How Homeowners Can Maximize Return on Equity



When buying a home, you want to earn a return on your investment regardless of whether it is your main residence, a planned flip or a rental property. What are some ways that you can make sure that you maximize your potential profits when purchasing real estate?

How Homowners Can Maximize Return on Equity

Pay off the Loan Quickly

The faster that pay off your loan, the less interest you pay and the more equity you build over the long-term. If you were to pay your loan over 30 years, you could pay as much in interest as you did in principle to eventually claim full ownership of the property. Ideally, you will pay the loan in 10 years or less to maximize your potential return by limiting interest paid.

Make Sure Vacancies are Kept to a Minimum

If you decide to rent some or all of your home, it is imperative that vacancies are kept to a minimum. Ideally, you will have your property rented at least 90 percent of the time, and the best way to accomplish this is to find a long-term tenant. Doing so ensures that you have someone who is willing to pay your rental rate and will do so for years to come. However, if the rental is vacant, make sure to maximize tax breaks by upgrading or otherwise spending time working on the property. This may enable you to treat the rental like a business and deduct a majority of the costs associated with maintenance and upgrades.

Find a Lender Who Understands Your Needs

Working with a financial partner will make it easier to use the equity in your home to meet other financial needs. With a home equity loan or line of credit, you can pay off other debt, invest in a business or equity of your choice or upgrade your home to increase its value. Flexible repayment terms and low interest rates make an equity loan or line of credit the smart way to refinance your debt or finance a home improvement project.

Each dollar that you invest on a property needs to return as many dollars back as possible. This enables you to finance a lifestyle that you can be proud of or help others who may need financial assistance to start a business or buy property of their own. By maximizing your return on equity, you will never stay up at night worrying about personal liquidity or where you would get the money to cover an emergency.

 

About the Author: Lizzie Weakley is a freelance writer from Columbus, Ohio. She went to college at The Ohio State University where she studied communications. In her free time, she enjoys the outdoors and long walks in the park with her 3-year-old husky Snowball. The information in this article is credited to Tru Partner Credit Union.