The Benefits of Growing Equity in Your Home

The Benefits of Growing Equity in Your Home | MyKCM

Over the last couple of years, we’ve heard quite a bit about rising home prices. Today, expert projections still forecast continued growth, just at a slower pace. One of the often-overlooked benefits of rising home prices is the positive impact they have on home equity. Let’s break down three ways this is a win for homeowners.

1. Move-Up Opportunity

With the rise in prices, homeowners naturally experience an increase in home equity. According to the Homeowner Equity Insights from CoreLogic,

“In the first quarter of 2019, the average homeowner gained approximately $6,400 in equity during the past year.”

This increase in profit means if homeowners decide to sell, they’ll be able to put their equity to work for them as they make plans to move up into their next home.

2. Gain in Seller’s Profit

ATTOM Data Solutions recently released their Q2 2019 Home Sales Report, indicating the seller’s profit jumped at one of the fastest rates since 2015. They said:

“A look at the national numbers showed that U.S. homeowners who sold in the second quarter of 2019 realized an average home price gain since the original purchase of $67,500…the average home seller gain of $67,500 in Q2 2019 represented an average 33.9 percent return as a percentage of the original purchase price.”

Looking at the amount paid when they bought their homes, and then the amount they received after selling, we can see that some homeowners were able to walk away with a significant gain.

3. Out of a Negative Equity Situation

Negative equity occurs when there is a decline in home value, an increase in mortgage debt, or both. Many families experienced these challenges over the last decade. According to the same report from CoreLogic,

“U.S. homeowners with mortgages (roughly 63% of all properties) have seen their equity increase by a total of nearly $485.7 billion since the first quarter 2018, an increase of 5.6%, year over year.

In the first quarter of 2019, the total number of mortgaged residential properties with negative equity decreased…to 2.2 million homes, or 4.1% of all mortgaged properties.”

The good news is, many families have moved beyond a negative equity situation, and no longer owe more on their mortgage than the value of their home.

Bottom Line

If you’re a current homeowner, you may have more equity than you realize. Your equity can open the door to future opportunities, such as moving up to your dream home. Let’s get together to discuss your options and start to put your equity to work for you.

Interested in knowing what your home is worth in today’s market? Visit  https://www.nexthomevictors.com/cma/property-valuation/

Dani

Investing in Real Estate to Diversify Your Portfolio

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Serious investors know the value of a diversified portfolio. In addition to stocks and bonds, real estate should be included in your investment mix. One way to accomplish this is to purchase, hold, rent or flip actual real property as part of your investment strategy. Real estate is a solid asset which can provide annual income, asset appreciation, and quick profit. To be successful in real estate investing, it is critical that you identify what skills you have and your tolerance for risk. Then choose a type of investment that works for you and repeat that model.

Investors can make significant profits by both flipping properties as well as holding them as rentals. The difference boils down to a few considerations.  First, what kind of income are you seeking: active or passive.  Actively buying, fixing and flipping properties is quick cash that requires careful timing and effort. Rental properties, on the other hand, offer passive long-term income which accumulates over time. Additionally, the property value increases during this time. The downside is that you must invest time in property maintenance and tenant management.

The second concern is the risk. Flipping property is not traditional investing where you buy and hold investment. Flipping is speculation. When purchasing a flipper,  you must carefully gauge the cost of refurbishment, remodeling and the cost of the holding time into the price valuation, then carefully market the home and realize the profit. Any number of variances can go wrong which can cause the value to drop and profits to diminish or even disappear, such as a delay in remodeling or a slow real estate market.

Keeping in mind that real estate is a substantial capital investment, it’s helpful to learn as much as you can.  These eight basic tips will give you some direction as you venture into real estate investing.

  1. Location, Location, Location: One of the most critical aspects of a successful real estate investment is the location. The right neighborhood, street or community can make thousands of dollars of difference
  2. Consider Wholesale Properties: Watch for properties listed below market value. Foreclosure lists, courthouse auctions and short sales are just a few of the options to buy below market value.
  3. Understand the Tax Advantages: Before you invest, visit your tax professional and learn about write-offs, business taxes, and tax breaks. Figure these numbers into your plans.
  4. Manage Your Credit: Leverage is essential in real estate investing. Determine your ability to gain loans and correct any mistakes in your credit report.
  5. A budget for the Unexpected: Have a fund available to draw on for the unexpected. Even the most carefully planned project can have unexpected costs.
  6. Don’t Over-Extend: After evaluating the risk, be honest about your ability to handle the negative possibilities the opportunity could present.
  7. Invest for the Long Term: Real estate investing should not be viewed as a “get rich quick” scheme.
  8. Be Patient: Wait for the right opportunity for your skills and budget.

Real estate offers solid investment opportunities. Investors can realize a profit and positive cash flow with careful planning and research.

Ready to begin investing in real estate? Send me a message using the box to the right, or call, text or email me!

Dani