Equity Tips & Tricks

I could use some guidance. I’m a college senior graduating shortly with a degree in anthropology. I’ll be working with a county sheriff’s department in Illinois after graduation, which should be exciting. I’m already planning everything for the big move.


My parents suggested that I buy a property there instead of renting. My dad apparently travels there for work periodically, and he said that, based on rental prices, it would be much smarter to own and build equity.


I never considered that idea, because everyone else I know plans to rent. I also don’t necessarily understand what equity is or how to build it as a homeowner. Is it anything like owning equity in a company?


Homeownership is vastly different from renting property. Both are viable options, depending on your specific circumstances. There’s more to consider than simply the cost of living. Fortunately, Amy Fontinelle at Investopedia has already done you the favor of highlighting the pros and cons of renting versus owning a home. Weighing stability versus flexibility is her opening point. Others important points include leisure time and financial predictability.


There are other pragmatic perspectives you should consider, too. For instance, Kristin Wong at LifeHacker wrote an article explaining why the debate between renting and buying is pointless. She does an excellent job of discussing the enormous gray area that exists between them. Nuance is everything to her. Only you can know how influential all these factors are to your situation.


As for home equity itself, it isn’t nearly as complicated as it might sound. Justin Pritchard at The Balance wrote a helpful article defining home equity for you. It is like having equity in a company, in the sense that you accrue value from the asset over time. You’ll notice that home equity is uniquely tied to the way in which it was financed, in addition to the wider market values. Unlike having equity stakes in a company, however, you often have more control over building equity in a home.


Let’s use Illinois as a quick case study. The state and region are notorious for prolonged winter seasons with heavily and abundant snowfall. That type of ecosystem has a real impact on property values. Some of the most costly home repairs are those done to the rooftop and foundation (the result of water damage). That means if you plan to buy a pre-owned home, you’ll want to inspect those two areas with extreme care. Either way, you should consider basement waterproofing to prevent any type of future damage.


There are other ways to increase home equity. Marilyn Lewis at Nerdwallet suggests six ways of doing so, one of which involves home improvements. This can involve replacing carpet with hardwood floors or upgrading interior bathroom amenities. The more obvious ways include making the largest down payment possible and finding opportunities to increase mortgage payments. Again, these are considerations which are irrelevant to a renter, so if they sound too daunting, perhaps renting is the more realistic choice.


“Equity is the only acceptable goal.” – Paul Farmer

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