top tourist areas and can be rented weekly or monthly. The benefit of these types of investments is that they are usually at a premium and can generate a lot of revenue. The downside is there can be a lot of wear and tear on the unit and generally you do need to hire a property manager to keep up with the maintenance on the unit.
I have an extensive referral network across the country. If you are thinking about investing out of state, let me know and I can connect you with the best agent in the area.
What If You Don’t Want To Invest In Another Property?
You can continue to increase your net worth with some home renovations, which will increase your home’s market value. For example, bathrooms, kitchens, landscaping and deck/patio/porch additions have the largest return on investment.
Is it the right time to sell your primary or investment property? Consider these factors:
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You won’t have much competition when listing.
- Setting the home price at the competitive market value may even bring on bidding wars and sell your home for a higher price.
- The value of your home may be higher than even 6 months ago.
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The homes tend to sell quickly, to gain the highest return on your property, your home should be set up to sell- cleaned, staged and highlighted with professional photography. Don’t skip this important step.
If you are curious what your home is worth, follow the link below for an automated value. I will be in contact with you shortly to go over these comps in more detail.
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