Ways To Increase the NPV of My Home

Net present value, or NPV, is the formula used primarily by real estate investors in order to assess whether a particular investment will be profitable.  NPV is the difference between a home’s present price or value, and its estimated future expenses.  If a home’s NPV is positive, then, the home is likely to be a good investment.  Where estimated future expenses outweigh the home’s present value, however, the NPV becomes negative, and the home is not likely to be a good investment.

Factors That Affect the NPV of My Home

All of the expenses that are needed to maintain a home directly affect its NPV.  If these expenses increase, the NPV decreases; conversely, if these expenses can be decreased in some way, the NPV of the home will increase.  Examples of expenses that can potentially affect the NPV are:

• Property taxes
• Insurance costs
• Maintenance expenses
• Neighborhood association fees

All of these expenses can be affected by outside forces, such as a state’s property tax reform laws, inflation, and the economy.  However, you can directly impact these expenses in some circumstances.  For instance, you can minimize your insurance expenses by avoiding the addition of any feature to your home that might raise your insurance rates, and by refraining from filing unnecessary or minimal insurance claims.  Likewise, you can install certain features in your home, such as energy saving appliances and construction materials that may provide you with tax credits.  Finally, by scheduling regular maintenance activities for your home, you minimize the risk of large future expenditures due to a lack of maintenance or neglect.

Contact an Attorney for Advice

If you need further advice about how to legally increase the NPV of your home, you should consult with an experienced real estate attorney.  Only an attorney can properly advise you of the real estate laws and regulations that may affect your case.