How to have instant equity when you build a custom home

After months of pouring over every decision, you open the door to your dream home on move in day. Imagine exhaling with contentment, knowing you already have equity in your new home. Sound too good to be true? It doesn’t have to be.

What is Equity?

Equity is the difference in what a home is worth versus what you owe on it. Generally, the market determines what a house is worth. “A home’s value at any given time is what a willing and qualified buyer is willing and able to pay for at that time” (source).

There are two traditional ways to gain equity, paying what you owe on the house or waiting for the value of home to increase over time. People who purchase a finished home are paying the full market price (or more in the current competitive market). They end up paying for the additional equity thoughtfully built in.

Thus initially, if someone has equity, it’s usually from their own deposit. This does not represent any true economic gain. In contrast, building a home can present an economic opportunity. For someone to have instant equity in a new build, the cost to build must remain under the appraised market value for the finished home.

However, many people build a home without extra equity. Others spend more than their new home would be appraised for. This can happen simply because the average client may not understand what truly adds value to a new home. As you can imagine, it is much easier to add cost than value.

How to add Equity

Generally, it is the ‘luxuries’ that add up in your budget without really contributing to home equity. When you build, it’s possible to consider these factors along the way. This could leave you with instant equity on closing day, meaning you could turn around and instantly sell your new home for more money than you spent to build it.

Instant equity can be created by considering the overall values of the market in addition to your family’s wishlist. Value comes from smart, lasting decisions that will remain over time. Examples include, adding an extra room, garage, or a home office. While spending extra on your favorite light fixture may feel valuable, it will eventually be outdated and does not represent as much value to the home buyer market.

To gain equity by building, you must balance your wishlist with market must haves. This goal often requires making many decisions based on logical market factors instead of only relying on personal must haves.

With the many decisions required in building a house, it’s important to find an experienced builder to help you maximize equity and avoid spending pitfalls. Their expertise can help you navigate budgeting and keep you from spending more than your future home’s market value.

If you are interested in learning more, schedule a free consultation today with one of our experienced staff members to discuss your goals and how you can build your dream home with instant equity.

For more information on budgeting, read out Decisive Guide to Staying on Budget when Building a Custom Home

-The Team at Texas Signature Custom Homes, proudly building custom homes with spectacular service in the San Antonio Hill Country