How to Build Equity in a Home to Turn a Profit
Many people buy a house with the intent of building equity in a home, then selling. The goal is usually either to sell it to move to a more expensive home or to turn a profit on an investment property. Either way, the methods to building equity are generally the same.
The ideal place to start is prior to a home purchase. The real estate "rule" is to buy the worst house on the nicest street. The idea is to pay less than the houses in the neighborhood are worth and that will produce instant equity. Also, look for the most desirable neighborhoods in the area with the least amount of houses on the market. This will help limit supply and increase demand for your house when you are ready to sell.
In starting the remodel or upgrading process, focus on areas with the most bang for the buck. Kitchens and bathrooms are good bets. They are the rooms that sell houses and since they're also the most expensive to remodel, they offer a higher rate of return. Prior to swinging a hammer create a realistic budget and don't make changes that can reduce equity like eliminating a bedroom or bathroom.
Keep in mind that the goal is to turn a profit and not necessarily to live in the house long term. That means choosing colors and finishes that will appeal to a mass buyer pool. Even though you may love the color green, this is not the time to paint a room the color of a Granny Smith apple. This will limit your potential buyers and turn some people off. Keep the focus neutral, clean, and fresh.
An important rule for building equity is to make sure that the house isn't overdone for the standards of the neighborhood. The finishes and details should reflect what is common for similar houses. Overspending on materials that won't be appreciated by potential buyers can kill the profit in a real estate sale.