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Intro to "Estimate your Home Value Appreciation and the Profits from its Future Sale"


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Calculate your home appreciation and project your net value

Estimate your Home Value Appreciation and the Profits from its Future Sale You can evaluate your future house equity by using an appreciation rate on your property's value, and compare its final value with the future mortgage balance that will be left to be paid. This approach will help you project the net value of your real estate asset. After finding the amount of equity, you can plan to use it as cash down for a new home, an investment for retirement or as a guarantee on a future loan.

Adding value to your home with renovations

The purchase of a house is often accompanied with renovations. Renovations can add value to your house if the expenses are an improvement, unlike cost of repairs. There is a difference between the two expenses; the costs of improvements are a capital expense, while the costs of repairs are current expenses with little impact on the property's value. For example, installing new windows vs. cleaning the windows; the first one is a capital cost that increases your property's value, while cleaning the windows is just maintenance.

In theory, the home value increases by the same amount as the costs of improvements. For example, a residential purchased at $300,000.00 with new renovations of $50,000.00 should, in theory, see its value increased to $350,000.00. However, it is not always the case, the value can be lower or higher than $350,000.00; many factors will influence the price. Some people speculate that a house would be worth more than its cost of renovations, which explains the popularity of the house flipping trend.

Expenses when purchasing a house

When you make such a projection, you have to realize that the equity doesn't represent 100% of the amount you will cash in. Selling costs such as realtor fees, publicity or mortgage closing cost (as a penalty) will eat up your profit.

Once you have evaluated the true amount you will cash in, it is interesting to include all the other costs in the equation. We are referring here to the expenses related to purchasing and owning a property. They indicate how much it will cost you to build your home equity.

To enumerate them, when you purchase the property, there are disbursements on top of the cash down on mortgage balance such as the transfer tax, the notary fees and the house inspection. When the deal is signed, you could start renovation, and cover annually the mortgage payments (capital and interest), property taxes (municipal and scholar taxes), condo fees, insurances, maintenance cost and other unexpected expenses. If the projection is done over many years, it is necessary to include an inflation rate for expenses other than the mortgage payments, because the fees will increase year after year.

What the calculator is saying...

This calculator will help you evaluate all the necessary expenses you need to build your net value. By subtracting the total expenses from the sales net profit, you obtain the net profit or loss of your real estate purchase. A profit of more than 0 indicates that the house appreciation covered all the costs of living, so you were able to "live for free".

You can also obtain the rate of return of your investment. The investment would be the expenses and the return would be the net profit, annualized on a number of years. You can't really hope to get the same return as what you require on the market exchange because you can't house yourself for free. The alternative of being a home owner would be to rent, so it is more approrpiate to compare buying a house to renting and saving. This calculator is a great tool to evaluate if purchasing a house is a good investment.


Try the Estimate your Home Value Appreciation and the Profits from its Future Sale Calculator >

Numbers in our calculators are rounded to two decimals.
The same calculations made in an Excel spreadsheet may differ slightly.

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