How Do I Win in Real Estate?
- Remember the FOUR benefits to investing in real estate: Principal Pay Down
- Unlike your rent payment, mortgage payments include a principal component that otherwise brings your total monthly mortgage balance owing down, & therefore your equity up.
- Appreciation refers to the increase in your home’s value over time. Your home value may increase for a number of reasons, including, interest rate fluctuations, supply & demand, inflationary periods, & even emotional buyers shifting the market.
- Cash Flow
Whether you’ve purchased a stand-alone rental property or have a rental component to your home, this secondary source of income (ideally above & beyond your total monthly bills) provides great value.
- Rent = $2,500
- Mortgage = $1,500
- Expenses = $500
- Cashflow = $500
- Sweat Equity
- Sweat equity refers to the physical improvement of upgrading your home through renovations.
- Let’s look at a simple example:
- Based on consistent payments at a rate of 2.59% over 25 years with 5% down ($25,000) & a 2.5% conservative annual appreciation.
• Purchase Price = $500,000
• Mortgage Balance = $494,000 - with mortgage loan insurance
- In 5 Years
• Value = $565,704.11
• Mortgage Balance = $418,983.89
- 5-year estimated property value = $565,704.11
- 5-year principal pay down = $75,016.11
- 5-year earned equity = $121,720.22 - includes day one loan insurance premium
- 5-year equity outlook = $146,720.22
Remember – It’s time in the market that builds WEALTH in real estate!