How Do You Increase the Value of a Home?

Unlike with many other kinds of investments, there are a number of things you can do to increase the investment value of your home.

"Location, location, and location" is worth remembering when you buy a home.

This increase in value can result in a capital gain to you when you sell your home. Your capital gain is the amount you sell your home for, minus your cost basis. Your cost basis will be the principal amount you paid for the property, plus the value of any substantial capital improvements (e.g., building a patio, additional bedroom, etc.) you may have invested in, but not including the cost of ordinary repairs and upkeep. The good news is that most people who incur capital gains upon the sale of their personal residences will not have to pay tax on the gains, due to the current exemption limits. The old adage that the three most important attributes of real estate are "location, location, and location" is worth remembering when you buy a home.

If you buy or build in an area that is attractive to other homebuyers, chances are that the market value of your home will increase more rapidly. Important location factors can include:

Proximity to cities and other focal points of economic development
Quality schools
Availability of public transportation
Overall prosperity of the community

Buying a home at different points in the housing market cycle also affects how the value of your home appreciates. If you buy at the beginning of a housing boom, your gains may be rapid indeed. Business and finance magazines often run articles about communities that are becoming popular places to live. Many of them will be in the early stages of a boom, while others will have already been caught in the wave.

Upgrading your house can also increase its market value. Capital improvements you make will increase the appraised value of your home and help you sell it for a higher price. Capital improvements can include adding additional living space—adding a porch, room or other addition, or finishing a basement or attic—or major refurbishing of existing space, such as remodeling the kitchen or bathroom. These kinds of improvements can increase your home's value by 15 to 20% or more. However, not all improvements add value. Some may even make selling your home more difficult, especially if they make your home "the most expensive house on the block" or cater to peculiar tastes.

While repairs do not add value as capital improvements do, they are essential to maintaining the value of your basis in the house. Leaky roofs, cracked foundations and the like can detract significantly from your home's market value, since buyers will either request that you repair them before the sale is closed, or deduct the estimated cost of repair from their offer.

Buying or building in the right location and keeping your home in good condition will maximize the return on your home investment.

The purchase of a potentially appreciable asset such as a stock, a bond, a property, or a unit of production. The purchase provides funds for the growth of businesses and governments.

The profit from the sale of an investment asset. The opposite of a capital gain is a capital loss.

The principal amount paid for an asset, plus the value of any additional capital invested in it.

1. The amount borrowed, or the part of the amount borrowed that remains unpaid (not including future interest). 2. The part of a monthly payment that reduces the outstanding balance of a mortgage or other loan. 3. The original investment amount of a security. 4. In banking terms, principal is the original deposit or loan on which interest is earned or paid.

1. Wealth in the form of cash or property that can be used to earn income. 2. The net worth of a business, which is the amount by which its assets are greater than its liabilities. 3. What one owns free and clear.

A payment to federal, state, and/or local governments based on the sales price of a product, on worker income, or on other property and activities.

Freedom from a tax or other obligation. For example, interest obtained on certain investments is tax-exempt. Exemption from taxes is a major incentive for certain types of investing.

Land and the physical property attached to it, such as houses, buildings, factories, and trees. Where applicable by law, real estate may include gas and oil leases.

The current sale price of a security or other asset.

A place where buyers and sellers make transactions. Sometimes the term also refers to the specific demand for an investment, such as in the stock market or the commodity market.

1. An entity that engages in commercial activities in some particular sector, such as industry, retail, or professional services. 2. The commercial activity in which a business engages.

To raise money by selling stocks, bonds, and other notes. In economics, finance is the practice of extending credit and backing ventures, both with the purpose of making money.

The total cost of ownership in an asset, used to determine capital gains. Also, the difference between the cash price of an asset and its futures price.

The earnings on securities or other investments, whether they are dividends or interest, realization of profits or receipts, income, or some other source.

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How Do You Increase the Value of a Home?

Home Ownership