2021 New Year, New you kind of thing. Yes, let’s dive into that a bit by talking about money. Equity is probably the best form of money because it usually grows quicker than we can save. That is especially the case due to the cost of living being far higher than wages these days.
I am one of those people that believes everyone should own real estate. I just grew up with everyone in my family owning, and my father investing quite a bit. Although I want everyone to buy property, I understand that the price of properties has far exceeded inflation. That has made it next to impossible for regular folks to buy a property.
With all that said, I still want you to buy properties and lots of them. So, let’s talk about money and equity.
Equity is the amount the house is worth, minus what you owe. For example, if you purchased a home in 2010 for $250,000. You now only owe $50,000 on the property, but as of December of 2020, the property is worth $350,000. You have $300,000 in equity. Could you have saved $300,000 in 10 years? I couldn’t have, and that is the beauty of equity, and that’s why I will always encourage property ownership.
Suppose you found a fixer-upper that you wanted to buy. Equity would allow you to do that. Let’s stick with the same scenario above that gives you $300,00 to work with because – EQUITY. The owner of the fixer-upper wants $100,000 cash. The property needs $100,000 worth of work, but real estate in the area is $300,000, and rents are about $2,500 per month. You can quickly and easily grab the funds to buy this property because – EQUITY. Say if you get extra, just in case the renovation estimation is low. So you get $225,000 equity from your property. If your $225,000 loan is for fifteen years, at a 3.5% interest rate, your monthly payments will be $1,608.48.
You could do two things:
You could rent the fixer-upper property, get $2,500 per month rental income, and that would allow you to pay the equity loans monthly payment. This option would allow you to build more equity in that property. Then you would have two properties, both with equity that will be worth over $600,00 upon repayment of all debt owed against it.
You could sell that property for $300,000, pay off the 1st equity loan and the amount owed on the original loan. Then you can start the process all over because – EQUITY. You still have equity in the first property.
My point here is to display how important property ownership is for giving you easy access to a lot of money really quickly to make business moves that you wouldn’t ordinarily be able to pull off without access to equity.
So go forth and buy some stuff in 2021! Buy stuff, I mean property.
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