Many companies in the world use the combination of equity and debt financing. Equity is usually calculated by taking the market property value and deduct the amount owing on the mortgage. As we know that the market value of the property may fluctuate constantly so, equity will never remain the same on regular basis. The article will point out what is Real Estate Equity Investment and its advantages in detail.
Defining Real Estate Equity Investment:
Real Estate Equity is the most commonly used term among the different real estate investors of the world. Equity in real estate can be calculated as the difference between the market property value and the money owed on a mortgage. The investment is used by investors to deduct the value of mortgage from the actual value of the real estate resources of property.
How to create equity on the real estate investment?
In real estate investment, equity is the figure that changes up and down and up as an investor spends money on his or her resources. If anyone wants to build a Real Estate Equity Investment, then there is need of the following things.
Repaying the mortgage will help in building the property equity in real estate. The payment included in the mortgage is any insurance and tax payment for the property. If an investor has a commitment to repay the mortgage, there will be more chance to build equity.
Making improvements to real estate property gives rise to increased equity. If you want to know how much equity you have built up, then sell your property. The increased in property value goes to investors credit rather than the lenders.
The other way to build up Real Estate Equity Investment is to pay extra money on your mortgage principal. Let’s suppose, the monthly mortgage principal is $700 and your financial condition permits you to pay $800, then it will enable to repay your mortgage faster and also raise equity value.
Benefits of Real Estate Equity Investment:
The following are some advantages of Real Estate Equity Investment that makes the investor increase his or her credibility.
Most people invest in different rental properties because of earning extra money in the form of monthly cash-flow. This cash-flow will provide monthly and ongoing income and allow you to spend time for the betterment of your real estate equity investment.
Another benefit of Real Estate Equity Investment is tax benefits. The government provides tax benefits for real estate investors in the form of depreciation or lower rate of tax for long-term revenue.
Inflation is the situation in which prices are increased due to the decrease in the value of money. As inflation is higher, the cost of living will increase which increases cash-flow. So, we can say that real estate is a strong hedge against inflation.