SS145: What is Equity in Real Estate

SS145 What is Equity in Real Estate

Property ownership has a number of benefits, including the ability to grow your net worth as the value of your property increases. In this episode, Charles discusses what equity is, and how investors are able to grow it.

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Talking Points:

  • Real estate equity is the difference between the market value of a property, and the total amount of debt owed against the property. For example; if a property is valued at $100,000 and has a $50,000 mortgage, then there would be $50,000 of equity in the property.
    • If the property owner owed any additional liens, this too would be deducted from the property’s equity. For example, if the owner owes property taxes or has a mechanics lien, this would also be subtracted from the owner’s equity in the property.
  • Equity is the value of an owner’s financial interest in a property.
  • The amount of equity in a property will change over time, as the mortgage is paid down, and value of the property varies by the local real estate market, and the condition of the property.
  • Property owners are able to access the equity in their property by selling it, or by borrowing against it. Loans secured by real estate typically have lower interest rates since the loan is secured by real property, and the risk to the lender is minimal. There are a number of equity lending products available to owners depending on the type of property they own.
  • How to Grow Your Property’s Equity?
    • Make a larger down payment
    • Take out a principal and interest mortgage that pays down your debt (the principal) every month; avoid an interest only mortgage.
      • Make additional mortgage payments to pay down the mortgage balance faster.
    • Make upgrades to the property or if it is a rental property or commercial property; increase the property’s net operating income to increase the value, while also increasing your equity in the property.

Transcript:

Charles:
Welcome to Strategy Saturday; I’m Charles Carillo and today we’re going to be discussing what is equity in real estate.

Charles:
Have you always wanted to invest in real estate, but didn’t have the time, didn’t know where to find the deals, couldn’t get the funding and didn’t want tenants calling you. Since 2006, I’ve been buying income producing properties and great locations that provide us with consistent passive income. While we wait for appreciation in the future and take advantage of tax laws while we’re waiting and unlike your financial advisor, we invest alongside our investors in every property we purchase. Check out to investwithharborside.com. If you like the idea of investing real estate, if you like the idea of passive income partner with us at investwithharborside.com, that’s investwithharborside.com.

Charles:
Real estate equity is the difference between the market value of a property and the total amount that owed against the property. For example, if a property is valued at a hundred thousand dollars and has a $50,000 mortgage, then there would be $50,000 of equity in the property. If the property owner owed any additional liens, this two would be deducted from the property’s equity. For example, if the owner owes back property taxes or has a mechanic’s lien, this would be also subtracted from the owner’s equity in the property. Equity is the value of an owner’s financial interest in the property. The amount of equity in the property will change over time as the mortgage paid down and the value of the property will vary by the local real estate market and the condition of the property. Property owners are able to access equity in their property by selling it or borrowing against it. Loan secured by real estate typically have lower interest rates since the loan is secured by real property and the risk of the lender is minimal.

Charles:
There are a number of equity lending products available to lenders depending on the type of property they own. So how do you grow your property’s equity? Well, number one would be make a larger down payment, and two would be take out principal and interest mortgage that pays down your debt, the principal every month. So avoid any interest only mortgages. You can make additional mortgage payments that pay down the mortgage balance faster as well, but really making upgrades to the property, or if it is a rental property or commercial property, increase the properties and net operating income to increase the value while also increasing your equity in the property. So I hope you enjoyed. Please remember to rate reviews, subscribe, submit comments, and potential show topics at globalinvestorspodcast.com. Look forward to two more episodes next week. See you then.

Announcer:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar, LLC, exclusively.

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